Orange County Industrial CRE Market Update – 4th Qtr. 2025

Market Highlights

• At the close of 2025, the direct vacancy rate stood at 5.8%.
• The market average was $1.49/SF on an NNN basis.
• The average sale price in Q4 2025 was $310.50/SF, while the cap rate was 5.9%.

Market Drivers

• At the close of 2025, Orange County’s industrial market remained in a state of adjustment, characterized by reduced tenant interest and rising vacancy rates due to recently completed construction. Total availability of industrial space—including subleases and space under construction—increased to 9.0%, while the vacancy rate rose to 6.7%. Negative net absorption in the fourth quarter indicates a decline in occupancy, resulting in a year-to-date loss exceeding two million square feet.

• Smaller-format buildings continue to lease much faster than larger box facilities. In Q4 2025, vacancy climbed to 6.7% as newly delivered projects from 2024 and 2025 remained unoccupied. To attract tenants and accelerate transactions, landlords are responding to lower asking rates by offering enhanced concession packages, such as free rent.

Economic Review

• Orange County’s economy is growing slowly but steadily. Employment growth has lagged behind the national average due to labor shortages and a population shift to more affordable regions during the pandemic. The county’s diverse workforce—particularly in advanced manufacturing, healthcare, and life sciences—supports long-term demand for industrial space. However, logistics-related space requirements have declined amid falling import volumes and rising operating costs. With new supply entering the market as demand softens, vacancy rates face additional upward pressure.
  
  

Near-Term Outlook

• Market stability is anticipated in 2026 as the number of active construction projects declines significantly from its cyclical peak. This trend should continue to benefit tenants with substantial space requirements. Developers are delaying new project starts due to high barriers to surplus supply. Asking rates are expected to remain steady through 2026, then gradually increase as vacant space is absorbed. Investor activity surged in 2025, approaching record highs, driven by price adjustments and Orange County’s high barriers to entry.

The information in this report was composed by the Kidder Mathews Research Group.