Q2 2025 Orange County Industrial Market Report

 

Highlights

• Vacancy increased to 5.7% in Q2 2025, up from a record low of 1.8% at the end of 2022 marking a broad-based occupancy losses and slower leasing velocity.
• While rents have dropped from around 10% from their 2023 peak, and landlords increasingly offering multi-month concession offerings, the Orange County industrial sector remains among one of the nation’s most expensive markets.
• New construction added only 0.7% to total inventory, underscoring the region’s tight development constraints. Land scarcity and high redevelopment costs keep supply growth limited, even as demand cools.

 

By the Numbers

• Sales Volume: $662M
• Cap Rate: 5.5%
• Market Sale Price Per SF: $335
• Vacancy Rate: 5.7%
• Rent Growth: (1.5%)
• Market Asking Rent Per SF: $19.01
• SF Under Construction: 2.4M
• SF Absorbed: 117K
• SF Delivered: (372K) | Q2 2025 | Source: CoStar Group

 

Demographics

• Unemployment: 4.1%
• Current Population:3,176,712
• Households: 1,109,697
• Median Household Income:$117,511

 

Market Performance

A cooling demand environment and elevated availability are weighing on Orange County’s industrial performance. Overall vacancy has climbed to 5.7%, with availability—including space under construction and subleases—rising to 8.2%. Landlords are increasingly turning to concessions and rent reductions to remain competitive, especially as tenant decision-making has slowed. Leasing timelines have lengthened, and the median time on market now exceeds 3.5 months, up from just two months in 2022.

 

Larger facilities and mid-sized properties in lease-up are facing the most pressure, while smaller, infill assets under 100K SF remain comparatively resilient. Operating margins are tightening as landlords grapple with higher carrying costs and elevated vacancy, especially for newer spec projects. Even stabilized properties are feeling the strain, as rent erosion and increased concessions continue to chip away at effective income.

 

Market Asking Rent Per SF and Vacancy Rate

Source: CoStar Group

 

Under Construction

 

 

Despite rising vacancy and slower leasing, construction remains active as developers bet on Orange County’s long-term fundamentals. Most projects are mid-sized (100K–250K SF) and clustered in North County near ports and rail. Smaller buildings under 100K SF continue to lease well. Developers like Prologis and Alere have lowered rents to spur demand, with recent listings reduced to $1.75–$2.00/SF triple-net. With over 85% of new supply still available, near-term vacancy could rise further as more projects deliver.

 

Sales

Sales activity in Orange County’s industrial market has shown resilience but remains below peak levels. Over the past year, $1.8 billion in assets traded, consistent with 2023 but still trailing the pre-2020 average of $2.1 billion. Investors are targeting assets with below-market rents for future upside, while REITs and institutional buyers—led by Rexford—have steadily increased their market share. Roughly 50% of recent sales involve fully leased, high-credit buildings, reflecting a focus on income stability amid tighter capital markets. A standout deal includes New York Life’s $92.1 million acquisition of a 219,000-SF Brea warehouse at a 5.8% cap rate, underscoring continued demand for well-located, core product in a shifting market.

 

Sales Volume and Market Sale Price Per SF

Source: CoStar Group

 

 

 

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