Market Snapshot: A Cooling Trend with Long-Term Potential

The Orange County medical outpatient sector showed signs of moderation in Q4 2024, with slight declines in leasing activity and rising vacancies. However, underlying fundamentals—including steady healthcare job growth and ongoing development—suggest resilience in the long-term outlook.

Key Q4 2024 Metrics at a Glance

✔ Healthcare Employment: 175,600 jobs (+2,700 QoQ / +5.4% YoY)
✔ Average Lease Rate: **$2.83NNN/sq.ft.\ast \ast (down$0.01 from Q3)
✔ Highest Submarket Rent: Greater Airport Area ($3.20 NNN/sq. ft.)
✔ Net Absorption: -15,096 sq. ft. (Year-to-date remains positive at +19,852 sq. ft.)
✔ Vacancy Rate: 6.5% (up from 6.3% in Q3)

Market Dynamics: What’s Driving the Shift?

1. Leasing Activity Softens, But Key Submarkets Hold Strong

• West OC led absorption with +3,754 sq. ft. leased, demonstrating continued demand in coastal areas.

• The minor dip in average rents (-$0.01) suggests landlords are adjusting to maintain occupancy.

2. Rising Vacancy Signals Short-Term Rebalancing

The uptick in vacancy (6.3% → 6.5%) and availability (10.3% → 10.4%) reflects:

• Some tenant consolidation post-pandemic

• New supply entering the market (see Development Pipeline below)

3. Healthcare Job Growth Supports Future Demand

With 5.4% annual employment growth, the need for outpatient facilities remains on a long-term upward trajectory—hinting at a potential rebound in leasing activity.

Development Pipeline: New Projects to Watch

Despite the quarterly slowdown, Orange County’s medical outpatient development pipeline remains active:

Under Construction (34,696 sq. ft. total)

• Shoreline Dental (San Clemente) – 6,000 sq. ft. | Completion: Q1 2025

• BeWell OC Building A – 23,500 sq. ft. | Completion: March 2025

• 4552 Katella Ave Medical Office – 5,196 sq. ft. | Completion: Early 2025

Planned Developments

• 228,000 sq. ft. of new medical office space in planning stages

• 448,416 sq. ft. of assisted living facilities proposed

What This Means for Market Participants

For Tenants:

• Negotiation opportunities may arise as landlords compete for tenants in a slightly softer market.

• Newer facilities (like BeWell OC) will soon offer modern space options.

For Investors & Developers:

• Short-term absorption dip doesn’t negate long-term demand drivers (aging population, healthcare job growth).

• Assisted living projects (448K+ sq. ft. planned) represent a growing niche.

For Sellers:

• Premium assets in high-demand submarkets (e.g., Greater Airport Area) continue to command top rents.

Bottom Line

While Q4 2024 showed temporary cooling, Orange County’s medical outpatient market remains fundamentally healthy. Expect stabilization in 2025 as new deliveries meet persistent demand from healthcare providers.

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???? Orange County Medical Space

The Los Angeles medical office market, which includes Orange County, has seen robust sales activity in recent months, though rent growth remains subdued. According to a recent report, investor demand for medical office properties remains strong, but economic pressures are keeping rental rates in check.

Key Trends in the Orange County Medical Office Market

1. High Demand for Medical Office Properties

Despite broader economic uncertainty, medical office buildings (MOBs) continue to attract investors due to their stable tenant base and long-term leases. Healthcare services are essential, making MOBs a recession-resistant asset class. In Orange County, well-located properties near hospitals and major healthcare systems are particularly sought after.

2. Sales Activity Remains Strong

Transaction volumes for medical office spaces in Southern California have been steady, with institutional buyers and private investors competing for high-quality assets. Cap rates have remained relatively low, reflecting strong demand. However, rising interest rates have slightly tempered deal flow compared to the peak of 2022-2023.

3. Limited Rent Growth Ahead

While demand is strong, rent growth has been modest due to economic headwinds. Many healthcare providers are facing higher operational costs, making aggressive rent increases difficult. Landlords are focusing on tenant retention by offering flexible lease terms and property upgrades rather than pushing for higher rents.

4. New Development Faces Challenges

Construction costs and financing hurdles have slowed new medical office developments in Orange County. Those projects that do move forward are typically affiliated with major health systems or located in high-demand areas like Irvine, Newport Beach, and Anaheim.

What This Means for Orange County Tenants & Investors

• Tenants: Now is a good time to secure favorable lease terms, as landlords prioritize occupancy over rent hikes.
• Investors: Medical office properties remain a stable investment, but buyers should focus on well-located assets with strong tenant covenants.
• Sellers: The market remains favorable for those looking to divest, with continued interest from buyers.

Looking Ahead

While the Orange County medical office market remains active, rent growth is expected to stay moderate in the near term. Investors and healthcare providers should stay informed on market trends to make strategic decisions.

For the latest listings and market insights, visit Orange County Medical Space.