US Bank, the fifth-largest commercial bank in the nation, has leased a 5,708-square-foot space at 936 State St. as a new branch location.
The deal is the largest retail lease in downtown Santa Barbara this year, said Michael Martz and Kristopher Roth of Hayes Commercial Group, which represented the landlord in the transaction.
The bank will include the storefront area previously occupied by Shooz, plus approximately 3,000 square feet of adjacent space that had been used as offices by Santa Barbara County Child Protective Services. A banking fixture back in 1877 when it was purchased by the Santa Barbara Savings & Loan Society, the building changed hands several times until First Federal Saving & Loan bought the building in 1950.
In 1965, the building was completely rebuilt for Mission Federal, with the solid 14-inch thick walls that exist today. The Sobhani family has owned the property since 1994, Hayes officials said.
News of the transaction comes as South Coast commercial real estate brokers are publishing their midyear reports. While acknowledging the second quarter of 2010 wasn’t as hot as the first, some South Coast commercial real estate brokers said this week that activity is expected to pick up again in the third quarter.
For example, Radius Group Commercial Real Estate announced the $4.1 million sale of the former corner home of Left at Albuquerque restaurant, 700 State St. The 5,753-square-foot building has been vacant since Christmas. No new tenant has yet been found.
The building is an investment purchase by an out-of-town buyer, Radius officials said in a statement. Michael Chenoweth of Radius Group represented the owner and Mike Heisheima of Epsteen & Associates represented the buyer. That sale is the second-largest retail sale on State Street this year.
The largest transaction was the sale of the $10 million Borders bookstore building at 900 State St. While the bookstore continues to operate, its parent company is facing another hefty loan payment next year as its sales continue to lag.
Radius saw nine commercial deals in the past three months, compared to a dozen in the first quarter, company officials said. Hayes officials said that despite just seven second-quarter sales, the South Coast is seeing more activity, both in number of sales and dollar volume this year than in 2009 – but prices are still dropping.
“Investors are returning to the sales market and have bought several properties this year,” Hayes officials said in the company’s midyear report.” These are cash investors, however, as traditional financing is still very tight for commercial property loans.”
In an interview with Noozhawk, Martz said he expects much more activity on State Street in the next two quarters because triple-net lease are much lower than they were in 2006 and 2007. “There will be new opportunities and new concepts,” he said.
Hayes officials said three State Street retail buildings were sold in downtown Santa Barbara this year, and two more are in escrow.
As for retail leasing, South Coast vacancy has been more than 2 percent now for six consecutive quarters, the Hayes report said.
“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,” the report said. “Specifically, achieved rates on the 600 to 900 blocks of State Street have declined just 1 percent since 2008, while rates on the 300 to 500 and 1000 to 1200 blocks have plummeted 31 percent.”
While acknowledging in his company’s midyear report that the commercial market “feels static” because of the recession, Mark Mattingly at Pacifica Real Estate Group said some big deals are on the horizon in the retail, commercial and technology sectors. He said it’s too early to say exactly what they are until the deals are signed.
Mattingly pointed out that the number of transactions should not be confused with the dollar value of the deals.
“To summarize, the retail and tourism statistics show improvement for the first time since 2007,” Pacifica officials said. “We remain concerned that the technology seems to be lagging and will require real stimulus to create an enduring economic recovery.”
As for office leasing, Santa Barbara is in much better shape than Goleta and Carpinteria in terms of office vacancy, Hayes officials said.
“Goleta’s 13.9 percent office vacancy is the highest we have on record, and at 12.5 percent vacancy, Carpinteria is not far behind,” they said. “By comparison, Santa Barbara’s office vacancy is 5.8 percent.”
And for industrial Leasing, Hayes officials said, “This is the only sector that has seen a decrease in available space so far this year.” They cautioned, however, that “landlords have had to drop prices significantly to get leases signed. Achieved industrial lease rates for the South Coast are below $1 per square foot this year, a level we have not seen in recent memory.”
– Noozhawk contributor Ray Estrada can be reached at firstname.lastname@example.org.