Orange County Office Market Adjusts: Significant Transformations in Q3 2025

The Orange County office market is currently facing significant shifts as it adapts to changing economic conditions. As highlighted in a recent Savills report, the third quarter of 2025 marked a notable decline in leasing activity, which fell to 1.5 million square feet. This represents a dramatic 23.7 percent decrease compared to the same period last year. Much of this activity is characterized by smaller transactions, with a majority of deals now falling below the once dominant 40,000-square-foot mark. Despite this downturn, certain submarkets like Irvine Spectrum have shown resilience, achieving an 11.3 percent increase in leasing activity.

Beneath the decelerating transactions lies a tightening market. Total office inventory in Orange County has seen a reduction from 83.3 million square feet in Q3 2024 to 81.1 million square feet this quarter, a drop of 2.2 million square feet. The availability rate has also decreased significantly, dropping 230 basis points year-over-year to 20.6 percent, with a further decline of 80 basis points from the previous quarter. While asking rental rates have remained relatively stable at $2.8 per square foot per month—showing only a slight 0.7 percent decline from the previous year—landlords are increasingly offering attractive concession packages and tenant improvement allowances in this competitive landscape.

Key Transactions Highlight Market Movement

The transportation sector emerged as a significant player in Q3, with Hyundai signing a lease for 133,745 square feet at 2300 Main Street in the Airport Area. Alongside this, another notable transaction includes an undisclosed tenant renewing 99,000 square feet at 840 Newport Center Drive, also within the Airport Area. Other significant leases during this quarter include:

• Foundation Building Materials: Renewed 48,972 square feet at 2510–2520 Red Hill Avenue in Central County.
• West Capital: Leased 44,241 square feet at 17911 Von Karman Avenue in the Airport Area.
• Anduril: Acquired 41,770 square feet at 3515 Harbor Boulevard in the Airport Area.
• Kind Lending: Relocated to 35,575 square feet at 1920 Main Street in the Airport Area.
• Integral Life Science: Established a new location with 30,741 square feet at 7585 Irvine Center Drive in Irvine Spectrum.

These transactions indicate a varied landscape within the Orange County office market, attracting smaller tenants while reflecting broader economic shifts.

Mixed Signals in Sublease Space Availability

Availability of sublease space in the office market showcases a mixed outlook. In Q3 2025, the total available sublease inventory slightly increased to 2.4 million square feet, up 0.5 percent from Q2. However, this figure is still considerably lower than the 3.3 million square feet reported a year earlier. The increased availability is primarily concentrated in the Airport Area and South County submarkets, although the pace of new sublease listings has begun to slow as expiring leases transition to direct availability.

This mixed signal emphasizes that while there are pockets of opportunity, the overall market is navigating a complex landscape that warrants careful attention from investors and tenants alike.

Constrained Supply Outlook and Future Developments

The Orange County office market is facing a constrained supply outlook, which may further tighten the leasing landscape. New construction has been notably limited, with the CVOBie project in Anaheim being the only planned addition to the office inventory, expected to be completed by December 2026. Additionally, property conversions continue to impact existing inventory; the latest property scheduled for multifamily conversion is 1901 Main Street in Irvine.

The scarcity of new supply could contribute to a more competitive environment, influencing landlords’ strategies in retaining and attracting tenants.

Return to Office: A Potential Catalyst for Growth

On a more optimistic note, the return-to-office momentum may bolster demand within the market. Data from PlacerAI shows that Irvine has reached 72 percent of its office occupancy levels from January 2020, indicating a gradual return of workers to physical workspaces. This uptick in occupancy is expected to provide some level of support for demand, as companies look to adapt their work environments in response to changing employee preferences.

Market analysts anticipate that landlords will continue to maintain stable asking rates while enhancing deal terms through improved concessions, influenced by debt obligations. This combination of dwindling inventory and a slight recovery in demand could lead to the gradual absorption of excess space, although properties in distress might continue to be available at discounted rates as investors search for long-term value opportunities.

Conclusion: Navigating Challenges and Opportunities

In summary, the Orange County office market is currently undergoing transformative changes characterized by declining leasing activity and reduced inventory. The observed tightening of the market amid economic uncertainties presents both challenges and opportunities for tenants and landlords alike.

As the market shifts toward smaller transactions and undergoes transformations in sublease availability, stakeholders must remain vigilant and adaptable. The potential for a return to the office environment may ultimately provide a much-needed boost in demand. For ongoing updates and insights about the Orange County office sector, stay informed through high-quality real estate resources such as The Registry.

Overall, understanding these dynamics will be crucial for making informed decisions and successfully navigating the Orange County office landscape in the months to come.