The Santa Barbara industrial sector saw lease rates increase modestly from $1.21/SF at the end of 2011, to $1.36/SF at the end of 1st Quarter 2012. As expected, the vacancy rate remained low, declining from 1.2% to 1.0% at the end of 2011.

Vacancy will remain low for the foreseeable future, in part due to recent industrial leasing activity in Carpinteria which has further depleted the amount of available space in that market. This could push some industrial tenants back north to Santa Barbara, where industrial inventory remains low, and especially to Goleta given its large supply of industrial space.

That said, Goleta’s industrial sector was relatively quiet during the 1st Quarter with most activity coming from renewals of existing tenants. The vacancy rate increased slightly from 7.1% at the end of 2011 to 7.5% at the end of the 1st Quarter. Average asking rates dropped by $.01 to $1.15/SF on a modified gross basis and overall the market remains quiet.

Although we do not expect vacancy levels to change drastically over the next few quarters, that could change if business confidence improves and companies feel the need to increase production or supply. Again, with industrial space in short supply in Santa Barbara and Carpinteria, Goleta is well positioned to take advantage of any increased demand with an ample supply of large industrial properties. Download a full copy of Radius Insight, 2012 South County Commercial Real Estate 1st Quarter Report.