Q2 2025 Orange County Multifamily Market Report

Key Findings

• Despite national trends of rising vacancy, Orange County’s vacancy maintains a steady rate at 4.0%, ranking second lowest among the top 50 U.S. markets.
• If employment continues to expand, rent growth could climb back into the 3% range in 2025, as increasing demand helps keep vacancy rates low.
• 5,858 units remain under construction (as of Q2 2025), heavily concentrated in Irvine, which benefits from land holdings by the Irvine Company.

 

By the Numbers

• Sales Volume: $588M
• Market Sale Price Per Unit: $450K
• Cap Rate: 4.4%
• Vacancy Rate: 4.0%
• Rent Growth: 1.4%
• Average Market Asking Rent Per Unit: $2,736
• Units Under Construction: 5,858
• Units Delivered: 465
• Units Absorbed: 633 | Q2 2025 | Source: CoStar Group

 

Orange County Demographics

• Unemployment Rate: 4.1%
• Current Population: 3,176,579
• Households: 1,109,604
• Median Household Income: $117,293

 

IN APRIL 2024, ANAHEIM APPROVED DISNEYLANDFORWARD, A 30-YEAR EXPANSION INITIATIVE EXPECTED TO CREATE MORE THAN 4,000 JOBS AND GENERATE $1.1 BILLION IN ECONOMIC OUTPUT DURING ITS INITIAL FOUR-YEAR CONSTRUCTION PHASE, FOLLOWED BY NEARLY 2,300 ONGOING JOBS AND $253 MILLION IN ANNUAL ECONOMIC IMPACT.

 

Market Performance

In Q2 2025, Orange County’s multifamily market demonstrated stable performance, underpinned by strong fundamentals and restrained supply growth. The vacancy rate remained compressed at 4.0%, significantly outperforming the national average of 8.1%, as demand held firm amid ongoing job growth, improving affordability and a rebound in international immigration. Absorption kept pace with new deliveries, with 633 units absorbed versus 465 units delivered over the prior 12 months. Rent growth remained modest at 1.5% year-over-year, reflecting a market-wide focus on maintaining high occupancy, particularly within the Class A segment, where increased supply exerted downward pressure on pricing. Construction activity began to decelerate following a surge in completions in 2024, with no major new starts reported since mid-2024. Despite this, over 5,800 units remain under construction, primarily concentrated in Irvine. Overall, the market’s fundamentals point to continued resilience, with the potential for rent growth acceleration later in 2025 if employment trends remain favorable and new supply stays constrained.

 

Orange County Multifamily Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Orange County Under Construction

Construction activity showed clear signs of moderation, following a period of elevated development. No significant new projects have broken ground since mid-2024, reflecting growing caution amid rising construction costs, tepid recent rent growth, and higher exit cap rates. Despite this, the market still maintains a robust pipeline of roughly 5,900 units under construction, representing 2.3% of the existing inventory. Development remains heavily concentrated in Irvine, where over 4,000 units are currently underway, including large-scale projects like The Irvine Company’s Colonnade at The Marketplace and Simon Property Group’s Brea Mall Sears redevelopment. Elsewhere across the county, the pipeline is thinning, limited by land constraints and challenging entitlement processes. This more measured pace of construction is expected to help maintain low vacancies and support rent stabilization in the quarters ahead.

 

Construction Starts

Source: CoStar Group, Inc.

 

Under Construction

Source: CoStar Group, Inc.

 

Orange County Sales Activity

Source: CoStar Group, Inc.

 

In Q2 2025, Orange County’s multifamily sales activity remained subdued but stable, reflecting broader national investment trends. Sales volume during the quarter was low, continuing the cautious pace set earlier in the year, as buyers and sellers adjusted to elevated cap rates and financing costs. Despite the slowdown, cap rates for larger institutional assets hovered in the 5% range, suggesting a pricing recalibration from previous peaks. Meanwhile, private investors, especially those pursuing 1031 exchanges, remained active in smaller transactions, accepting initial yields in the 3% to 4% range in desirable coastal locations. Though Q2 did not mark a major rebound, the quarter was seen as a potential inflection point, with improving transaction momentum hinting at increased deal flow in the second half of 2025.

 

Submarket Highlights

North County

Vacancy stands at 3.9%, closely aligning with the market average of 4.0%. Absorption is expected to stay positive in the coming quarters, though a project scheduled for completion in mid-2025 is likely to push vacancy slightly higher.

 

Anaheim

Anaheim recorded one of the biggest multifamily deals of the past year in Orange County, with the purchase of a $144M apartment complex.

 

Central OC East of I-5

Vacancy in this submarket is on a downward trend, currently at 3.6%.

 

Tustin

Vacancy has declined slightly year-over-year, now at a tight 3.0%, well below the market average of 4.0%. Limited supply growth has helped keep vacancy from rising further.

 

Central OC West of I-5

Rents are experiencing moderate growth as increased leasing activity drives vacancy down, with annual rent growth currently at 1.9%.

 

Huntington Beach/Seal Beach

Although underlying fundamentals remain strong, market rents in the area have increased by 1.4% over the past year, closely aligning with the Orange County average of 1.5%.

 

Irvine

Irvine is by far the most active submarket for apartment development in Orange County, with 3,732 units under construction.

 

Costa Mesa

Rent levels declined from mid-2022 through the first quarter of 2023, but are now climbing as demand strengthens moving through 2025.

 

Newport Beach

Driven by tightening and improving market conditions, local rents have risen by 4.3% over the past year, significantly outpacing the 1.5% national average.

 

South County

South County apartments remain among the most expensive in Orange County, with rent growth over the past five years exceeding the market average. However, in 2025, landlords are increasing rents at a modest year-over-year rate of only 0.7%.