Economic Overview
Orange County (OC) nonfarm employment increased by 4,300 jobs, or 0.3% year-over-year (YOY), between August 2025 and August 2026, reflecting modest growth concentrated outside traditional office-using sectors. Private education and health services led gains (+10,100 jobs, +3.5% YOY), driven by health care and social assistance (+8,200 jobs), while leisure and hospitality added 5,100 jobs (+2.1%). Six sectors declined, losing a combined 11,900 jobs, with government recording the largest decrease (-3,800 jobs, -2.7%). All three major office-using sectors contracted, as professional and business services lost 3,500 jobs, information declined by 1,200 jobs and financial activities shed 300 jobs.
The monthly unemployment rate was 4.4% in August 2026, down from 4.6% in August 2025 and above the Q3 2026 average of 3.9%.¹ Looking ahead, total employment is projected to grow 0.9% in 2026 and 0.7% in 2027, below the five-year historical average of 1.7%.² As a result, office demand is expected to recover gradually, with leasing activity continuing to be driven by higher-quality space and selective tenant expansion.
Supply And Demand
During Q3 2026, OC's office market recorded a second consecutive quarter of modestly negative absorption, though fundamentals remained well ahead of year-ago levels. The overall vacancy rate was 14.2%, up 30 basis points (bps) quarter-over-quarter (QOQ) but down 280 bps YOY and well below the Q1 2024 peak of 17.8%. Overall net absorption totaled negative 8,765 square feet (sf), bringing year-to-date (YTD) net absorption to nearly 1.1 million square feet (msf). Class A continued to outperform, absorbing 181,652 sf, while Class B gave back 169,355 sf, underscoring occupiers' preference for higher-quality space.
At the submarket level, Central County drove the decline, giving back 95,077 sf, while the Greater Airport Area added 93,373 sf. Notable move-ins during the quarter included 70,640 sf at 600 Anton Boulevard in Costa Mesa, 34,174 sf by National Services Group in South Santa Ana and 32,621 sf by SpyGlass Pharma in Irvine Spectrum. Sublease availability edged up 3.7% QOQ to 1.9 msf but remained down 18.2% YOY.
Leasing activity totaled nearly 1.6 msf in Q3 2026, down 2.5% QOQ and 6.7% YOY
Pricing
Despite a modest uptick in vacancy, asking rents firmed during the quarter. The overall average asking rent rose 1.2% QOQ and 1.1% YOY to $2.93 per square foot (psf) per month on a full-service gross basis, its highest level since Q3 2021. The Class A average asking rent increased 1.7% QOQ and 1.9% YOY to $3.22 psf, while the Class B average asking rent rose 0.9% QOQ and 1.2% YOY to $2.54 psf. Rents in the Greater Airport Area led gains, up 5.0% YOY to an average of $3.27 psf. Trophy assets continued to command a premium, with asking rents ranging from $5.15 to $9.50 psf. To attract and retain tenants while preserving face rents, landlords continued to offer generous concession packages, including free rent and tenant improvement allowances.
Future Inventory
The development pipeline remains limited, with 277,079 sf underway and no projects delivered YTD. Activity is concentrated in two projects: Advantech's 108,942-sf build-to-suit (BTS) North American headquarters in Tustin (South of I-5), scheduled for completion in October 2026, and The Weave @ OCVIBE, a 168,137-sf Class A development in the Stadium Area expected to deliver in Q2 2027. Beyond these projects, the broader pipeline remains largely on hold as higher construction costs and financing challenges continue to constrain new development.
Sales Activity
Office sales in OC totaled $586 million (M) across eight transactions in Q3 2026, up 74% QOQ from $336M in Q2 2026 and 35% YOY from $436M in Q3 2025, marking the highest quarterly volume since Q4 2021.³ Activity was headlined by Broadcom's $325M acquisition of the 660,900-sf campus at 15101-15191 Alton Parkway in Irvine Spectrum, which accounted for 55% of quarterly volume. Other notable trades included Greenlaw Partners' $98M purchase of 100 Bayview Circle in Newport Beach and homebuilder Taylor Morrison's $68.7M acquisition of Tustin Financial Plaza, which is slated for residential redevelopment. Owner-users (41%) and private investors (41%) led 2026 YTD acquisitions, while private owners (40%) and institutional owners (38%) accounted for the largest shares of dispositions. The trailing four-quarter average sale price was $322 psf, up from $221 psf a year earlier.
