Orange County Industrial Real Estate Market Sees Rising Vacancy Amid Uncertain Recovery | Q1 2025

Overview The Orange County industrial real estate market started 2025 with mixed signals. Vacancy rates increased to 4.8%, a 53.75% year-over-year jump, while net absorption dropped to -823,333 SF. Leasing activity slowed dramatically to 1.5M SF, and asking rents fell to $1.57/SF. Despite several recent project deliveries and renewed optimism among some business leaders, ongoing political and economic uncertainty, including early effects of a trade war, continues to suppress demand.

Key Takeaways

• Vacancy and Availability Rising: Direct vacancy climbed from 3.1% in Q1 2024 to 4.8% in Q1 2025. Total availability jumped to 8.7%, with sublease space up significantly.
• Asking Rates Drop: Average asking lease rates declined 8.72% YOY, down to $1.57/SF.
• Negative Net Absorption: Net absorption for Q1 stood at -823,333 SF, reflecting softening demand.
• Reduced Leasing and Sales Volume: Leasing volume dropped 46.37% YOY. However, sales activity surged 68.19% YOY, driven by key transactions like The Walt Disney Company’s $124M purchase of a North County facility.

Submarket Trends

• North County: Largest submarket with 111.5M SF inventory. Posted -128,487 SF net absorption. Key leases included Straub Distributing (281,548 SF).
• South County: Recorded -268,274 SF in net absorption, with vacancy rising to 3.6%.
• West County: Highest submarket loss at -181,156 SF, despite having multiple projects under construction.
• Airport Area: Net absorption came in at -245,416 SF, largely due to 278,624 SF in deliveries.

Construction & Sales Activity

• Construction Pipeline: Over 1.5M SF is underway, with major projects like Goodman Commerce Center (390,268 SF) and Bake Freeway Business Park (379,168 SF).
• Sales Highlights: The Walt Disney Company acquired a 406,787 SF facility in Anaheim for $124M ($304.83/SF). Other notable sales included properties on Birch St and Page St.

Forecast Despite broader economic challenges, the Orange County market is expected to stabilize. Rising vacancy and falling rents may soon be offset by an uptick in demand as tenant uncertainty wanes. The area’s strong fundamentals, including a diverse business base and strategic location near major ports, position it for long-term resilience.