If there was any doubt that commercial real estate sales have not yet recovered from the pandemic recession, a recent report released by Santa Barbara’s Hayes Commercial Group certainly proves otherwise.
Commercial sales for 2021 topped the charts at 117 transactions totaling $770 million, the highest-volume sales year on record, the brokerage said in its analysis of the South Coast region. Leasing volume, however, is still trailing behind the pre-pandemic five-year average.
A handful of notable hotel sales contributed to the banner total: Bill Foley purchased the Hotel Californian for $130 million; Hotel Santa Barbara sold to Diane Hendricks for $41.9 million; and Hotel Indigo sold for $18.7 million.
As for retail sales, a local development team bought most of La Cumbre Plaza, including the Macy’s building and surrounding parking areas, for $63 million, and an investor purchased the long-vacant Nordstrom building in Paseo Nuevo for $13 million. There seems to be a trend around the country of pivoting properties away from retail, and these purchases follow suit, Hayes said ― La Cumbre Plaza is rumored to eventually morph into a residential redevelopment, and the Nordstrom building will likely be converted into office space.
Office space transactions totaled $154 million, with Apeel’s Goleta office, as well as two large office buildings on East Victoria Street, changing hands.
According to the Hayes report, there are only 60 commercial properties currently on the market on the South Coast. Inventory decreased 27 percent since mid-2021, ending the year at its lowest level in three years. However, Hayes predicted, the persistent demand for commercial property from both owner-users and investors should keep things moving throughout the coming year if interest rates and inflation don’t climb too high.
On the leasing side of things, 2021 proved to be another challenging year for many South Coast restaurants and retailers. State Street did not see much action, with only eight retail leases signed, the lowest tally in the last 10 years. Notable deals included the addition of an Athleta storefront and restaurants-to-be Augie’s Tequila and Belching Dragon Tavern on the 700 and 800 blocks.
Storefront vacancies on State Street have topped 10 percent for five consecutive years, Hayes noted. By comparison, the Great Recession of 2008 triggered less than two years of a double-digit vacancy rate. But on a more positive note, “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 report said. “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.”