Commercial real estate forecast for 2011

That’s the consensus from the commercial real estate insiders I asked to gaze into the crystal ball for our annual forecast issue. Here are some thoughts from brokers throughout the region:

For retailers, the buzz at the end of 2010 was a successful holiday shopping season. Preliminary estimates pegged spending in November and December at 4 percent increase over 2009 levels.

“The question that is on our mind as we go into 2011 is whether the recent growth in the retail sales numbers is a true indication that the retail sector is healthy for the long term”, Hayes Commercial Real Estate brokers Michael Martz and Kristopher Roth said in an e-mail interview.

“Our prediction is that the local retail sector will be healthier in 2011, but we will continue to see changes as shopping habits have been altered by technology and by the recession,” Martz said.

Santa Barbara’s retail vacancy is at 2.5 percent, which, while comparatively low, marks its eighth consecutive quarter above 2 percent, according to Hayes. The city’s downtown has held pretty steady- with rental rates for retail space on the 600-900 blocks of State Street down just 1 percent since 2008- but rates on the 300-500 blocks and 1000-1200 blocks have dropped 31 percent.

“Our prediction for 2011 is that vacancy will tighten up and rents will stabilize,” Martz said. ‘The bulk of the tenant turnover is behind us, but expect to see a few more notable changes in 2011.”