Fourth Quarter 2025
Orange County Retail Continues Steady Recovery, Despite Chain Store Closures
Vacancy edges slightly higher, but leasing activity and investment gains signal resilience and repositioning opportunities across prime trade areas.
Despite bankruptcies and shifting consumer trends, OC’s retail market shows measured growth, steady rents, and strong investor interest heading into 2026.
MARKET OVERVIEW
Orange County’s retail market recovery in 2025 has been steady, as economic shifts tempered demand for retail space in the second half of the year. Landlords continue to see gradual progress as retailers return to brick-and-mortar locations vacated during the pandemic.
A wave of bankruptcies among major retail chains, including Forever 21, Joann’s, Rite Aid, and Hooters, added strain. These closures, driven by declining revenues alongside rising supply chain and labor costs, created additional challenges for the market.
Despite these obstacles, recovery is underway. Total vacant square footage declined by 424,132 square feet compared with Q4 2024, leaving overall vacancy slightly above 5.3 million square feet. Occupancy also expanded by 930,000 square feet compared with Q4 2020, when pandemic-driven vacancies peaked. The current vacancy rate stands at 3.8%, a 10-basis-point increase quarter-over-quarter but 30 basis points lower than the same period last year.
Landlords have largely held rents steady while attracting tenants, with the average asking rent unchanged at $2.45 per square foot triple net both quarter-over-quarter and year-over-year. Leasing activity started slowly early in the year but gained momentum, rising 15.0% quarter-over-quarter. Year-to-date leasing totaled nearly 2.6 million square feet, though this remains 21.1% below 2024 levels.
Sublease vacancy fell 15.2% quarter-over-quarter as retailers absorbed excess space. However, vacant sublease space increased 55.3% year-over-year, reflecting broader bankruptcies and continued adjustments to shifting consumer behavior.
Investment activity strengthened. The average sale price per square foot rose 5.6% quarter-over-quarter to $573, approximately $108 higher than one year ago. Sales volume reached $1.53 billion year-to-date, more than two and a half times 2024’s total. Construction activity also increased, with retail space under construction rising 16.9% quarter-over-quarter to 345,304 square feet, up 50.2% from the same period last year. While progress remains measured, Orange County’s retail market continues to move forward on a recovery path well beyond the pandemic period.
TRENDS TO WATCH
Consumer spending continues to anchor the retail market, demonstrating resilience as retailers, investors, and developers recalibrate. Even with economic headwinds, demand for well-located retail space is evolving rather than retreating, and investor interest in prime corridors remains steady.
A recent example illustrates how quickly plans can shift and how opportunity follows. Amazon Fresh had leased the 50,000-square-foot former Dick’s Sporting Goods at Laguna Hills Plaza (24821 Alicia Parkway) and was in the midst of re-tenanting it into a new grocery store, with construction continuing through mid-2025 and a planned early 2026 opening. The project has since been shelved as Amazon narrows its brick-and-mortar grocery footprint to focus on delivery and Whole Foods Market. The center’s former Big Lots anchor also closed following the chain’s bankruptcy restructuring. While these closures create near-term vacancy, they also open the door for repositioning. High-visibility grocery boxes and strong infill locations are likely to attract new concepts or potential Whole Foods conversions, underscoring how quickly prime real estate can be reabsorbed.
Elsewhere, under-construction retail projects that have already secured a diverse mix of tenants highlight ongoing, selective expansion in key trade areas. T&T Supermarket signed a 34,881-square-foot lease at The Canopy at Great Park in Irvine, currently under construction, while leasing at the Dana Point Harbor redevelopment includes Riviera Yacht Charters taking 500 square feet at 34675 Golden Lantern Street. In Newport Beach, Uchi leased 5,096 square feet at 2510 W. Coast Highway, reflecting sustained demand for prime restaurant space. In Placentia, Chick-fil-A leased 7,500 square feet at the southeast corner of S. Rose Drive and Alta Vista Street and is scheduled to open April 1, 2026. Additional projects underway includes a 4,428-square-foot Kia dealership under construction on Auto Center Drive in Tustin and a 2,673-square-foot bank branch space leased by Chase at 155 E. Chapman Avenue in Fullerton.
Together, these shifts point to a broader theme heading into 2026. Store closures and strategic pullbacks are not simply contractions. They are catalysts for repositioning and backfilling in strong trade areas. As the market continues to normalize, well-located vacancies are expected to lease up, reinforcing retail’s ongoing recovery rather than retreat.
