Multifamily Rents in Orange County Gain Momentum in the Second Half of 2024

Construction of apartment properties has been on an upswing in Orange County during the past few years, after deliveries of new units were limited in 2021 and 2022. While there was a pause in deliveries during the fourth quarter, the nearly 2,800 units that came online in 2024 marked the county’s highest annual completions total since 2018. The addition of units to the overall rental supply resulted in a modest vacancy rise in 2024, but demand for units was strong enough to support rent increases in the second half. Performance varied between submarkets, with the North Santa Ana recording solid improvement. North Santa Ana had the largest decrease in vacancy and steepest rent growth of any other submarket in 2024, as recently delivered properties leased-up. Conditions softened a bit in Irvine, but the submarket still leads the area in rent growth over the past three years, with rents rising more than 11.4 percent in that span.

Multifamily investment activity was light in the fourth quarter, continuing trends that began in early 2023. Transaction volume was down across most submarkets including North County which has historically been one of the most active submarkets in Orange County. While activity in North County dipped, Anaheim led the region in trade volume, making up 30 percent of all sales in 2024. The Huntington Beach/Seal Beach submarket also performed well compared to the overall market. While accounting for 20 percent of annual sales, the median price in this submarket was $385,400 per unit, up 5 percent from last year. This makes Huntington Beach/Seal Beach the only area of Orange County to record an increase in pricing from 2023 to 2024.

Looking ahead

The Orange County multifamily market is expected to record another healthy year of operating conditions in 2025, although a rise in deliveries will likely result in a vacancy uptick. This year will mark the fourth consecutive year where the pace of deliveries will accelerate, after new apartment construction stalled in the period immediately after the Covid disruption. While deliveries are increasing, additions to the overall market inventory will be fairly modest. Still the pace of supply growth will likely exceed the rate of economic expansion and demand growth. Rents should continue to push higher across Orange County, although there could be an uptick in concessions in areas such as Irvine and Anaheim, where the bulk of the new construction projects are located.

Investors targeting low multifamily vacancies and rising rents are expected to pursue opportunities in Orange County in the coming year. Real estate markets across Southern California were severely impacted by wildfires in January, which has added uncertainty to the local investment market. There will likely be some additional demand for housing across the region by people displaced by the fires, but the availability and costs of insurance will be a primary consideration for multifamily investors. Cap rates in Orange County have been stable since 2023 and average levels will likely not shift much during the next year. The increase in new development in recent years could drive a bit of transaction activity as developers execute exit strategies on recently completed properties.

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