VACANCY IS LOWEST SINCE 2019; OC RANKED SIXTH COSTLIEST
Strong merchant demand in the second quarter drove down the countywide vacancy rate to 3.5%, the lowest since 2019.
Second-quarter net absorption totaled 177,260 SF. Available space hit a near decade low of about 2.63 million SF, or 3.3% of the 79.1-million-SF inventory.
Sublet space available in Q2 totaled 152,106 SF, down from 418,627 SF in the last two years. There are 21 properties under construction totaling 312,669 SF at nearly 73% preleased.
Institutional-quality space is tight, and most prime corridors are near full occupancy. Well-located vacancies fill quickly, and all second-generation restaurant spaces attract intense user interest. The strong merchant demand reflects the county’s diverse economy and a stable population with the purchasing power from a $120,000 median household income and more than 4% wage growth.
Vacancy rates in Q2 across the county’s five submarkets ranged from 5.1% in South County to 1.5% in the Airport submarket, where availability totals 118,055 SF or 0.9% of the 13.9-million-SF countywide inventory.
Orange County’s average lease rate was $2.27 PSF, which is up 8% since the lockdown but unchanged from a year ago. Rents vary widely, ranging from $1.50 per SF to $5.50 per SF triple net monthly, depending on location, building size and type. In a Q2 survey of lease rates across 170 U.S. markets, Orange County ranked sixth costliest, behind San Jose and Miami.
Rents in the Airport submarket were highest, averaging $5.82 per SF, and lowest in North County, averaging $2.10 per SF. Rents averaged $2.24 per SF for new leases and $3.09 per SF for sublet space.
The South County submarket posted the largest net absorption gains with 110,266 SF leased in the Foothill Ranch Towne Centre by LV Furniture Collection and Dumos
Home.
Larger-format leasing in 2026 has been led by entertainment providers such as The Picklr. Operators of the indoor pickleball franchise have taken three leases for 67,545 SF in the last 12 months. There also were second-quarter leases of 38,000 SF by Lucky Strike at The Commons in Laguna Hills’s and 20,112 SF by FunBox at the North Hills Plaza in Brea.
There were 330 sales transactions in 2025 with sales volume doubling from the previous year to $1.6 billion. Much of the increase was due to the $357-million purchase of five Class A South County properties last July by Florida-based Regency Centers, which owns 485 retail projects of more than 59 million SF nationwide. Cap rates for fast-food properties average 4.5%. For trades larger than $10 million, cap rates average about 6%.
MARKET FORECAST
The war with Iran, rising fuel costs, persistent inflation and interest rates were seen by local business leaders as the biggest challenges facing area companies, according to a Q2 survey by economists at Cal State Fullerton. Other concerns included housing, government deficits, AI and stock market volatility. Tariffs are seen as less of an issue, the survey said.
