Orange County's Warehouse Market Tilts as Tenant Power Surges

IRVINE, CA – January 20, 2026 – For years, securing industrial space in Orange County felt like an impossible quest. Now, after nearly three years of steady market cooling, the balance of power in America's most expensive warehouse market is decisively shifting, creating the first tenant-favorable conditions seen in nearly a decade.

According to a new report from industrial real estate marketplace WareCRE, the county's industrial vacancy rate has tripled, climbing from a historic low of 1.8% in late 2022 to 5.5% by the third quarter of 2025. This 11-quarter climb in available space has forced a dramatic change in landlord strategy, with lucrative concession packages—once unthinkable—becoming the new norm to attract and retain tenants.

The New Tenant Advantage

The financial relief for businesses is tangible. While Orange County still commands the nation's highest average industrial rents, those rates have fallen 6.3% year-over-year and sit roughly 10% below their 2023 peak. This softening has opened the door for landlords to offer significant incentives, including multiple months of free rent and generous tenant improvement (TI) allowances to help businesses build out their spaces. Market analyses confirm that concessions such as one month of free rent per year of the lease term are becoming common, effectively reducing a tenant's costs by 5% to 8%.

This shift presents a critical window of opportunity for logistics, manufacturing, and e-commerce companies that were previously priced out of this strategic Southern California locale. Proximity to the bustling Ports of Los Angeles and Long Beach—the nation's busiest port complex—has long justified a steep premium. Now, that premium is becoming more accessible.

"Orange County has been the most expensive industrial market in America for years because there's simply nowhere to build," said Nick Gardiner, Head of Platform Strategy at WareCRE. "Now you have landlords offering up to a year of free rent on new leases. For businesses that have been priced out of proximity to America's busiest port complex, this is the window they've been waiting for."

A significant factor driving this change is the surge in sublease space, which now accounts for a staggering 17% of all available inventory. This flood of secondary space, often from companies reducing their footprint amid economic uncertainty, has put direct downward pressure on asking rents and increased competition among landlords.

A Market Normalizing, Not Collapsing

Despite the dramatic rise in vacancy, industry experts caution against viewing the current climate as a market collapse. Instead, they frame it as a much-needed normalization following an unprecedented, overheated cycle during the post-pandemic e-commerce boom.

Orange County's current 5.5% vacancy rate, while a sharp increase from its record lows, remains healthier than the national industrial average, which hovers above 7%. Furthermore, it is only slightly above the county's own 20-year vacancy average of 4.2%, indicating a return toward historical norms rather than a freefall.

"What we're seeing is a normalization after an unprecedented tightening cycle," Gardiner added. "The fundamentals haven't changed. Proximity to the Ports of Los Angeles and Long Beach continues to command a premium. What's changed is bargaining power."

The market's underlying structural value remains robust. The scarcity of developable land and high construction costs act as a natural barrier to oversupply, a key reason why property sales values remain high, trading at an average of $306 per square foot—second only to Detroit nationally. This suggests that while leasing dynamics have softened, long-term investor confidence in the region's industrial real estate endures.

A Tale of Two Markets

A closer look at the data reveals a clear bifurcation in the market. The rise in vacancy is not uniform across all property types. Large-bay facilities, those exceeding 50,000 square feet, are experiencing the most significant softening, with availability rates climbing past 8%. These larger warehouses, often used by national distributors and third-party logistics providers, are more sensitive to macroeconomic shifts in consumer spending and import volumes.

In stark contrast, smaller industrial properties under 100,000 square feet—and particularly those under 40,000 square feet—remain comparatively resilient. These small-bay and infill properties maintain a much tighter vacancy rate of around 4.1%. This segment is sustained by steady demand from a diverse base of local and regional businesses that require space for last-mile delivery, light manufacturing, and services. The prohibitive cost and complexity of redeveloping these smaller, well-located sites insulate them from the oversupply dynamics affecting their larger counterparts.

This division highlights a nuanced market where opportunity and risk vary significantly by building size and location. Tenants seeking large blocks of space have the most leverage, while those needing smaller, strategically located facilities will find a more competitive, though slightly softened, landscape.

National Ripples and Regional Realities

Orange County's experience is not happening in a vacuum. It is a potent local example of a broader rebalancing occurring across the U.S. industrial real estate sector, especially in other high-cost, port-adjacent markets. After years of relentless demand and double-digit rent growth, a combination of elevated interest rates, moderating consumer demand for goods, and a wave of new construction deliveries has cooled the national market.

Neighboring Los Angeles County has seen its industrial vacancy rise to its highest level in a decade, with asking rents falling nearly 20% from their 2023 peak. Similarly, the New York/New Jersey market, serving the East Coast's largest port, has seen vacancy climb for ten consecutive quarters before showing recent signs of stabilization. In these markets, as in Orange County, landlords are increasingly turning to concessions to secure deals in a slower leasing environment.

The current climate marks a significant departure from the frenzied pace of 2021 and 2022. For tenants, it represents a period of strategic opportunity to secure space on more favorable terms. For landlords and investors, it necessitates a shift in strategy, prioritizing occupancy and stable cash flow over the aggressive rent growth of the recent past.