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4/07/26
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This report provided by real estate services firm JLL
• Vacancy levels remained elevated but relatively stable, with total vacancy at 16.9% in Q1, generally tracking within a narrow range over the past year. This suggests limited near-term pressure on space availability while tenants continue to evaluate long-term space needs.
• Occupancy gains were modest early in the year, as year-to-date net absorption totaled 160.5k sf. This contrasted with negative absorption through much of 2025 and indicates some stabilization in leasing activity without signaling a broad-based expansion.
• Asking rents showed minimal movement, with the overall direct average asking rent at $2.97 p.s.f. The flat trajectory reflects a market where pricing is largely holding as landlords balance competitive conditions with cost considerations.
Q1 2026 absorption remained positive for the second quarter in a row, causing vacancy to decrease slightly from 17.0% to 16.9% quarter-over-quarter. In one of the largest leases signed during the quarter, Pathway Capital, a financial services company, renewed the 7th floor for 65k sf at The Boardwalk in Irvine. In another notable Q1 lease, O5 Group signed for the 2nd and 3rd floors totaling 55k sf at 5271 California Ave in Irvine. Asking rents remained stable quarter-over-quarter with Class A buildings commanding a 20.9% rent premium over Class B buildings, highlighting ongoing flight-to-quality among considerable tenants.
On the supply side, the ongoing conversions of office space have begun to narrow the gap between supply and demand in Orange County. The Von Karman Creative Campus (VKCC), a 25-acre, nine-building office complex located at 16715-16969 Von Karman Ave in Irvine, commenced demolition in early 2026. The site, originally constructed in the late 1980s, is being transformed into residential housing, reflecting a trend within Orange County of converting underutilized office space into residential housing.
OUTLOOK
Office development activity remained limited, with under development supply totaling 168.1k sf. The restrained construction pipeline will keep supply condition balanced in the near term. Conversion continues to be an important theme and will impact supply by removing obsolete office product from inventory in the coming year. Orange County's market is set to benefit from the expanding aerospace and defense sector. Key defense technology firm Anduril continues to anchor the industry's presence in the county. While planning a major expansion in nearby Long Beach, Anduril maintains its headquarters in Costa Mesa and occupies nearly 1.5 msf of space in Orange County. The company's recent acquisition of ExoAnalytic Solutions, an Orange County-based space surveillance company, further solidifies its local footprint.
Fundamentals -- Forecast
YTD net absorption: 160.5k sf ↑
Total vacancy: 16.9% ↓
Class A direct asking rent: $3.17 p.s.f. →
Overall direct asking rent: $2.97 p.s.f. →
Concessions: Stable →
Under development: 168.1k sf →
Preleased: 0.0% →
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