2018 Radius Real Estate & Economic Forecast

More than 400 business owners, investors, landlords, tenants and community leaders registered for the annual economic and commercial real estate forecast presented by Radius Commercial Real Estate. This year’s event, held Tuesday, November 13, 2018 at the Hilton Santa Barbara Beachfront Resort, follows the hotly contested midterm elections and featured unique insights and takeaways from renowned economist Christopher Thornberg, Ph.D., Beacon Economics, an international consulting firm based in Los Angeles.

Dr. Thornberg, widely regarded as one of the earliest and most vocal predictors of the sub-prime mortgage market collapse in 2007 and the global economic recession that ensued, presented a spirited take on the U.S. and California economic climate including a no-holds assessment of the risks facing our economy.

The program also featured local commercial real estate experts from Radius delivering market updates and forecasts for the greater South Coast area, including a breakdown of local commercial real estate sectors.

The annual event is co-sponsored by Reicker, Pfau, Pyle & McRoy, LLP; Bartlett, Pringle & Wolf, LLP; American Riviera Bank; HUB International Insurance Services; Meridian Group Real Estate Management; and Hilton Santa Barbara Beachfront Resort.

Balancing the Market? Third Quarter sees second straight year of declining sales activity since 2016; rise in owner-user versus investor purchases.

With 2018’s 3rd Quarter coming to a close, we can confirm that market activity year-to-date is continuing to decline since the peak in 2016. In comparison to last year’s 3rd Quarter total of 25 commercial sales amounting to $85,387,500 in sales volume, this year’s 3rd Quarter came in at 22 commercial sales with total sales volume of $64,328,520, not including the outlier sale of the Hyatt Centric Hotel located at 1111 E. Cabrillo Blvd., which traded in July for $87,500,000. Large hospitality sales typically tip the scales, so subtracting that sale reduces 3rd Quarter volume to roughly $21 million below Q3 2017…

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South Coast Leasing Summary

We’ve seen very little change in Santa Barbara’s office leasing market since early 2017, with the vacancy rate fluctuating between 5.8% (Q2 2017) and 6.6% (Q2 2018). The 3rd Quarter ended with vacancy at 6.1%. Average gross asking and achieved rates also remained relatively steady over the past six quarters, with asking rates between $3.03/SF and $3.17/SF (currently $3.10/SF), and achieved rates coming in lower, ranging between $2.68/SF and $2.88/SF (currently $2.77/SF)…

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Radius Insight: Q2 2018 Market Report

As the second quarter of 2018 came to close, market activity, as expected, did not seem to change much from the first quarter. Overall, the second quarter’s 15 sales brought the total number of sales for the first half of the year to 29. That is a sharp decline compared to the 49 commercial sales we recorded in the first half of 2017.

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Retail Special Report: State Street’s Sad Song Plays On

It’s no secret there remains much discussion and debate about just exactly what’s going on in our once-bustling downtown corridor. The one thing we can all agree on is the tale of State Street retail is playing out like a re-recording of Willie Nelson’s iconic “Always on my Mind”. Ultimately it’s a song of angst and perhaps regret, with no definitive solution on the table.

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South Santa Barbara County Multifamily Summary

The South Coast multifamily market continues to remain strong and should stay this way through 2018. Renters make up a large portion of the region’s population, with vacancy in the greater Santa Barbara area below 2% as it has been since 2011, which of course is very attractive to investors. Demand for rental units is expected to remain high due to economic, demographic and lifestyle trends, including the continuing trend of baby boomers and empty nesters choosing to downsize.

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Radius Insight: Q1 2018 Market Report

Perhaps not surprisingly, sales during the first quarter of 2018 got off to a markedly slower start versus Q1 2017. Altogether the first quarter compiled 14 sales of commercial property totaling approximately $53 Million in volume, not too far off the prior 15-year average of 18.7 sales per quarter but significantly fewer than Q1 2017’s 30 sales and Q1 2016’s 24 sales. In fact, Q1 2018 has been the weakest first quarter since 2013. So what is causing the slow start to the year?

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South Coast Leasing Summary

As expected, Santa Barbara’s office vacancy rate dropped slightly from 6.7% in Q4 2017 to 5.9% in the first quarter of 2018. Average gross achieved rates ticked up from $2.69/SF to $2.93/SF while average gross asking rates remain nearly unchanged at $3.04/SF.

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South Santa Barbara County Multifamily Summary

Just as the Thomas Fire and Montecito mudslides may have impacted the South Coast commercial sales sector, the Multifamily sector also slowed during the first part of 2018, but resilient Santa Barbara is on the mend.

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Radius Insight: Q4 2017 Market Report

The high annual transaction volume that started in 2014 continues. Last year was another strong year with 97 total sales, just six short of 2014’s record 103. The majority of commercial properties sold in 2017 were office buildings (37) followed by retail (24). Though not for lack of demand, industrial and land sales totaled just 17, while there were also two hotel sales. The 4th Quarter’s 22 sales were down from Q1’s high of 31, yet still above the 17 sales-per-quarter average and in line with 2nd Quarter (19) and 3rd Quarter (25)…

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South Coast Leasing Summary

Santa Barbara’s office vacancy rate has been slowly increasing since 2014 bringing the current vacancy rate to 6.7%, the second highest level we have seen over the last 17 years. It would be realistic to expect lease rates to level off or decrease, likely driving vacancy rates back toward 5%…

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South Santa Barbara County Multifamily Summary

We ended 2017 with moderate sales compared to 2016 due solely to lack of inventory. It’s clear strong demand for multifamily isn’t going to wane any time soon. While the Millennial population grows, they remain locked out of the homeownership game. That means as Millennials continue to save for a down payment they must rent. This trend is expected to continue for the next few years…

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Radius Insight: Q3 2017 Market Report

From 2014 to 2016 we experienced the three strongest years of commercial sales on the South Coast since Radius began recording market activity in 1998. In fact 2014’s record 103 transactions were nearly matched by last year’s 101. And despite the fact that dollar volume dipped last year to $366 Million versus $437 Million and $439 Million in 2014 and 2015 respectively, 2016 was still a strong year by any standard.

Enter 2017 and, while we are on track for another strong year, we do appear to be in a bit of a transition period (call it transformation?) with some divergent storylines emerging, particularly involving industrial and retail properties in the downtown area…

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South Coast Leasing Summary

Santa Barbara’s office vacancy rate remained stable with a slight decrease from 5.8% in the second quarter to 5.6% during the third quarter. The majority of vacancies remain below the 3,000 sq. ft. range, with leasing activity skewing heavily to smaller spaces: 48 new leases involving spaces under 3,000 sq. ft. over the past three quarters, versus just 18 new leases for spaces over 3,000 sq. ft. The largest lease during that time period was at 425 N. Milpas St. for 9,200 SF. But perhaps the most noteworty activity came in Q2 when LogicMonitor gobbled up more than 20,000 sq. ft. at 820 State St. (which includes 5,800 SF of former retail space on the first floor). The company is vacating 5,800 sq. ft. at 12 E. Carrillo St…

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South Santa Barbara County Multifamily Summary

South County multifamily sales have continued this year well behind 2016’s extremely brisk pace (there were a record 42 sales of 5+ unit properties last year), and the only reason we are not seeing more is pure lack of inventory. The trend of historically low availability continued through the end of Q3 2017, while demand remains high for apartments particularly in Santa Barbara and Goleta. Still, some sellers are beginning to loosen up on their holdings as they see we remain in a seller’s market…

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