Q2 2023 Retail Market Outlook – Orange County


A changing economy has caused sluggish demand for retail space in Orange County’s post-pandemic
recovery in Q2 2023. Landlords are currently grappling with a slow progression as retailers pivot back to
brick and mortar and occupy some of the retail space that was previously vacated during the pandemic
shutdown. However, progress in this regard has been slow. As of Q2 2023, the total vacant square footage
on the market has decreased by 247,608 square feet compared to Q2 2022, bringing it down to 6 million
square feet. Occupancy is still just 78,936 square feet short of its Q2 2020 levels when the rapid pace
of space vacating began. Orange County’s retail market has made significant strides toward returning to
pre-pandemic vacancy levels. Currently, the vacancy rate stands at 4.3%, which is well below the peak
rate of 6.7% during the Great Recession in Q3 2010.


Landlords will continue to make adjustments to their asking rents as they work towards improving cash
flow and filling vacant spaces. In South Orange County, where approximately 1.6 million square feet of
retail space sits vacant, the largest inventory in the region, there has been a 2-cent decrease in asking
rent for direct space on a quarter-over-quarter basis, lowering it to $2.97 per square foot triple net. In the
Airport area, which boasts the region’s most prestigious retail spaces and leads Orange County with the
highest average rent, Q2 saw a net gain of 69,540 square feet in positive absorption, resulting in a 30-basis
point reduction in vacancy to 3.4%. Nevertheless, the average asking rent in this area decreased by 3.2%,
contributing to a 27.1% increase in leasing volume quarter over quarter. Property owners will need to
absorb additional costs to entice replacement tenants, and some may still face challenges filling large
second-generation vacated spaces.