Orange County favors small bays

Orange County’s industrial market is no longer moving as one block. In the first quarter of 2026, countywide vacancy rose while smaller industrial spaces continued to outperform larger buildings, according to local market reports and brokerage research. The shift has left many newer and larger logistics properties competing harder for tenants even as smaller bays remain relatively tight. In practice, that has pushed leasing conversations toward flexibility, term structure and functionality rather than pure scale. ### Why are small bays holding up while bigger buildings sit longer? Lee & Associates reported in April that Orange County’s countywide industrial vacancy rate had climbed to 6.6% in the first quarter of 2026 after rising from a record low of 1.8% in 2022. The same report said tenant demand had become scarcer for large requirements and that smaller industrial buildings were landing tenants in about four months, compared with more than nine months for buildings larger than 100,000 square feet. A broader Southern California report from Lee published on May 13 said sub-50,000-square-foot industrial space remained under 5% vacancy in many areas, including Orange County, even as the wider market normalized. The firm said those smaller spaces were being supported by local service businesses and tenants seeking more flexible footprints. ### What do the countywide numbers show? Cargile Commercial Group said Orange County’s industrial vacancy rate rose to 5.79% in the first quarter of 2026, with total availability at 8.07%. (lee-associates.com) The report said the gap between vacancy and availability reflected persistent sublease inventory, especially in the Irvine Spectrum and North County submarkets. Asking lease rates fell to $1.47 per square foot in the quarter, down 6.4% from a year earlier. (lee-associates.net) Lee’s Newport Beach office put the countywide vacancy rate slightly higher, at 6.6%, and said available space had expanded from 11.2 million square feet to 24.7 million square feet since 2022. The report also said free rent and other concessions had become common. ### Where is the pressure showing up most clearly? Orange County’s larger-box segment has been hit by both new deliveries and slower large-tenant demand. (cargilecg.com) Lee said several speculative projects completed in the past year remained available for lease, and cited a state-of-the-art logistics building at 2872 E. La Palma Ave. in Anaheim whose asking rent had been cut by more than half after sitting vacant since its 2023 completion. (lee-associates.com) WareCRE said in a May update that small-bay and multi-tenant properties were holding tighter vacancy than big-box logistics space, where sublease returns and speculative deliveries drove much of the softening. The same report said Orange County’s construction pipeline had fallen to 845,000 square feet, the lowest since 2020. ### Which tenants still fit the market? (lee-associates.com) Cargile Commercial Group said manufacturing-oriented facilities accounted for roughly 55% of lease transactions in the first quarter, while distribution product accounted for 38%. The report said precision fabricators, mechanical contractors and defense tenants made up much of the leasing activity, while traditional distribution users stayed more cautious. (warecre.com) That backdrop helps explain why smaller footprints are still moving. Lee said there was more tenant interest for buildings under 100,000 square feet, while its regional report said smaller spaces were being supported by local operating businesses rather than only large logistics users. ### What does this mean for landlords and brokers right now? (cargilecg.com) Orange County landlords with divisible, multi-tenant product have more room to match current demand bands than owners of larger vacant boxes. WareCRE said small-bay and multi-tenant properties were outperforming big-box space, while Lee said concessions were increasingly common across the market. (lee-associates.com) The next read on whether that split widens will come in second-quarter and midyear brokerage reports from firms including Lee & Associates, Kidder Mathews and other Orange County market trackers, which will show whether vacancy in larger buildings keeps rising or smaller-bay tightness begins to ease. (kidder.com) (warecre.com)