— By Wes Hunnicutt and Matt Moore of Stream Realty Partners —
Following a record-low vacancy of 1.4 percent in fourth-quarter 2022, Orange County’s industrial market has experienced a sustained period of rising vacancy and negative net absorption, driven by broader economic caution, elevated interest rates and softening demand for space. However, it also showed signs of slight improvement at the end of 2025.
Vacancy stood at 6.1 percent at the end of last year, down slightly quarter over quarter from 6.2 percent, but higher than 5.5 percent 12 months ago. For context, vacancy immediately prior to the pandemic was 3.3 percent. Availability, which includes all spaces listed on the market for lease, came in at 7.5 percent at the end of last year.
A defining feature of recent quarters has been low tenant demand for space, with seven consecutive quarters of negative absorption. This reflects cautious tenant behavior as businesses delay expansion decisions amid economic headwinds and higher borrowing costs.
Fourth-quarter 2025 ended this streak with the market experiencing positive net absorption of 285,000 square feet. Larger distribution and logistics facilities experienced increased pressure and longer lease-up timelines, whereas smaller spaces of less than 100,000 square feet have performed better with more tenants seeking space.
Despite fewer space givebacks in the fourth quarter, leasing activity remains challenged. New leases totaled 1.7 million square feet in the fourth quarter, down 30 percent from 2.4 million square feet recorded in the previous quarter. The 10-year pre-pandemic average was 3.1 million square feet, demonstrating quite a bit of runway on the path to recovery.
Rent trends have shifted alongside vacancy dynamics. After years of rapid growth through 2023, asking rents have declined by 14 percent from peak levels reached in 2023. They now sit at a current average monthly rate of $1.49 per square foot, triple net. Landlords are increasingly offering concessions such as free rent and tenant improvement allowances to attract and retain tenants or risk prolonged vacancies.
From an investment perspective, sales volume has stayed relatively robust, with capital still targeting industrial assets within the market, drawn by long-term fundamentals, limited future supply, and proximity to key logistics hubs like the ports of Los Angeles and Long Beach. Fourth-quarter investment activity totaled nearly $175 million, bringing the 2025 total to just about $956 million. This exceeds both 2023 and 2024 levels, representing a 31 percent increase over the 10-year pre-pandemic annual average of $728.7 million.
The Orange County industrial market is heading into 2026 with early signs of improvement. Any recovery will be a slow one as the economy and business environment move forward, impacting demand for industrial space.
— By Wes Hunnicutt and Matt Moore, Executive Vice Presidents, Stream Realty Partners. This article was originally published in the February 2026 issue of Western Real Estate Business.