— By Shane Halpern of Avison Young —
The Orange County office market comprises about 1,800 buildings totaling more than 126 million square feet of inventory. After navigating a period of elevated vacancy and negative absorption between 2020 and 2023, the market has entered a measured recovery phase characterized by three consecutive quarters of positive net absorption, declining vacancy and stabilizing rental rates.
Over the past decade, the Orange County office market has delivered 78 properties and 8.1 million square feet of new supply, supported by a regulatory environment that’s comparatively more business-permissive than neighboring Los Angeles County.
Orange County employment grew from 1.7 million jobs in 2020 to more than 1.8 million in 2025, an 8.6 percent increase over five years. It did this despite a 1.1 percent regional population decline over the same period. Demand for office space is anchored by three industries: healthcare, government and professional services. All of these sectors have demonstrated consistent space requirements through varying market cycles.
After peaking at 14.8 percent in 2023, total vacancy has compressed to 12.6 percent in the first quarter of 2026, the lowest level recorded since first-quarter 2022. The market has posted three consecutive quarters of positive net absorption from third-quarter 2025 through first-quarter 2026, totaling 1.8 million square feet. This is the clearest indication of stabilizing occupier demand. At 12.6 percent in the first quarter of 2026, Orange County maintained a lower total vacancy rate than both the Los Angeles market (18.5 percent) and the U.S. average (13.7 percent), underscoring the market’s comparatively stronger occupancy fundamentals.
Leasing activity across Orange County varies significantly by submarket, with deal volume and rental rates concentrated in two primary submarket clusters.
The Airport Area, encompassing Costa Mesa, Irvine/Tustin, Newport Beach and South Santa Ana, recorded 178 transactions totaling 946,269 square feet in the first quarter of this year, the highest leasing volume in the market. Average gross office rent reached $37.95 per square foot, reflecting the submarket’s concentration of institutional-grade product and professional services tenants. Total vacancy percentage in the Airport Area stood at 14.4 percent in the first quarter, above the countywide average of 12.6 percent, indicating that elevated leasing activity has not yet fully offset available supply.
South County, encompassing Irvine Spectrum, Laguna Hills/Aliso Viejo, Laguna Niguel/Laguna Beach, Lake Forest/Foothill Ranch, Mission Viejo, Ladera Ranch, San Juan Capistrano and surrounding communities, recorded 91 transactions totaling 397,828 square feet at an average gross rent of $33.50 per square foot. With total vacancy at 12 percent, South County sits below the countywide average, reflecting a tighter supply demand balance despite lower absolute leasing volume. Remaining submarkets recorded comparatively lower transaction volumes that were consistent with their smaller inventory bases and distinct tenant compositions.
Gross office rents have risen steadily, reaching $34.30 per square foot in the first quarter of 2026 from $33.71 a year prior, reflecting landlord pricing discipline in the face of improving fundamentals. Investment activity in first-quarter 2026 totaled $190 million at $269 per square foot. Sales pricing remains below the fourth-quarter 2021 peak of $325 per square foot, but its recovery to $258 per square foot suggests renewed investor confidence at reset valuations. Leading acquisition activities are Rexford Industrial Realty, MGR Real Estate and UCI Health.
Taken together, moderating vacancy, sustained positive absorption, rising rents and recovering investment pricing position the Orange County office market for continued stabilization, with demand growth contingent on broader employment expansion across office tenants.
— By Shane Halpern, market intelligence analyst, Avison Young. This article was originally published in the July 2026 issue of Western Real Estate Business.