Market Watch: Investors Making Most of Shallow Supply

1st Quarter 2012 Recap / Commercial Sales

The year started with a noticeable dip in commercial sales transactions versus the same time last year. There were just 11 commercial sales during the 1st Quarter of 2012 with $43,550,000 / 148,150sf in volume (Radius was involved in 8 out of the 11 sales). Comparatively, 1st Quarter 2011 saw 18 sales with a total transaction volume of $62,430,000 / 277,700sf.

We credit the lower number of transactions this quarter to lack of supply as there is less inventory on the market for sale. Still, there are numerous pending sales and we expect to see the number of commercial transactions continue at a similar pace in the 2nd Quarter.

An unusual trend this year is that investor sales are exceeding owner/user sales (7 investor and 4 owner/user).

Also worth noting is a possible sign that the construction industry is rebounding. There were 11 owner/user sales and only 1 development transaction in 2011, yet we have already seen 3 development deals in 2012.

Notable transactions during the 1st Quarter include Fresh & Easy closing on the 2 acre parcel at 5955 Calle Real where they will build a new 14,000sf market; the investment sale of Trader Joe’s at 3025 De La Vina at a low 5% CAP; and the sale of 901 Olive, an 18,000sf office building in downtown Santa Barbara.

Investment demand remains strong but, as mentioned before, there continues to be a shortage of inventory. Properties priced at current market values are generating multiple offers.

Download a full copy of Radius Insight, 2012 South County Commercial Real Estate 1st Quarter Report.