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1/06/26
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This report provided by real estate services firm Kidder Mathews
Market Highlights
• The direct market vacancy rate in Orange County is now 11.7%.
• The average asking price is $2.78/SF, on a full-service basis.
• In 4Q25, 367k sf is still being developed.
Market Drivers
• By late 2025, Orange County’s office market remained stable, with its fundamental infrastructure improving over time. Leasing activity stayed strong in the Airport Area and Irvine Spectrum, both known for quality facilities. Direct vacancy held at 11%, showing limited year-end tightening and continued demand for Class A space. Older high-rises and well-located mid-tier buildings saw selective occupancy gains as tenants pursued value while still prioritizing amenities and transit access. With few new office projects underway, large spaces in top-tier buildings are increasingly scarce, prompting tenants to begin space searches early to secure the most desirable locations.
• Average asking rates have stabilized in the mid-$2.70/sf (full-service) after earlier declines. Landlords continue offering incentives—free rent and property upgrades—to secure reliable tenants ahead of anticipated market shifts in 2026. Net absorption has remained positive for the second consecutive quarter.
Economic Review
• Orange County’s economy remains strong, driven by corporate services, technology, healthcare, and government contracting. Office-using sectors expanded gradually, offsetting declines in older industries like construction and banking. Despite growth in key high-value segments, overall job growth has slowed due to high housing costs and a shortage of qualified workers.
• The region has emerged as a hub for AI and life sciences, driving demand for adaptable buildings, energy efficiency, and modern workplace solutions. Healthcare continues to add jobs, helping counter broader declines in the traditional financial services sector.
Near-Term Outlook
• The 2026 outlook is cautiously optimistic, with several strengths. High-quality properties are expected to appreciate faster as tenants seek modern spaces with enhanced amenities. Repositioning and redevelopment will remain key strategies, particularly in older suburban areas still below pre-pandemic performance.
• Landlords are likely to gain negotiating leverage for premium properties, given the limited pipeline of new office buildings. Investors and private funds increasingly believe prime real estate has reached its lowest price point, signaling confidence in long-term value.
The information in this report was composed by the Kidder Mathews Research Group, led by Gary Baragona, Vice President of Research Data source: CoStar
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