Blog #Orange County industrial market

Orange County’s industrial market showed encouraging signs of stabilization in the first quarter of 2026, recording positive net absorption for the second straight quarter.

After 11 consecutive quarters of declining demand totaling nearly 9.5 million square feet, the county posted +540,161 SF of net absorption in Q1. This improvement, led by modest tenant expansion in the Airport and West County submarkets, is welcome news for both property owners and business occupiers.

Key Highlights from the Q1 2026 Report:

• Vacancy Rate: Rose slightly to 6.30% (still well below the national average of 7.5%)
• Average NNN Asking Rent: $18.12 PSF (modest softening from $18.36 in Q4 2025)
• Sale Prices: Increased to $362 PSF, up from $314 PSF last quarter
• Cap Rates: Compressed to 4.84%, reflecting continued strong investor demand
• Under Construction: Dropped sharply to 840,178 SF as new speculative development slows

The county’s total inventory now stands at 305.3 million SF. While available space has increased significantly since 2022 due to new deliveries, the return of positive absorption suggests demand is beginning to catch up with supply in certain areas.

Notable Q1 Transactions:

Top Sales:

• 576,234 SF portfolio at 200 & 250 S. Kraemer Blvd, Brea – Sold for $139 million ($241 PSF)
• 195,617 SF at 415 & 1425 S. Acacia Street, Fullerton – Sold for $46.6 million
• 93,750 SF at Aliso Creek Road, Aliso Viejo – Sold for $41.05 million ($438 PSF)

Top Leases:

• 229,422 SF in Fullerton to Houdini, Inc.
• 132,503 SF in Santa Ana to Cubework
• 100,784 SF in Anaheim to Hyper Solutions, Inc.

What This Means for Owners and Occupiers

For property owners and investors: Rising sale prices and compressing cap rates demonstrate that investor appetite for Orange County industrial assets remains healthy, even in a higher interest rate environment. However, with more vacant space available, leasing velocity and rental growth will require targeted marketing and competitive positioning.

For occupiers and tenants: The current environment offers more options and slightly softer rental rates than the tight market of recent years. Businesses looking to expand or relocate may find improved negotiating leverage, especially in newer or well-located buildings.

Local business leaders continue to highlight geopolitical tensions (including the war with Iran), rising fuel costs, inflation, and interest rates as the biggest challenges facing area companies.

Want the full Q1 2026 Orange County Industrial Market Report?

As a local industrial specialist with Lee & Associates, I have the complete report with detailed submarket breakdowns, additional transaction data, and deeper analysis. Whether you’re an owner evaluating your portfolio, planning a sale, or an occupier considering expansion or relocation, I’d be happy to provide you with a complimentary copy and discuss how these trends impact your specific situation.

Contact me today to request your copy of the full report and to get a personalized market update tailored to your needs.

Positive Tenant Demand Ends 11-Quarter Contraction 

Orange County’s industrial market showed clear signs of stabilization in the fourth quarter of 2025, posting its first positive net absorption in nearly three years and officially ending the county’s longest contraction on record. 

Key Highlights – Q4 2025 

• Net Absorption: +316,406 SF (first positive quarter since Q4 2022)
• Full-Year Net Absorption: –1.8 million SF
• Vacancy Rate: 6.30% (up from 5.20% one year ago, but still below the national average of 7.6%)
• Average NNN Asking Rate: $18.36 PSF
• Average Sale Price: $318 PSF
• Cap Rate: 5.88%
• Space Under Construction: 1.59 million SF
• Total Inventory: 304.2 million SF

After 11 consecutive quarters of negative absorption totaling 9.3 million SF (3.4% of total inventory), positive tenant demand finally returned in Q4. While vacancy has risen from a record-low 1.8% to 6.3%, Orange County remains one of the nation’s strongest and most sought-after industrial markets thanks to its proximity to the Ports of Los Angeles and Long Beach and dense Southern California consumer base.

 Market Indicators Trend (2025) 

 Notable Transactions Q4 2025

Top Sales 

• 2164 N. Batavia Street, Orange – 249,431 SF sold for $69.6M ($279 PSF) – Class A
• 17352 Armstrong Avenue, Irvine – 123,748 SF sold for $17M ($137 PSF) – Class C
• 2601 S. Garnsey Street, Santa Ana – 122,407 SF sold for $31.8M ($260 PSF) – Class C

 Top Leases 

• 2164 N. Batavia Street, Orange – 246,732 SF to Paper Mart (Packaging Wholesale)
• 17352 Armstrong Avenue, Irvine – 123,748 SF to Fletcher Jones (Retailer)
• 15345 Barranca Parkway, Irvine – 84,580 SF to Undisclosed Tenant

 What It Means for Occupiers & Investors 

• Occupiers: Rental rates have moderated slightly, giving tenants more negotiating power than they had in 2021–2023. Availability is up, especially in Class B and C product.
• Investors: Sale prices are down and cap rates have expanded ~150 bps year-over-year, creating more attractive entry points in a market that historically delivers strong long-term performance.
• Developers: The pipeline has shrunk 22% from Q3, signaling that new supply is finally tapering as demand stabilizes.

 Outlook 

The return to positive absorption in Q4 2025 is a major inflection point. While full recovery will take several quarters, Orange County’s strategic location, limited new supply, and enduring tenant demand position the market for gradual improvement through 2026.

For the full Q4 2025 Orange County Industrial Market Report contact me directly.