South Coast Update

The South Coast commercial real estate market broke sales records last year, with the total deal value topping $365 million.
The news came from Hayes Commercial Group, which jokingly noted that it had to redo the graphics in its market report because the maximum value on the sales graph used to be $350 million.

The impressive sales volume was driven in large part by owner-users – that is, businesses buying their own properties.

Sales really gained steam in the fourth quarter, when $175 million of that $35 million came through.

The South Coast industrial market really heated up in 2012, with available space decreasing 30 percent. The current industrial vacancy rate in the area is 3.1 percent, the lowest since 2007, Hayes said. And that’s as achieved lease rates jumped about 5 percent.

As in Ventura County, the office market recovery continues to lag the rest of the CRE markets. Commercial real estate brokers in Ventura County have pointed out that there may just not be enough white collar jobs to fill all the space in the market, and it seems that the story could be true in Santa Barbara County as well.

Office Vacancy on the South Coast actually increased in 2012, to 8.8 percent, Hayes said. But it’s worth keeping a perspective on things – nationwide, the office vacancy rate hovers around 17 percent.

Goleta notched 199,000 square feet of office and R & D deals in 2012, less than half of the total in 2011.

“One reason for the anemic activity is the prevalence of defense industry companies in the area, whose revenue may be constricted by federal budget cuts in 2013”, Hayes points out.

Santa Barbara’s office market slowed down too, with just two leases larger than 10,000 square feet, both of them renewals. And some large spaces have been on the market for more than a year.

In Carpinteria, meanwhile, fast growing online education continues to be the driving force. The company, which recently raised more than $100 million in its first round of outside investment, leased an additional 19,000 square feet on Mark Avenue last year. That likely makes it the single largest tenant in Carpinteria, occupying about 20 percent of the office space there.