In many ways it was a year of economic recovery for the local retail sector. Taxable retail sales on the South Coast rebounded to 2019 levels, according to midyear reporting by California Economic Forecast, while hospitality indicators show a huge rebound in tourism. At the same time, 2021 proved to be another challenging year for many South Coast restaurants and retailers, with coronavirus surges undercutting shopping and dining traffic at local businesses. “The Restaurant Guy” on santabarbara.com reports that 2021 brought the fewest new restaurant openings in a year (30) since he began tracking 15 years ago, but also—surprisingly—the fewest closings (26). By his count there are 32 food and beverage locations already projected to open in 2022. That level of investment reflects an expectation that this year will bring strong consumer spending at restaurants, and presumably, brick-and-mortar retail and entertainment as well.
[This is an excerpt from the full market report, which is available here.]
While preparing this report, news broke that the 142,000 sf former Sears building at 3845 State St has been leased on a 10-year term by a local retail tenant and will reportedly become a mix of furniture and general consignment, antiques, and maybe more. Coming on the heels the purchase of most of La Cumbre Plaza by a developer, the speculation that the Sears property might be redeveloped as residential has been supplanted by a scenario where a large residential development replaces the north side of the mall, while the south end where Sears was remains retail for the time being. In any case, this lease brings the Santa Barbara vacancy rate back down to a more typical level, around 3.3%.
In addition to the big news at La Cumbre Plaza, 2021 produced nine retail leases on upper State totaling 18,000 sf. For instance, a local restaurateur leased the former Dunkin Donuts at 3771 State to try a taco concept. And Cottage Clinics leased 2,500 sf in the Marc complex at 3885 State for a walk-in clinic. Not including space in La Cumbre Plaza, there are six spaces totaling 14,400 sf available in the upper State neighborhood.
Turning to downtown, it was a very slow leasing year for the State Street corridor, with only eight leases signed, the lowest tally in at least 10 years. The most notable deals were on the 700 block, where a local team signed a long-term lease at 700 State to become Augie’s Tequila, and the national apparel company Athleta leased the former Miniso storefront at 733 State. Nearby, after Starbucks departed 800 State, landlord Michael Sheldon took matters into his own hands and will open Belching Dragon Tavern in the space shortly. The lone Q4 lease was 1309 State, signed by Maune Contemporary Gallery, which is already open for business. Despite the low leasing volume, the storefront vacancy rate has decreased from a peak of 18.0% during the depths of the pandemic to 14.3% at year-end.
State Street has officially hit the grim milestone of five consecutive years of storefront vacancy over 10%. By comparison, the 2008 recession triggered less than two years of double-digit vacancy during 2009-2010. The root causes of the current blight—including online commerce and shifts in consumer behavior, the rise of the Funk Zone, homelessness, and the pandemic—have been discussed at length. A decade ago, the recession caused several tenants to leave, and many tenants that replaced them were lower-price point chains, such as Marshall’s, H&M, and the 99 Cent Store. In the current high-vacancy cycle, and especially during the pandemic, there appear to be more local entrepreneurs trying concepts on State Street, which is encouraging and has the potential to help the district evolve and attract locals again. The makeshift promenade lined with parklets, combined with a critical mass of homegrown restaurant and retail businesses, are promising ingredients to help bring about a revitalization of State Street. Other components will be needed, along with effective leadership to guide the process, and soon, but there is evident courage and creativity happening on the business side that should be welcomed and supported.
In Goleta, 20 transactions totaling 76,385 sf were proof of one of the most active leasing years the city has seen. Planet Fitness leased the 21,372 sf anchor space in the Albertsons center at 7127 Hollister Ave. If you are having déjà vu, Planet Fitness leased the same space in 2020 but never moved in and ultimately terminated that lease. This time it appears they will actually open for business in March. In another Q4 deal, Goodland BBQ leased the 2,655 sf building at 5725 Hollister Ave in Old Town. Vacancy decreased to 1.9%, the lowest rate since 2015. Aside from Magnolia Center, which still has about 18,000 sf available, the rest of Goleta’s centers are not contending with significant vacancies.