Speakers make note of commercial real estate hotspots like Santa Barbara’s Funk Zone and upper De la Vina Street, and ongoing demand for industrial space on the South Coast
Millennial real estate trends and breakdowns of commercial real estate for the Santa Barbara County South Coast were among the themes at the 11th annual Radius Real Estate & Economic Forecast Tuesday morning.
The gathering, presented by Radius Commercial Real Estate & Investments and multiple other co-sponsors, featured commercial real estate expert speakers, as well as insights and takeaways from a renowned economist.
The real estate industry is starting to take note of millennials (the generation commonly defined as those currently between the ages of 22 and 37), said Gene Deering, senior vice president of Radius Commercial Real Estate & Investments.
Procore’s headquarters located on the bluffs above the Pacific Ocean in Carpinteria has “built an incredible campus,” Deering said, adding that the construction project management software company has been a “great thing for the Carpinteria area.”
The facility off Carpinteria Avenue offers an open, collaborative working space, and some private offices, he said.
“The improvements in the buildings have helped build Procore’s culture, and that’s a millennial-based culture,” Deering said. “You look inside some of these buildings, and it looks like a hotel lobby…It’s not the same structure we are used to.”
Millennials are active on Instagram, Deering said, and a search by hashtag shows a look inside the Carpinteria-based company.
“You can see they have brought snow to the campus… and it’s dog-friendly,” Deering said of Procore hashtag posts on Instagram. “It’s a different type of office environment.”
The market for office space remains strong in Carpinteria, he added.
An area that Deering foresees as up-and-coming and attractive to millennials is upper De la Vina Street in Santa Barbara.
“Upper De la Vina (Street) is a cool area,” he said.
Coffee shops are appealing to the generational demographic, Deering said, and people can get their fix at Handlebar Coffee Roasters, the Daily Grind and the Coffee Bean & Tea Leaf on upper De la Vina Street.
“This area, rents are a little cheaper than other locations,” he said of upper De la Vina Street.
A question mark for that area is the impact of the new medical marijuana dispensary, Santa Barbara Collective, located at 2609 De la Vina St. adjacent to Yellow Belly Tap and Restaurant and Jedlicka’s Saddlery, he said.
“Is it going to be a neighbor that everyone likes?” Deering said of cannabis industry operations. “Or is it going to be a neighbor you don’t want?”
Deering also gave a shout-out to a shared space in Santa Barbara’s Funk Zone, with the space at 121 E. Yanonali St. being shared by Dart Coffee Co., Tyger Tyger and Monkey Shine.
The site features multiple pink-hued hanging lanterns, and it’s an Instagram-worthy photo spot, Deering said.
“It’s a piece of art,” he said of the building. “You have this ‘wow’ factor when you drive by…You walk in, and it’s light, bright and fun…this is where retail is headed.”
Deering highlighted three restaurants in progress in the Montecito Country Mart on Coast Village Road and noted that there is still a lot of demand for commecial real estate in the Montecito area following the Jan. 9 debris flows.
“I would have thought the Montecito commercial market would have struggled and limped along a little bit — it hasn’t,” Deering said. “There has been a lot of demand, and the rates that are taking place remain strong.”
Industrial lease rates have also increased on the South Coast, Deering said.
“Everyone wants industrial, whether an office tenant, retail or even restaurants want industrial,” he said.
Brad Frohling, partner and principal of Radius Commercial Real Estate & Investments, echoed Deering’s remarks. He said industrial businesses are trying to find the space to move into the region.
“This year, we have only had seven industrial sales,” Frohling said. “There’s little on the market, and we don’t see any relief coming.”
Office sales remain stable, Frohling said, while the retail forecast remains sluggish and flat.
Amidst a strong national and local economy, the number of transactions this year will be slightly below the average largely due to results for the first quarter and interest rates, Frohling added.
Land values are forecast to take the biggest hit due to construction costs, interest rates and the “highly” regulatory environment.
Steve Golis, a Radius principal and co-founder, said the rental market is “strong” in the area, and occupancy levels remain high.
He noted the ongoing popularity of the Funk Zone, a site for wine-tasting rooms, shops, restaurants and a location just a few blocks from the beach.
“Everything is happening in the Funk Zone,” Golis said. “They are getting strong rents, and it’s a great area to live in.”
Christopher Thornberg, founding partner with Beacon Economics, delivered the keynote address at the event.
More than 400 business owners, investors, tenants, landlords and community leaders attended the event which was held at the Hilton Santa Barbara Beachfront Resort.
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Summary of market insights and analysis from Q2 2019 South Coast commercial sales and leasing activity: Download the complete report here …