If you own industrial property in Orange County, the second quarter of 2026 brought a market that's shifting in more than one direction at once. Tenant demand turned negative again, vacancy climbed to its highest point in 15 years, and asking rents kept sliding — but sale prices per square foot and construction activity are also cooling in ways that change the calculus for owners weighing a sale, a refinance, or simply wanting to know where their property stands today.
Here's a breakdown of the numbers and what they mean for your property.
| Market Indicator | Q2 2026 | Q1 2026 | Q2 2025 |
|---|---|---|---|
| Quarterly Net Absorption | (188,878) SF | 285,376 SF | (441,954) SF |
| Vacancy Rate | 6.50% | 6.30% | 5.80% |
| Avg NNN Asking Rent | $1.44/SF/month | $1.51/SF/month | $1.53/SF/month |
| Sale Price | $289.00/SF | $364.00/SF | $336.00/SF |
| Cap Rate | 5.40% | 4.87% | 5.46% |
| Under Construction | 720,838 SF | 894,467 SF | 2,529,176 SF |
| Total Inventory | 304,689,757 SF | 304,346,460 SF | 302,530,060 SF |
Net absorption swung back into negative territory in the second quarter after two positive quarters, and it's now been negative in 12 of the last 14 quarters. Available sublease space also hit a record high this quarter, which adds to the shadow inventory tenants and their brokers are weighing against new leasing options — something owners should factor into how competitively they're positioned when a space comes up for lease.
At 6.50%, vacancy has now risen for five straight quarters. That's still a historically tight market by national standards, but it's a meaningfully different environment than the sub-3% vacancy Orange County saw a few years ago. For owners, that means longer lease-up timelines and more negotiating leverage sitting with tenants than at any point in recent memory.
Asking rents have fallen 12% from their peak two years ago, landing at $1.44 per square foot per month on a NNN basis in the second quarter. Effective rents — what tenants actually pay once concessions are factored in — have softened further still, as landlords lean on free rent and tenant improvement allowances to get deals done. Several buildings that delivered over the past year, along with nearly all the speculative projects still under construction, remain available for lease, adding to the competitive pressure on rents.
This is where the picture gets more nuanced for owners. Sale price per square foot came in at $289.00 in the second quarter, down from $364.00 in the first quarter and $336.00 a year ago. Cap rates, meanwhile, moved to 5.40% — up sharply from 4.87% in the first quarter, though still slightly below where they sat a year ago.Softer pricing paired with a moving cap rate is exactly the kind of environment where an outdated sense of your property's value — based on where the market was six or twelve months ago — can lead to a mispriced listing or a missed opportunity. If you've been going off a valuation from earlier this year, or you haven't had one at all, it's worth an updated look.
Space under construction fell to 720,838 square feet in the second quarter, its lowest level in five years, as the slowing market and a persistent shortage of available land keep new development in check. For owners of existing buildings, less new supply on the way is one of the more owner-favorable data points in this report — it should help put a floor under vacancy over time, even as current inventory works through its lease-up.
Sale activity in the second quarter included the sale of a 348,230-square-foot Class B building on Irvine Boulevard in Irvine for $107,000,000 ($307.27 per square foot), along with two additional Irvine sales ranging from roughly 92,000 to 261,000 square feet. On the leasing side, the largest transaction was a 223,406-square-foot lease at Argosy Circle in Huntington Beach, followed by leases in Irvine and Fullerton in the 156,000 to 177,000 square foot range.
Whether you're planning a sale, a refinance, or just want an accurate read on where your infill market property stands today, a complimentary Broker Opinion of Value is the fastest way to get a current, data-backed answer.
Q: Is Orange County still a landlord-favorable market?
A: It's shifted. Vacancy is at a 15-year high and rents have pulled back 12% from their 2024 peak, giving tenants more negotiating leverage than they've had in years — though vacancy in the low-to-mid 6% range is still tight by national standards.
Q: Why did cap rates jump so much from the first quarter?
A: Cap rates moved from 4.87% to 5.40% quarter over quarter, reflecting how investors are pricing risk and returns differently as sale prices per square foot have also declined. It's a sign the investment market is recalibrating, not necessarily a single-quarter anomaly.
Q: Does slower construction mean the market will tighten again soon?
A: It's a positive signal for existing owners. With under-construction space at a five-year low, less new supply is coming online, which should help vacancy stabilize once current buildings finish leasing up — though that process can take time given the elevated availability already in the market.
Q: Should I get a new valuation if I already had one earlier this year?
A: Likely yes. Sale prices and cap rates both moved meaningfully between the first and second quarters, so a valuation from even a few months ago may no longer reflect current market conditions.
Q: Can I get a copy of the full report this article is based on?
A: Yes. Contact Ron directly at 562-354-2537 or rmgrublian@leelalb.com for a copy of the complete Q2 2026 Orange County industrial market report.
We specialize in industrial real estate from the greater Los Angeles to the Inland Empire markets, including: Long Beach, Carson, Torrance, Gardena, Compton, Rancho Dominguez, Wilmington, Paramount, Santa Fe Springs, Huntington Beach, Garden Grove, Irwindale, Signal Hill, Pomona, City of Industry, and Ontario, serving surrounding submarkets including LA South Bay, LA Central, Mid-Counties, San Gabriel Valley, Orange County and the Inland Empire.
Ron Mgrublian
Principal, Lee & Associates Los Angeles – Long Beach
562-354-2537
rmgrublian@leelalb.com
CalDRE# 01902882
