The Future of Santa Ana’s Commercial Real Estate Market

Santa Ana, California, nestled in the heart of Orange County, is a vibrant city known for its rich cultural heritage, dynamic urban environment, and strategic location near major economic hubs like Irvine and Los Angeles. As we look toward 2025 and beyond, the commercial real estate (CRE) market in Santa Ana is poised for significant evolution, driven by economic trends, demographic shifts, and changing business needs. This blog post explores the key factors shaping the future of Santa Ana’s CRE market, focusing on office, retail, industrial, and mixed-use sectors, while providing insights for investors, businesses, and stakeholders.

A Snapshot of Santa Ana’s CRE Market in 2025

Santa Ana’s CRE market is robust and diverse, encompassing approximately 3.7 million square feet of commercial space across 205 properties, including office, retail, and industrial assets. The city’s central location, cultural vibrancy, and accessibility make it an attractive destination for businesses and investors. According to recent data, there are 475 CRE listings available for lease, with office spaces leading at 1.46 million square feet, followed by industrial spaces at 1.28 million square feet, and retail at 304,740 square feet. The market is characterized by a competitive environment, with low vacancy rates in retail and industrial sectors and evolving dynamics in office spaces due to hybrid work trends.

Office Market: Adapting to Hybrid Work and Flexible Spaces

The office sector in Santa Ana is undergoing a transformation driven by the rise of hybrid work models and changing tenant priorities. In Q1 2025, Orange County’s office market reported a vacancy rate of 14.2%, reflecting broader challenges in the office sector due to remote work. However, Santa Ana’s office market is adapting through the growth of flexible workspaces and coworking environments, which cater to startups, small businesses, and hybrid teams.

Coworking spaces, occupying about 387 square feet in Santa Ana, are gaining traction as businesses seek cost-effective, scalable solutions. These spaces offer amenities like high-speed internet, shared conference rooms, and short-term leases, appealing to companies navigating economic uncertainty. Class A office spaces, while still in demand, face higher vacancy rates (20.3% in April 2025) compared to Class B properties, which benefit from stronger rent gains and lower vacancy growth.

Looking forward, the office market in Santa Ana is expected to stabilize in 2025, with limited new construction and conversions of office spaces to other uses creating positive net absorption. Submarkets like Saddleback View – Mabury Park are leading in office space availability, offering 118 CRE listings. Investors should focus on properties with modern amenities, such as large floor plates, high ceilings, and LEED certifications, which align with tenant demands for sustainability and wellness-focused environments. The $137 million sale of One & Two MacArthur Place in Santa Ana’s South Coast Metro submarket in Q2 2024 signals continued investor confidence in premium office assets.

Retail Market: Resilience and Experiential Growth

Santa Ana’s retail sector is a standout in the CRE landscape, benefiting from low vacancy rates and strong consumer demand. In Q1 2025, Orange County’s retail vacancy rate dropped to 3.0%, a 70-basis-point decrease year-over-year, driven by limited new supply and evolving consumer preferences. Downtown Santa Ana, with its rich cultural tapestry and vibrant arts and culinary scenes, is a hub for retail activity, offering a mix of historical charm and modern amenities.

The rise of experiential retail—think dining, entertainment, and boutique shopping—is reshaping Santa Ana’s retail market. Consumers are prioritizing experiences over traditional retail, leading to demand for smaller, more flexible retail spaces. Major retailers like Target and Walmart are adapting by opening smaller-format stores, a trend expected to continue into 2025. The lack of new retail construction, due to high costs and regulatory constraints, further tightens supply, driving rent growth and maintaining low vacancies.

For investors, retail properties in high-traffic areas like Downtown Santa Ana offer strong potential. The $3 billion Related Bristol project, a mixed-use development, exemplifies the city’s push toward vibrant, community-focused spaces that blend retail, residential, and office components. Properties with sustainability certifications, such as LEED, are particularly attractive, as they reduce tenant costs and align with growing environmental consciousness.

Industrial Market: E-Commerce and Logistics Drive Demand

Santa Ana’s industrial market remains a powerhouse, fueled by e-commerce growth and Southern California’s role as a global trade hub. In Q1 2025, Orange County’s industrial vacancy rate rose to 4.2%, up 170 basis points year-over-year, due to new construction and tenant consolidation. However, Santa Ana’s industrial sector, concentrated in neighborhoods like Delhi, continues to see strong demand for warehouses and distribution centers.

The $49.5 million acquisition of a 134,000-square-foot warehouse at 3500 W. MacArthur Blvd., fully leased to Home Depot, underscores the sector’s appeal. Industrial lease rates in Southern California are projected to reach $1.40 per square foot in 2025, with 3.8% annual growth, driven by e-commerce and logistics needs. Santa Ana’s proximity to major ports and highways enhances its attractiveness for industrial tenants.

Looking ahead, investors should target industrial properties with modern logistics capabilities, such as dock-high doors and ample loading positions. However, excess sublease space (22.4% of available inventory in Q1 2025) may exert downward pressure on rents, creating opportunities for tenants seeking cost-effective leases.

Mixed-Use Developments: The Future of Urban Growth

Mixed-use projects are revolutionizing Santa Ana’s CRE market, blending residential, retail, and office spaces to create walkable, community-oriented environments. The $106 million First Harbor Square project and the $3 billion Related Bristol development highlight the city’s commitment to mixed-use growth. These projects benefit from local government support, including tax breaks and streamlined permitting, making them attractive for investors.

Mixed-use developments cater to Santa Ana’s diverse population and urban lifestyle, drawing residents and businesses alike. They also address the city’s housing shortage, with only 0.26 homes per person, by integrating residential units with commercial spaces. As demand for walkable, amenity-rich environments grows, mixed-use properties are expected to drive CRE growth through 2030.

Economic and Demographic Drivers

Several macroeconomic and demographic factors will shape Santa Ana’s CRE market in the coming years:

• Interest Rates and Investment: The Federal Reserve’s decision to maintain interest rates between 4.25% and 4.50% in May 2025, coupled with expected rate cuts, is likely to boost transaction volumes and investor confidence. Lower rates could spur construction and increase demand for mixed-use and retail properties.

• Population Growth: California’s net population growth, driven by international immigration (277,468 new residents between 2021 and 2024), supports demand for commercial spaces. Santa Ana’s cultural vibrancy and proximity to employment hubs like Irvine enhance its appeal.

• Employment Trends: Orange County’s professional and business services sector is projected to grow by 2.9% in 2025, driving demand for office and coworking spaces.

• Housing Shortage: With only 0.26 homes per person, Santa Ana’s tight housing market fuels demand for mixed-use developments that combine residential and commercial spaces.

Challenges and Opportunities

While Santa Ana’s CRE market is poised for growth, challenges remain. Macroeconomic volatility, including potential trade wars and supply chain disruptions, could impact investor sentiment. The office sector faces ongoing pressure from remote work, with high vacancy rates in Class A properties. Additionally, excess industrial sublease space may temper rent growth in the short term.

However, opportunities abound. The retail sector’s low vacancy rates and experiential focus make it a safe bet for investors. Industrial properties, driven by e-commerce, remain a hot commodity, particularly in logistics-heavy areas like Delhi. Mixed-use developments, supported by local policies, offer long-term growth potential. Investors who leverage data-driven strategies and work with experienced brokers can capitalize on these trends.

Investment Strategies for 2025 and Beyond

For investors eyeing Santa Ana’s CRE market, consider the following strategies:

1. Focus on Flexible Spaces: Invest in office properties with coworking potential or retrofit existing spaces for hybrid work environments.

2. Target High-Traffic Retail: Prioritize retail properties in Downtown Santa Ana or near cultural hubs, focusing on experiential tenants like restaurants and entertainment venues.

3. Capitalize on Industrial Demand: Acquire or lease industrial spaces with modern logistics features, especially in Delhi, to tap into e-commerce growth.

4. Explore Mixed-Use Opportunities: Invest in mixed-use projects like Related Bristol, which offer diversified revenue streams and align with urban trends.

5. Leverage Technology: Use blockchain and smart contracts to reduce transaction costs and improve efficiency, as tokenized real estate gains traction.

6. Work with Local Experts: Partner with commercial real estate brokers familiar with Santa Ana’s submarkets to navigate competitive leasing and sales.

Conclusion

Santa Ana’s commercial real estate market is at a pivotal moment, driven by its strategic location, cultural appeal, and adaptability to modern business needs. The office sector is evolving with flexible workspaces, retail thrives on experiential demand, industrial spaces benefit from e-commerce, and mixed-use developments are reshaping the urban landscape. While challenges like vacancy rates and economic uncertainty persist, the market’s fundamentals—low retail vacancies, strong industrial demand, and supportive local policies—point to a promising future.

Investors and businesses should stay informed about market trends, leverage data from sources like PropertyShark and Cushman & Wakefield, and work with local experts to seize opportunities. As Santa Ana continues to grow as a commercial hub, 2025 and beyond will offer exciting prospects for those ready to invest in its dynamic CRE market.