High demand and low supply – that’s the state of Orange County’s apartment market, and people who want to live here don’t have many options, at least for now.
The start of 2025 is promising for owners in the multifamily market, as rental demand for the region south of Los Angeles and north of San Diego is forecast to perform better than the rest of the country.
The recent fires in Los Angeles County that burned thousands of residential homes have reportedly caused a surge in rental demand in Orange County.
The supply of new multifamily developments is likely to lag compared to other California metro areas, according to reports on Orange County’s apartment market.
Several multifamily developments are currently under construction with roughly 4,000 new apartment units slated to come online this year. According to market researcher Marcus & Millichap, it’s the highest delivery of apartments in seven years and aligns with record volumes expected nationwide.
More are on the way.
Another 2,900 rentals are scheduled for renters in 2026.
The Marcus & Millichap report labeled Orange County as one of the tightest rental markets in the country, saying it was the only metro area outside of the Northeast U.S. with less than 5% vacancy.
Rent demand is due, in part, to Orange County’s median home price of $1.37 million, which is “funneling many would-be homeowners into these rentals.”
Average monthly rents for an apartment in Orange County, per Kidder Mathews, are $2,065 for a studio, $2,370 for a one bedroom, $2,860 for a two bedroom and $3,240 for a three bedroom.
Supply might be improving, particularly in North and Central Orange County.
Two out of every three apartments slated to come online are being built in Irvine and Santa Ana. Most of the remaining multifamily developments are north of these two cities, per Marcus & Millichap.
“The lack of construction in South County appears warranted, as the area is home to the highest local vacancy,” the Marcus & Millichap report said.
Kidder Mathews, in its most recent multifamily report for Orange County, highlighted five projects underway right now that would bring more than 3,000 apartment units online this year.
Those projects are the 1,281-unit Colonnade at The Marketplace, 1,100-unit 88 Pacifica, 876-unit Volar, 380-unit Brea Mall redevelopment and 371-unit The Pistoia.
Big Play in Irvine
Most of the new apartments forecast this year are coming to Irvine.
Colonnade at The Marketplace, 88 Pacifica, Volar and The Pistoia could bring 3,608 apartment units online in Irvine by the end of 2025.
Newport Beach-based Irvine Company could complete its ambitious 1,261-unit apartment project at The Irvine Marketplace by the third quarter of this year. Colonnade at The Marketplace is being built on the Irvine half of the sprawling retail center that straddles the Irvine-Tustin border.
Colonnade is the first of several apartment projects planned for Irvine, with as many as 4,500 rental units planned in the city over the next few years.
About 20%, or 211 units, would be set aside as affordable housing. An additional 60% of units would be available for local workers who earn between $50,000 and $110,000, annually.
The multifamily project is replacing 200,000 square feet of retail space formerly occupied by tenants such as Barnes & Noble, Hobby Lobby and Bed Bath & Beyond.
Irvine Co. is also developing 1,100 new units across 500,000 square feet at 88 Pacifica in Irvine’s Spectrum area. CoStar data shows 88 Pacifica could be completed by November.
Then there’s Volar, the multifamily development being built in the Irvine Business Complex (2192-2302 Martin Road). Garden Homes, according to CoStar, could finish the apartment campus by June. Volar would feature 876 units across 900,000 square feet and three buildings. On-site amenities would include cabanas, a conference room, fitness area, game room, lounge, pool and spa.
Also, in the works at the Irvine Business Complex is The Pistoia (2581 Kelvin Ave.). The 371-unit development would be built within one five-floor building and cover 390,000 square feet, with an attached garage. Construction is expected to be completed by May, per CoStar.
Kajima U.S.A. Inc. is the project’s developer, with Humphreys & Partners Architects serving as the architect.
From Sears to Apartments, Simon Says
Indianapolis-based Simon Property Group Inc. has been planning for years to convert a former Sears at the Brea Mall into a seven-floor, 380-unit apartment building. The Brea Mall redevelopment project could bring those apartments online by the second quarter of this year, per Kidder Mathews.
An underground parking structure is also planned for the apartment building.
AO, the project’s architect of record and the largest architectural firm in Orange County, said the apartment project would include a clubroom, roof deck, courtyards, fitness center, pools, spa and lounging areas, once completed.
Construction started in October 2023 and is slated to finish in May, per CoStar. The Sears store was demolished to make way for the apartment building.
Cautiously Optimistic Market Conditions
Low vacancy rates, interest rate cuts, statewide legislation and the fate of a voter initiative could create favorable opportunities for multifamily investments, per Marcus & Millichap.
“Orange County’s standing as the West Coast’s least vacant major apartment market continued to generate investment activity over the 12-month period ended in June [2024],” per Marcus & Millichap. “Recent deal flow matched that of the prior yearlong span, with 1031-exchange transactions and properties that had a hold period of less than five years accounting for a notable share of trading.”
Low vacancy rates and increasing rents for what Marcus & Millichap labeled as lower-tier listings, particularly in Anaheim and Central Orange County cities west of Interstate 5, are becoming attractive to potential buyers.
The enactment of Senate Bill 1211 has also helped multifamily properties become attractive to investors. The bill allows as many as eight accessory dwelling units, or ADUs, on lots with existing multifamily dwellings.
“Interest rate cuts should draw investors off the sidelines,” per the Marcus & Millichap report.
