July 1, 2010
Mid-Year Review

Hayes Commercial Group releases its quarterly report

Hayes Commercial Group has released its Mid-Year Review of South Coast commercial real estate. To receive the full report, contact Hayes Commercial Group.

Here are some key points:

Overall – The second quarter was not as active as the first, both in leasing and sales, on the South Coast. Early indications are that activity will pick up again in the third quarter.

Office Leasing – Santa Barbara is in much better shape than Goleta and Carpinteria in terms of office vacancy. Goleta’s 13.9% office vacancy is the highest we have on record, and at 12.5% vacancy, Carpinteria is not far behind. By comparison, Santa Barbara’s office vacancy is 5.8%.

Retail Leasing – South Coast retail vacancy has been above 2% now for six consecutive quarters. In downtown Santa Barbara we are seeing the importance of location, with lease rates holding steady in the most desirable blocks but dropping dramatically in the less central blocks. (Specifically, achieved rates on the 600 to 900 blocks of State Street have declined just 1% since 2008, while rates on the 300 to 500 and 1000 to 1200 blocks have plummeted 31%.)

Industrial Leasing - This Is the only sector that has seen a decrease in available space so far this year. However, landlords have had to drop prices significantly to get leases signed. Achieved industrial lease rates for the South Coast are below $1.00 per sf this year, a level we have not seen in recent memory.

Commercial Sales - Despite just seven second quarter sales, the South Coast is still seeing more activity both in number of sales and dollar volume this year than in 2009. However, prices are still coming down. Investors are returning to the sales market and have bought several properties this year. These are cash investors, however, as traditional financing is still very tight for commercial property loans. Three retail buildings have sold on State Street in downtown Santa Barbara this year, and two more are in escrow.

Multifamily Sales - The second quarter saw only two significant multifamily sales on the South Coast, both of which were large, investment grade properties in Isla Vista. There is good financing available for multifamily loans, but there has been a shortage of quality property on the market. That may change soon, as we expect more inventory will come available in the second half of 2010, mostly in the 5 to 15 unit size range.