Orange County Industrial Vacancy Climbs to 5.8% Amid Economic Caution

Orange County Industrial Market Report – Q1 2025

Despite healthy trade volumes and broader economic growth, the Orange County industrial real estate market continued its downward trajectory in Q1 2025. The region experienced its ninth consecutive quarterly drop in tenant demand, as evidenced by a net absorption of -626,940 square feet. This reflects persistent tenant hesitancy in signing new leases, alongside rising vacancy and declining asking rents.

The vacancy rate increased from 5.6% in Q4 2024 to 5.8% in Q1 2025, marking a continued departure from the record low of 1.8% recorded during the 2022 boom. Vacant space across the county now totals approximately 16 million square feet, approaching levels last seen during the 2008 financial crisis.

Leasing Activity and Tenant Behavior

High interest rates, softening home sales, and lingering post-COVID supply chain uncertainty have led many business owners to pause or delay expansion. While trade through the ports of Los Angeles and Long Beach remained strong—posting monthly records in January and February—the flow of goods has not translated into leasing momentum for warehouse and distribution space within the county.

Only the North County submarket posted positive net absorption (+430,097 SF), thanks to significant deals in Anaheim:

• Straub Distribution signed for 281,548 SF at 4633 La Palma Ave.
• Legrand Manufacturing leased 194,357 SF at 1515 E. Winston Road.

All other submarkets posted negative net absorption:

• South County: -383,665 SF, vacancy rose to 5.0%
• Airport: -372,490 SF due to 278,624 SF in new deliveries
• West County: -300,882 SF, the worst since Q4 2020

Market Metrics at a Glance (Q1 2025)

• Total Inventory: 277.6M SF
• Net Absorption: -626,940 SF
• Vacancy Rate: 5.8%
• Asking Rent (NNN): $1.54/SF (down from $1.58 in Q4)
• Under Construction: 2.68M SF (up from 2.09M SF)

Notable Leases

• Adient Aerospace signed a 280,460 SF sublease in Huntington Beach at $1.05/SF NNN.
• Motion Industries signed a 10-year deal for 62,717 SF at 3373 E. La Palma Ave. in Anaheim, with two months free rent, effectively reducing the rate to $1.72/SF.

Outlook While trade activity and port volumes remain robust, the leasing environment in Orange County continues to face headwinds from higher borrowing costs, broader economic uncertainty, and tariff-related fears. However, business confidence has improved. Cal State Fullerton’s economic sentiment index rose from 73.1 in Q4 2024 to 85.9 in Q1 2025, its highest in three years.

Although construction activity has increased, the market may remain tenant-favorable in the short term as developers contend with elevated vacancies. If consumer confidence translates into leasing, absorption may stabilize mid-year.