Orange County, CA Retail Market Report
Market Overview
An affluent customer base, a thriving tourism industry, and a low unemployment rate are driving strong and consistent demand for Orange County’s prominent regional malls, shopping centers, and neighborhood restaurants. The availability of retail building space has dropped to its lowest point in over a decade. Many believe that the most desirable retail spaces have already been rented out.
Market Performance
While there was a decrease in net absorption during the first two quarters of 2023, it’s worth noting that store openings have exceeded closures in six out of the past nine quarters. Retail investors in Orange County are experiencing above average rental income growth, driven by limited available space and robust demand fueled by a historic surge in local consumer spending. Over the last 12 months, rents have risen by an average of 2.6%, surpassing the market’s previous five-year annualized growth rate of 3.0%. There is a notable lack of construction activity in Orange County, with only 130,000 square feet of retail building space currently being developed. This accounts for just 0.1% of the existing inventory. Interestingly, some of the most significant developments in progress are related to auto dealerships scattered throughout the county.
Transaction activity has slowed because some buyers are exercising caution due to the low cap rate environment, which is accompanied by increased debt costs. The average transaction price has declined to $296 per square foot year-to-date, a decrease from the previous year’s peak of $468.
Orange County by the Numbers Last 12 Months
- Vacancy Rate: 4.4%
- Rent Growth: 2.6%
- Deliveries SF: 152K
- Sale Volume: $876M
- Cap Rate: 5.02%
