REAL ESTATE NEWS

Orange County's apartment market in Q2 2026 reflects a balance between elevated supply and steady fundamentals, according to a new Q2 report from Northmarq.

Vacancy held firm at 4.6%, unchanged from the prior quarter and only 10 basis points higher than a year ago.

"The Orange County rental market continues to have very good growth fundamentals and is a country leader," Peter Hauser, Northmarq senior vice president, told GlobeSt.com. "Limited new supply is being absorbed, and the rental market remains healthy with positive rent growth forecasted into 2027."

Submarkets such as Anaheim, Costa Mesa and Buena Park posted notable improvements, with Anaheim's vacancy dipping to 3.6% and the latter two registering exceptionally tight conditions at 1.3% and 1.8%, respectively.

Despite the influx of new units, absorption remained positive, with about 1,100 net move-ins over the past year, though the pace has slowed. Looking ahead, the vacancies are forecast to edge up modestly to 4.8% by year-end as deliveries peak.

Supply has surged, with nearly 3,200 units delivered in the first half of 2026—quadruple last year's pace—driven by a handful of large projects. Still, the construction pipeline has contracted to 3,450 units, down 40% year-over-year, signaling a near-term slowdown in starts.

Permitting activity, however, accelerated, with about 2,000 units approved year-to-date compared to 1,600 in the same period of 2025. Overall, completions are expected to reach a cyclical high of 4,400 units this year, roughly double 2025's total.

Rents continued to climb, albeit modestly. The average ask rose 0.6% in the quarter to $2,655 per month, up 1.1% year-over-year. Submarkets such as Laguna Beach/Dana Point and Laguna Hills led rent growth, posting increases of 2.8% and 2.7%, respectively.

Class B and C properties outpaced Class A in rent growth, with combined average asking prices per square foot rising 1.2% in the lower tiers compared to just 0.2% for Class A. Forecasts call for rents overall to reach about $2,660 per month by year-end, with annual growth of 1%.

Employment trends remain a mixed backdrop. Jobs declined slightly over the past year by 200, though this marks an improvement from prior losses. The unemployment rate stands at 4.1%, lower than Los Angeles's 5.3%.

Leisure and hospitality added 7,200 jobs, while retail expanded by 2,100 positions. Government payrolls, however, contracted sharply, falling more than 10%. Employment is forecast to grow modestly in 2026, with about 2,000 jobs added, a 0.1% increase.

Investment activity has been steady, with transaction volume in line with recent years. Median pricing rebounded by 6% from 2025 to $326,700 per unit, though it is still 15% below the 2021 peak.

Cap rates averaged 5%, consistent with the past three years, with Class C assets trading closer to 5.5% and Class A/B properties in the mid-4% range. Sales have concentrated in Anaheim, Garden Grove, and Brea, with Class C assets dominating the mix.

Source: GlobeSt/ALM