The Funk Zone is the new darling of South Coast commercial real estate.

Radius Commercial Real Estate & Investments has dubbed the Funk Zone the region’s new “700 Club,” with four properties in the market fetching a whopping $700 per square foot when they recently changed hands.

As previously reported in the Business Times, local chain Rusty’s Pizza Parlor purchased the long-vacant property at 111 State St. for $5 million. In December, Blush Restaurant & Lounge purchased its 4,000-square-foot space at 630 State St. for about $2.7 million, or just under $700 per square foot. In the heart of the Funk Zone, 137 Anacapa St.—home to The Lark, Figueroa Mountain Brewery and seven other tenants—sold in October to an area investor for more than $700 per square foot, or $11.7 million.

While these lofty premiums might seem a bit wild, Radius said the prices still add up given the market fundamentals. “While buyers might be paying record numbers for properties, those numbers still have to make sense and the properties have to be well-located,” the firm said.

For example, Rusty’s Pizza purchased the building after being forced out of its iconic lighthouse building on Cabrillo Boulevard due to a nearby creek widening project. The pizza chain “wisely understands the value of their new real estate given the much-anticipated Entrada Hotel project close by,” Radius said.

Michael Martz, lead retail leasing agent at Hayes Commercial Group, also noted the rise of the Funk Zone in his recent market update, calling it “the city’s most exciting new retail area.”

Overall, 2013 was a good year for retail leasing in Santa Barbara, Martz said, with 50 retail leases penned. Those include McConnell’s Fine Ice Creams, CorePower Yoga, Granada Books and Sanford Winery, all on State Street. Rental rates also bumped up slightly, and the city’s retail vacancy rate is already low at about 2 percent.

Outside the downtown corridor, Fresh Market moved into the former Scolari’s building at 222 N. Milpas St. The new grocer is reportedly doing well, Martz noted.

“The volume of leases is healthy, and we are seeing more retail concepts looking at our market. I predict that 2014 will produce a slight decrease in vacancy,” he said.

The preceding article references the recently released “Radius Insight: 2013 Year-End Report”. Click here to read the complete report.