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Orange County Fall 2023 Industrial Market Update

The Details.

Looking at a single market report can be helpful, but without the proper context it can be misleading as well. Each submarket, city, neighborhood and even building, is uniquely positioned within the greater market. In this section, we aim to shine light on the nuances of the four primary regions of Orange County. As you can see, rental rates tend to be higher as you move south, and lower towards the north end of Orange County. However, the low vacancy rate impacting the entire region has resulted in a flattening of pricing across the board. North Orange County was once a notably cheaper submarket but with the increase in demand, it is catching up to pricing in South Orange County.

OC Fall 2023 The Details

The Big Picture.

The below table provides overall market average figures for Orange County, offering insight into the bigger picture of our market. While we continue to see rental rates increase year-on-year, the market as a whole has clearly passed its peak. Over the last three years, businesses have had an unprecedented appetite for space, but there has been a clear shift in demand illustrated by increasing vacancy and availability rates across the board. Despite this shift, Orange County market fundamentals remain incredibly strong. At 2.8% vacancy, Orange County is the third lowest vacancy rate among the nation’s largest 30 industrial markets. What’s more is that Orange County lacks significant land available for development, which limits supply opportunities.

OC Fall 2023 The Big Picture

The Buzz.

Dockworkers Reach Agreement. After one of the longest union negotiations on record, dockworkers have finally reached a tentative six-year agreement with shippers to ensure that goods landing in Southern California logistics buildings will arrive as scheduled. This comes right in time for the holiday season.

Rexford Lowers Rent Growth Projections. In February 2023, Rexford Industrial—the largest industrial buyer in Southern California—set rent growth projections at 15%. Last quarter they revised those numbers down, noting that rent growth had only been 4% so far this year.

fall 2023 orange county industrial market report the buzz

The Trend.

2022, like the two years prior, represented a frenzy of leasing and rental rate increases in Orange County, but we have seen that momentum slow in 2023. While 2021 and 2022 represented the fastest rental rate increases of any market on record, 2023 appears to be the beginning of a return to rational market behavior. This year we have seen occupancy drop, vacancy increase, availability increase and overall market conditions move in favor of the tenant and buyer—conditions not seen in years. Landlords are no longer in the driver’s seat of negotiations, and competition for new tenants is becoming fiercer every day. For the first time in years, it feels like tenants have taken back their leverage in the market, but historically low vacancy will likely remain in place for the foreseeable future as Orange County grapples with the challenges of increased demand and no meaningful way to increase supply.

OC Fall 2023 The Trend

The Neighbors.

Southern California boasts some of the highest rental rates in the country. As a result, many companies that do not have an operational need to maintain a facility in the region have elected to relocate, or expand out of state. Many major markets like Dallas, Texas and South Carolina can offer state-of-the-art properties at less than half the cost of Southern California. These real estate savings often outweigh any costs of relocating.

OC Fall 2023 The Neighbors

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