Santa Ana Warehouse Market Stabilizes
The Winter 2026 Allen Matkins/UCLA Anderson Forecast indicates a period of stabilization for the warehouse and logistics property market in Santa Ana and Orange County. After two years of volatility, vacancy rates have steadied and rental growth is modest. The forecast suggests strategic investment in high-demand submarkets will remain a sound strategy, though the era of speculative building has ended.
- Orange County's industrial market stabilization follows a period of rising vacancy, which saw the rate climb to 6.3% by the end of 2025, a significant increase from the record-low 1.8% seen previously. The fourth quarter of 2025 marked a turning point with the first positive net absorption in nearly three years, signaling an end to the county's longest market contraction on record. - A key trend is the bifurcation of the market, where smaller-format industrial buildings are leasing much faster than larger warehouse facilities. Vacancy rates for small-bay properties were as low as 4.1%, while properties over 50,000 square feet experienced higher vacancy rates, reaching 8.4% in mid-2025. - Investor activity in Orange County's industrial sector surged in 2025, approaching record highs. Institutional buyers and REITs like Prologis, Rexford, and Ares have been major players, collectively accounting for over a third of the total sales volume. - In a sign of market adaptation, a 122,000-square-foot warehouse at 2601 S. Garnsey St. in Santa Ana was acquired in January 2026 for $31.8 million by WareSpace. The property is being redeveloped to cater specifically to small businesses and e-commerce operators, offering flexible lease terms and spaces ranging from 200 to 2,000 square feet. - Landlords have adjusted to the cooler market by offering more concessions, such as free rent, to attract tenants and accelerate transactions, particularly for larger, newly delivered projects that remained unoccupied. - Santa Ana's strategic location remains a primary market driver, with its direct access to the I-5, I-405, SR-55, and SR-22 freeways and its proximity to the Ports of Los Angeles and Long Beach. - The growth of e-commerce continues to be a fundamental driver of demand, influencing the need for both large distribution hubs and smaller, last-mile delivery facilities. This has led to an increased demand for modern logistics capabilities in industrial properties. - Looking ahead in 2026, market stability is anticipated as the pipeline for new construction has declined significantly from its recent peak, which is expected to allow for the gradual absorption of vacant space.
