RECOVERY GAINS WITH SECOND STRAIGHT YEAR OF NET GROWTH
The Orange County office market continued to shake off the debilitating effects of Covid with more than 1 million SF of net absorption for the second straight year. The strong tenant demand drove down the countywide vacancy rate to 13.7%, the lowest level in more than three years.
A weak start to 2025 was offset by a second-half demand surge of more than 1.6 million SF. That included 1,068,612 SF of net absorption in the fourth quarter – the first 90-day period in a decade with 1 million SF tenant growth. The late-year surge pushed total occupancy past 100 million SF for the first time since 2022.
Total 2025 net absorption was 1,035,955, equal to 0.89% of the county’s 116.1-million SF inventory. Three of the county’s five office submarkets reported overall tenant growth for the year.
The rebound was the result of a number of sizable leases covering a cross section of industries, including finance and insurance, medical instruments, county government, electronics, defense-aerospace and pharmaceuticals. A diverse tenant base has been one of the county’s historical strengths.
Defense contractor Andruil signed the county’s largest lease in four years, agreeing in October to occupy a 14-acre creative-office campus with three buildings totaling 190,000 SF and a football field.
The project on South Susan Street in Costa Mesa called The Hive was previously leased by the Los Angeles Chargers. It was acquired by Drawbridge Realty for $78 million just prior to Andruil’s agreement.
With some 3,200 local employees, Andruil makes drones, warplanes, submarines and surveillance gear. The company has leased about 700,000 SF in Orange County this year. With some 1.5 million SF of space, Andruil is the county’s largest office tenant.
The most growth in 2025 was 708,162 SF reported in the 44.1-million-SF Airport submarket, the county’s largest. The Airport submarket also has the highest vacancy rate at 15.8% with the most availability, 18.3%.
There were 449,393 SF of tenant growth in the 27.3-million-SF South County submarket.
The second largest Q4 lease was by Medtronic. The medical equipment maker signed a lease with the Irvine Company for three floors totaling 102,000 SF at 5290 California Ave., Irvine. The building was on the market for 11 months.
Integra Capital Group leased 55,039 SF at 20 Pacifica, a 14-story building in the Irvine Spectrum. The Irvine Company had been marketing the space for a year.
A 203,490-SF, 10-story building on 6.7 acres that is part of The Outlets of Orange was purchased for $113 per SF by Avanta Properties from Greenlaw Partners. The building is 48% leased. Greenlaw acquired the property in 2016 for $241 per SF.
MARKET FORECAST
Orange County will see slow job growth over the next two years, said Cal State Fullerton economists Anil Puri and Mira Farka in their annual economic forecast. In CSUF’s latest survey of top local executives, 46% said they expect to increase sales in the first quarter. Their biggest concern was inflation, followed by interest rates, tariffs, geo-political risks and housing supply.
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