Second Quarter 2025
Ventura County Office Market Resets to 2024 Levels, with Vacancy Back at 12.4%
Although vacancy remains elevated at 12.4%, leasing and sales activity are gaining momentum as the market adapts to shifting demand and pricing.
Tenants pursue value in discounted sublease space, landlords adjust asking rents, and investors respond to changing market dynamics.
MARKET OVERVIEW
The Ventura County office market’s recovery is ongoing but continues to face challenges in boosting occupancy. Landlords, grappling with weak demand and elevated vacancy, have begun adjusting asking rents to address the persistent surplus of unleased space.
Vacancy rates have fluctuated in the first half of 2025. While the overall rate rose 30 basis points from Q1, it remained unchanged year over year at 12.4%. In Q2, total vacant office space increased by just 7,530 square feet compared to the prior year, suggesting the market may be treading peak vacancy for this cycle. The pace of growth in vacancy has begun to stabilize, driven by shifting remote work trends and changes in space utilization strategies.
However, since mid-2024, the amount of office space actively being marketed for lease, known as direct available space, has increased by 390,097 square feet, reflecting a market still in adjustment. Availability has remained above the pandemic shutdown peak for five consecutive years. Sublease space has also remained significantly elevated, rising 117% since 2020 to 557,729 square feet, levels not seen since the Great Recession.
Along with the increase in available office space, asking rents have shown modest growth. Rents rose 5 cents from the prior quarter to $2.54 per square foot on a full-service gross basis, up 3.7% year over year. This resilience can be partly attributed to an 11.6% increase in year-to-date leasing volume compared to the same period last year, as well as landlords hedging the market as more space becomes available in a tenant favorable environment.
TRENDS TO WATCH
Tenants seeking value may find opportunities in buildings with vacant sublease space. In the first half of 2025, tenants subleased 58,184 square feet in Ventura County, a more than twofold increase compared to the same period in 2024. The trend of offloading excess space through subleasing continues to taper off, with a notable 6.1% drop in available sublease space by mid-year. This decrease was particularly pronounced in the West submarket, which saw a 41.8% reduction in vacant sublease space, compared to just 4.7% in the East.
As subletting activity grows, the average asking rent for sublease space in Q2 was $2.14/SF, reflecting a 15.7% discount ($0.40) compared to direct space. Sublessors, motivated to offload space that has sat on the market for extended periods, continue to offer lower rents to stay competitive.
Office demand in Ventura County remains closely tied to labor market conditions, corporate earnings, and return-to-office trends. According to the California Labor Market Information Division, the unemployment rate rose to 5.0% in June, up from 4.5% a year earlier. Job losses in office-occupying sectors contributed to the slowdown, with employment in Finance and Insurance declining by 2.9% and Real Estate by 6.3%.
Employers, key drivers of office demand, are expected to remain cautious in their real estate decisions. Elevated occupancy costs, coupled with the Federal Reserve’s decision to keep interest rates higher for longer, are making financing more expensive and potentially dampening leasing activity and pricing.
Investment trends reflect this caution. The average cap rate for office properties rose 280 basis points year-over-year to 8.4% in Q2 2025, contributing to a 37.4% decline in average sale price per square foot, which dropped to $168/SF.
Still, sales activity showed signs of momentum. Sales volume for the first half of the year totaled 621,716 square feet, up 58.7% from the same period last year. The average building size sold increased to 38,857 square feet, up from 11,008 square feet in Q2 2024. Sales are expected to continue into the second half of the year, driven by adjusting market values.
