Pacific Coast Business Times: Radius latest CRE report highlights changing DT SB

The South Coast commercial market continues to evolve in a post-COVID world, and no better deal expresses that than Yardi Systems’ acquisition of the former Macy’s building and related Paseo Nuevo Mall interests for its future downtown Santa Barbara headquarters, according to Radius CRE’s Q2 report released July 28.

The proposal, which emerged after earlier plans to redevelop Paseo Nuevo fell through in December 2025, would see Santa Barbara-based Yardi move its corporate headquarters into the Macy’s building. The Macy’s building has been vacant since 2017.

At the same time, plans by DSP to convert the former Nordstrom building into up to 112 units of housing would be critical in reshaping downtown Santa Barbara’s future.

“Together, the projects bring new jobs, new housing, and renewed activity to two long-vacant anchor buildings at the center of downtown,” the report said.

In the second quarter of 2026, the South Coast CRE market recorded 28 sales totaling $65.1 million, including 10 office, eight retail, six industrial and four land and development transactions. This is much lower than the first quarter’s $280 million in sales; however, the report noted that figure is misleading as “once the extraordinary Tech Park Goleta portfolio and Montecito Post transactions are removed, second-quarter activity closely mirrors the underlying market seen throughout the past year.”

Notable sales during the quarter included Friendship Manor’s acquisition of the entitled redevelopment site at 701 N. Milpas St., approved for an 82-unit mixed-use residential development that includes 16 moderate-income affordable units, as well as Santa Barbara Plastic Surgery Center’s purchase of 220 W. Pueblo St.

“These deals demonstrate continued confidence in the South Coast’s long-term fundamentals,” the report said.

The South Coast commercial leasing market remained healthy during the second quarter, with activity returning to a more normalized pace following an exceptionally active start to the year.

The lease takeovers by Yardi and DSP of the former Macy’s and Nordstrom helped contribute to a decline in Santa Barbara’s reported office vacancy from 9.2% in Q1 to 6.9% in Q2. Goleta continued to post healthy office fundamentals, with vacancy holding at 8.4%. In Carpinteria, office vacancy stands at 12.2%.

“Although transaction volume slowed, leasing activity remained healthy, vacancy continued to decline, and tenant demand remained evident across well-located retail properties,” the report said.