Second Quarter 2025
Orange County’s Multifamily Market Holds Firm in First Half of 2025
Rising rents, driven by steady demand and constrained supply, underscore the multifamily market’s resilience.
Population growth and high single-family home prices continue to support demand, but construction headwinds and interest rates are capping new supply.
MARKET OVERVIEW
Orange County’s multifamily market has experienced significant pent-up rental demand over the past year, driven by new residents moving into the area and the high cost of single-family homes. According to the California Department of Finance, the county’s population increased by 0.2% between 2024 and 2025, reaching more than 3.18 million residents. The California Association of REALTORS® reported that the median sold price of existing single-family homes reached $1,470,000 in June, up 1.4% from the previous year and 3.6% from May. This demographic growth, combined with rising home prices, has fueled multifamily development, with 6,470 units under construction as of Q2. While that figure marks a modest 2.0% increase from the prior quarter, it reflects a sharp 26.9% decline compared to Q2 2024.
Despite strong demand, only 960 new units were added in the first half of 2025, representing just a 3.0% increase from the same period last year. This underscores the ongoing pressures facing multifamily development. Persistently high interest rates and elevated construction costs continue to limit new supply. Even so, newly completed units contributed to an increase in average asking rents. Rents rose 0.7% quarter over quarter and 1.7% year over year, reaching a record $2,698 per unit per month.
Vacancy remained flat compared to the previous quarter but edged up 10 basis points year over year to 3.8%. With fundamentals holding relatively steady, sales activity improved in the second quarter of 2025. A total of 1,500 units sold, up 21.1% quarter over quarter from the slow start in Q1. However, the year-to-date total was 22.6% below the same period in 2024. The average sale price per unit rose to $440,453, increasing 15.8% from the prior quarter and 11.8% year over year. The average cap rate rose 30 basis points year over year to 4.8%. These trends indicate a stable market environment where steady demand and limited supply combine to support continued price growth as economic conditions continue to shift.
TRENDS TO WATCH
Orange County’s economic fundamentals remain resilient as the market moves into the second half of 2025. Shifts in employment, housing trends, and population growth will continue to influence the region’s expansion, although at a more moderate pace. According to the California Department of Finance, Placentia (2.5%), Orange (1.0%), and Irvine (0.8%) led population growth between 2024 and 2025. Irvine, with a population of 318,629 and second only to Anaheim, accounts for 64 percent of the county’s 4,082 units under construction, despite a lower growth rate among the top three cities. Located in the Airport submarket, Irvine commands an average asking rent of $3,238 per month, about 20% higher than the countywide average. Rents increased 1.6 percent year over year. The city’s elevated level of construction activity highlights its growing prominence in the multifamily market.
Irvine Company’s Colonnade at The Marketplace, with 1,261 units under construction, remains the county’s largest development and is set to open in Fall 2025. This mixed-use project will include more than 130 restaurants, shops, fitness studios, grocery stores, coffee shops, and entertainment venues, all serving Irvine’s growing population. Notably, 20 percent of the units (211) are designated as affordable housing, with 60 percent targeted at middle-income workers.
Developers are capitalizing on these trends through strategic acquisitions. A standout deal this quarter was Crescent Heights, a Miami-based developer, owner, and operator of mixed-use high-rises, acquiring the 350-unit Skyline at MacArthur Place, a 25-story, two-tower apartment complex, for $239.6 million, or approximately $684,571 per unit. This transaction reflects investor optimism in the face of tightening supply and rising rents.
Affordability and employment remain critical drivers of multifamily performance. According to the California Employment Development Department, the unemployment rate in the Anaheim–Santa Ana–Irvine Metropolitan Division rose to 4.5% in June 2025, up from 3.6% in May and 4.1% a year earlier. Employment trends continue to influence occupancy rates in newly delivered projects. While Orange County benefits from a diverse economy, investors are navigating elevated interest rates and evolving market conditions, contributing to increased transaction activity.
