Rents Inch Higher Despite Multifamily Vacancy Uptick in Orange County

While the pace of multifamily deliveries slowed in recent months, the elevated completions in 2023 and 2024 continue to impact the market. Apartment rents have trended higher, posting an annual increase of 1.7%, the most significant since early 2023. This growth was primarily driven by gains in Huntington Beach and Newport Beach, which posted annual rent gains of 5.8% and 5.7%, respectively. Despite rising rents, the vacancy rate inched up to 4.5%, an above-trend figure for Orange County, though still below that of most major markets. This increased vacancy is not reflective of weak demand; the region absorbed 2,550 net units over the past year, a figure that is consistent with long-term area trends. Orange County apartments have typically recorded net move-ins ranging from 2,000 to 4,000 units annually since 2014.

Multifamily investment activity has been modest to this point in the year, closely tracking levels from recent quarters. At the beginning of this year, only one significant property changed hands, but it was one of the largest transactions in Orange County in recent years and sold at an elevated per-unit price. Over the past 12 months, the median price per unit in the region held steady at $361,000, in line with recent years. Santa Ana accounted for the largest share of transaction activity, representing more than 40% of all sales, while Anaheim comprised nearly 30%. This marks a significant shift compared to historical patterns; from early 2015 through the first quarter of last year, Anaheim and Santa Ana made up just 18% and 15% of multifamily sales, respectively. Additional trades took place in Huntington Beach and Irvine during the past year. Cap rates have remained relatively steady following their rise in 2023.

Looking ahead

Recent trends are expected to continue in Orange County, driven primarily by ongoing supply growth. Multifamily deliveries have increased each year since bottoming out at only about 1,000 units in 2021. Despite modest completions so far in 2025, developers are on track to complete 4,000 units this year, about a 2% increase in total inventory levels. New supply growth will not impact all submarkets equally, however. More than 70% of the region’s multifamily construction will be delivered in Irvine, including two projects with over 1,000 units each. This heightened activity could result in softer property fundamentals in and around Irvine, while the rest of the region is expected to perform more favorably.

Shifts in operating conditions in Orange County have been mixed in recent periods, though they remain stronger than in many other major markets, which should ultimately drive investor interest to the region. Sales activity slowed in the first quarter, influenced in part by the January 2025 wildfires that disrupted market dynamics in nearby Los Angeles, but a handful of properties remain available and are expected to trade in the coming quarters. Despite this, total transaction volume in 2025 may not match 2024 levels after a slow start to the year. Additionally, perpetually low cap rates in Orange County may prevent deals from penciling.

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