Orange County Retail Real Estate Market Update | Q4 2024

Orange County retail real estate market is showing resilience

Orange County’s retail real estate market continues to show strength, driven by high demand, limited supply, and steady rent growth. Retailers are actively seeking retail space for lease, particularly in prime locations in Orange County. With strong fundamentals supporting the market, Orange County remains a key retail destination in commercial real estate market. In this article, we’ll explore the trends shaping retail real estate landscape in Orange County and what to expect in the year ahead with stats.

The Orange County retail market has always had strong fundamentals. Due to this, Orange County's retail market tightened further at the end of 2024, with a new multi-year high of over 750,000 of leasing volume. This sent availability rates to below 4%, very strong in any market. In fact, availability has fallen to a new cyclical low, reaching levels reached more than 16 years ago, just before the global financial crisis in 2007-08.

Availability measures just 3.8% as of the first quarter of 2025, which compares to a U.S. national retail availability rate of 4.8%. While the national rate held steady in 2024, the OC availability rate declined by roughly 20 basis points.

Much of the leasing for 2024 was driven by discount retailers and grocery stores, while new experiential retailers like Defy Trampoline Parks are also opening. Expanding retailers have reduced the number of institutional-quality spaces available across the market, with most prime corridors at or near full occupancy.

Supply additions will remain constrained for the foreseeable future as only a few small projects are under construction. Retail building demolitions outweighed deliveries for a third consecutive year in 2024, reducing supply. Vacancies will likely remain tight in the years ahead, especially if recently elevated population outflows to more affordable areas subside.

Rent*

Market rents for retail space in Orange County increased by roughly 3% for a second consecutive year in 2024, much due to demand and limited supply. Given the robust demand for premier retail spaces that serve a high-income demographic, many owners expect to maintain pricing power in the near term. However, rent growth has moderated from an increase of over 4% in 2022.

Average asking rents in the market are up 4.6% over the trailing year as of the first quarter of 2025 and rose by 3% in 2023, moderating from a near-record increase of over 4% in 2022. Rent growth is stronger inland and in North County and lags in the more expensive central and coastal areas.

Strip center availability is trending above the market average, and owners have recently throttled back quickly on pushing rents in the subtype, from a recent peak of nearly 5.0% in 2022 to a more tepid 3.7% as of the first quarter of 2025.

Orange County ranks among the most expensive markets across the nation, with rent levels that average approximately $39.00/SF, triple-net. Retail leases in the market typically range between $20/SF and $40/SF triple net, depending on location, retail subtype, and quality. Larger lease deals over 10,000 SF typically rent in the low-$20/SF triple-net range.

Sales*

Due to the higher debt costs and tighter lending standards, sales activity in Orange County's retail real estate market remained muted in 2024 as buyers expressed caution. Sales volume fell to a 12-year low of under $800 million in 2024. Some local investors have instead turned to non-coastal markets for higher yields, particularly nearby Phoenix.

In line with national trends, private buyers drive the majority of investment in Orange County, at nearly 70% of acquisition volume historically. Institutional, private equity, and REIT investors combined account for over 20% of acquisition volume historically, while users account for the remaining 10%, with those ratios remaining roughly consistent over the trailing year.

Ongoing rent growth has helped mitigate some downward pressures on pricing stemming from higher cap rates. Also, cap rates in Orange County trend lower than in most United States markets due to its high barriers to entry and private investment capital. Nevertheless, higher interest rates placed upward pressure on cap rates.

Cap rates on recent deals have typically fluctuated in the 5% to 6% range for those deals under $10 million, and just below 6% for those transactions exceeding $10 million, stable for the last year.

Expectations for 2025 are to remain consistent with 2024, with some upward pressures on rents, that will be mitigated with the overall general economy. Sales and CAP Rates, should also remain relatively stable, barring anything to jarring happening with the overall economy and commercial real estate loan interest rates.

Looking to expand your business in Orange County? Have more questions about retail spaces in Orange County? Need help with your commercial real estate ventures? Contact us today and we will be more than happy to help!

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*Source: CoStar