Commercial
Orange County Industrial Vacancy Hits Decade High as Rents Slide
By Real Estate Wire Staff, . Real Estate Wire.
Orange County's industrial market deteriorated further in the third quarter of 2026, according to Cushman & Wakefield's MarketBeat report, with vacancy climbing to 6.0%, up 60 basis points from the prior quarter and 110 basis points year over year. That is the highest vacancy reading in a decade.
Net absorption came in at negative 849,136 square feet for the quarter, the third consecutive negative reading, bringing the year-to-date total to negative 2.0 million square feet. Most of the damage came from just two tenants leaving whole buildings, one in La Palma and one in Buena Park, which between them handed back more than 820,000 square feet. Only the Greater Airport Area finished in the black, adding 779,663 square feet of net occupancy, almost all of it from Anduril, the defense tech firm, taking a brand new building at South Coast Technology Center in Irvine.
Warehouse and distribution space bore the heaviest rent pressure. Average asking rents for that property type fell to $1.46 per square foot per month on a triple-net basis, down 3.6% from the prior quarter and 6.0% year over year. Overall average asking rent across all industrial types dropped to $1.47 per square foot, off 2.3% quarter over quarter and 3.4% year over year. Research and development space moved in the opposite direction, with average asking rent rising to $1.71 per square foot, up 6.5% year over year, pointing to continued demand for specialized, higher-function space even as commodity warehouse product softens.
Leasing activity did accelerate. New leases totaled more than 3.3 million square feet in the quarter, up 32.8% from Q2 and 78.1% from a year earlier. Notable deals included Glenair taking 237,246 square feet in Anaheim and Taco Bell signing for 235,000 square feet in Irvine Spectrum. The pickup in leasing is a meaningful signal, but it has not yet arrested vacancy's climb, partly because 401,089 square feet of the 713,089 square feet delivered during the quarter arrived vacant, adding to lease-up risk.
The construction pipeline has shrunk to its smallest in a decade: five buildings totaling 534,944 square feet are underway, including build-to-suit projects for Amazon in Santa Ana and for Advantech in Tustin. The remaining speculative supply is scheduled to deliver in 2027. A thinner pipeline limits near-term supply pressure, but it also reflects developer caution rather than confidence.
Port throughput at Los Angeles and Long Beach remained near record levels through August 2026. Los Angeles moved 955,907 TEUs in August, which the report says closed out the port's strongest three months ever, and Long Beach set its own August record at 919,992. Year-to-date volumes at both ports ran ahead of 2025 levels. Yet those cargo numbers have not translated into occupancy gains, with warehouse and distribution vacancy reaching 8.9% in the quarter. The gap between port activity and space demand reflects the influence of shifting tariff policy on how importers are managing inventory, a dynamic the report flags as an ongoing variable.
Investment sales slowed sharply. Transaction volume reached $231 million in the quarter, down 48.8% from Q2 and 26.7% from a year ago. The average sale price rose to roughly $344 per square foot on a quarter-over-quarter basis but sat 31.8% below year-ago levels. The report also points to the Fed's quarter point hike in September 2026, which put its target range at 3.75% to 4.00% and made borrowing dearer, as a reason many buyers stayed out. Private buyers dominated year-to-date activity at 79.9% of volume, with institutional investors accounting for 14.7%.
On the employment side, Orange County added 4,300 nonfarm jobs between August 2025 and August 2026, a 0.3% gain. The sectors driving those gains, health care and leisure and hospitality, generate little direct demand for industrial space. Manufacturing shed 1,400 jobs over the same period and transportation and warehousing lost 900, both headwinds for occupier demand. Forecasts call for overall job growth of 0.9% in 2026 and 0.7% in 2027, well short of the 1.7% the county has averaged over five years.
The leasing surge is the number to watch. If new leases signed in Q3 convert to occupancies over the next two quarters, absorption could stabilize. But with speculative supply still arriving vacant, a Fed that just tightened again, and employment growth in industrial-adjacent sectors running negative, the conditions for a quick vacancy reversal are not yet in place.