After the hit of Thomas Fire and debris flow caused a need for regional economic recovery, State Street retail faces the same challenges it did before
When smoke from the Thomas Fire started to stifle the city last December, retail conditions on State Street were already in bad shape.
The shift from bricks-and-mortar business to online shopping has delivered a significant blow to Santa Barbara businesses. Conspicuous vacancies dot State Street, and businesses, locals and tourists say homelessness and vacancy discourage people from visiting the downtown area.
Wildfire smoke forced businesses to close their doors during the holiday season, and the deadly Jan. 9 Montecito debris flow destroyed and damaged hundreds of homes, and flooded Highway 101.
The 12-day roadway closure cut Santa Barbara off from the south entirely, and according to a May UCSB Economic Forecast Project presentation, Visit California estimated the closure “resulted in a loss of $949,000 per day in visitor spending, adding up to a total of $11.39 million lost over 12 days of highway closure.”
Economic recovery from the disasters will take years.
“Looking ahead, the profound destruction and disruption caused by the Thomas Fire and the Montecito mudslides will have ripple effects on South Coast commercial real estate for years to come and is expected to slow down sales activity in the near term,” the recent UCSB Economic Forecast Project report said.
Now, almost six months after the debris flow, the conditions on State Street, even with the most optimistic face, are at best the same, with little marked change in vibrancy in the downtown core.
Staples is the latest big box store to pack up and leave, reportedly leaving at the end of August. Recently Chipotle also closed its doors, as did a Verizon store.
These stores follow a slew of other chains that have departed downtown, including the Macy’s department store that anchored Paseo Nuevo, Brookstone, Guess, American Apparel and Panera Bread, to name just a few.
“Everyone took a hit during the Thomas Fire,” said Steve Brown, a commercial real estate broker with Radius Group. “We lost a lot of traffic.”
But the conditions are back to where they were last year, Brown said.
“There is a lot of retail that is not meeting the demands of consumers,” Brown said. “Retail is in a funk. There’s not a lot of energy going down right now on State Street.”
Brown, the broker for the Staples building at 410 State St., said, however, that deals are happening, and there is interest in commercial properties.
“It is not dead,” Brown said. “We are not singing the death knell over State Street. There is obviously more vibrancy that needs to be injected into State Street to get the locals back down there.”
Ray Mahboob, a commercial property owner with dozens of properties on State Street, said one of the biggest challenges facing downtown is the extensive and lengthy permitting process with the city of Santa Barbara.
He said he had a tenant for one of his buildings, with a signed lease, that up and left because of the expensive delays in the city, and instead is opening a coffee shop in Goleta.
Mahboob said the planning department often asks new tenants to make entrances and exits to their properties compliant with the American Disabilities Act, and while the city’s Accelerated Permit Program fast-tracks exceptions for some ADA-compliant requirements, it’s not happening consistently.
“As a city, we can’t build a bad reputation as being difficult,” Mahboob said.
Santa Barbara City Administrator Paul Casey said Santa Barbara is experiencing some of the same problems afflicting other communities.
“State Street retail, and retail in general nationwide, continues to go through major shifts and adjustments,” Casey said.
“The Thomas Fire and debris flow came at a terrible time for retail everywhere in the city. We do see a number of new stores, restaurants and entertainment venues coming online on State Street, and hope the community will support them and they’ll be successful.”
A report by Hayes Commercial Group found that there is lowered demand for downtown commercial space from national retailers and that, contrary to popular opinion, some State Street landlords have actually lowered rents in recent years.
“We surveyed all the leases on the prime 600 to 1000 blocks of State Street from the past two years, and compared the new rent to the previous rent paid for the same space (and) on average, the new rent was 12 percent lower than the inflation-adjusted previous rent,” according to a May report from the UCSB Economic Forecast Project.
“Businesses are coming and going, but State Street is not stagnant.”
Mahboob agrees that there is reason for hope on State Street.
“It’s definitely getting better,” he said. “The people who are dying are weak; people coming in are stronger.”
He said the key is for property owners to be active and seek out clients.
“You can’t just put a sign on the door,” Mahboob said. “You have to go fishing. It’s about the hustle.”
Ken Oplinger, president of the Chamber of the Santa Barbara Region, said Santa Barbara is still a desirable area that people from all around the world want to visit.
Retail conditions aren’t likely to improve anytime soon, Oplinger said, but “there’s a strong possibility we will see a strong rebound in 2019.”
The downtown area faces the same challenges as it did before December, with the added need for regional economic recovery from the Thomas Fire and Montecito debris flow.
“We still have the same set of issues, and we have to figure out how we can address this,” Oplinger said. “The community must get active and come together with a plan.”
“Until, especially on State Street, we come together and put together a group that says, ‘here is the vision for downtown,’ I don’t see anything changing in the near term.”
We put together a list of transactions, lease highlights, and development projects around California's commercial real estate market. The list also …
Noozhawk: Brian Johnson: Californians for Homeownership Tackles Anti-housing Policies Across the State
Brian Johnson, Managing Director, Radius Commercial Real Estate; President, Santa Barbara Association of Realtors Policies related to the …
Please download the complete Q4 2020 market report here or contact your Radius broker for more information. Q4 2020 Commercial Sales Summary: …