Santa Barbara firms Radius Commercial Real Estate, Pacifica Commercial Realty, Hayes Commercial Group and Lee & Associates Central Coast have offered their insights into how commercial real estate vacancy rates and recent transactions indicate bigger overall trends in the South Coast’s economy.
Brian Johnson, general manager and sales agent for Radius Group, said that of the 18 new offices leased in Santa Barbara during the past few months, 14 were smaller than 2,000 square feet. Radius sales agent Gene Deering said he believes the trend represents a big change because small offices have had trouble getting leased since early 2009.
Deering said the Santa Barbara retail market is also on the uptick. Spaces recently vacated by Borders and Barnes & Noble bookstores have already been leased, indicating that the national retailers slated to fill those locations are eager to enter Santa Barbara’s exclusive retail market. The city’s retail vacancy rate has gone from 2.8 percent during mid-2009 to its current 2 percent rate.
Hayes broker Kristopher Roth said it remains unclear what the retail vacancy numbers indicate for Santa Barbara’s retail future. “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,” he said.
Roth said that recent patterns in store successes and failures are indicators of both new and preferred technology, as well as signs of economic struggles. “The closure of Borders bookstore and Barnes & Noble are clear signs that technology is driving significant change in how consumers buy and use certain types of products,” he said. “The entry of middle- and low-price point clothing stores such as Marshall’s, Crossroads and Heavenly Couture is a clear sign that consumers are opting for value.”
Clarice Clarke, principal for Lee & Associates, said the office vacancy rate in Santa Barbara appears to be far better off than in Carpinteria or Goleta, at 5 percent to 6 percent.
Although Goleta’s office vacancy rate experienced declines during the past two quarters, its current rate sits at just less than 14 percent, according to Radius Group, which is higher than at any point from 2000 to 2009.
Roth said Goleta’s high office vacancy stems largely from 16 available office spaces that are larger than 10,000 square feet, and only four leases in that category were completed in 2010 (one of which was a lease renewal). But he said he’s optimistic, believing that the Goleta office market will begin to stabilize in 2011.
Carpinteria boats the highest vacancy rate in the Santa Barbara area, and Johnson gives its office market the title of Most Lackluster Office Market on the South Coast. Its vacancy rate was exacerbated by Microsoft leaving its 24,000-square-foot space. But there’s a bright spot in Carpinteria’s recent leasing history: Lynda.com has expanded into an office building of more than 58,000 square feet, and it also purchased 60,000 square feet of office space.
The Santa Barbara, Goleta and Carpinteria industrial real estate markets remained fairly stable during the last quarter of 2010. In fact, for Santa Barbara, Johnson said it was the most stable market Radius Group tracks, with a vacancy rate of 1.2 percent.
Allied Waste of Santa Barbara leased two buildings totaling more than 13,000 square feet. Currently, there is only one space totaling more than 10,000 square feet on the market. The only transaction that took place in Goleta was a warehouse renewal, and the vacancy rate has remained steady at 5.8 percent.
Radius Group sales agent Paul Gamberdella said he doesn’t expect major activity during the next quarter, adding that the Goleta market can stir competition among industrial space landlords.
“Although we do not expect to see major industrial activity in Goleta over the next six months, one thing is for certain: When an industrial tenant has a need in the Goleta market, the multiple options available will lead to a softening in industrial lease rates as industrial landlords compete to attract that elusive Goleta industrial tenant by once again providing lower lease rates and other leasing incentives,” Gamberdella said.
Johnson said he predicts a brighter future. “I guess the biggest thing that we take away from 2010 is that everyone’s glad that it’s over,” he said. “We think the worst of the commercial real estate woes are over, too. We still have a surplus of office space, and it’ll take awhile to lease out. I think that Santa Barbara continues to prove its resiliency when it comes to economic downturns.”