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Pacific Coast Business Times: Big South Coast CRE deals boost first quarter dollar volume

May 24, 2019

The first quarter of 2019 saw 15 commercial real estate sales on the South Coast, compared to 14 in the same quarter last year, according to Radius Commercial Real Estate.

Santa Barbara, California – Published 5/24/2019
By Annabelle Blair
A nearly 83,500-square-foot office and R&D building at 600 Pine Ave. in Goleta sold to investors in February. It was one of the biggest first quarter deals on the South Coast.

 
Dollar volume was up, totaling nearly $104 million, compared to $53 million in 2018 — although Radius reported that annual sale numbers have been declining since market high sales in 2014 and 2016.

A handful of high-value transactions contributed to sales during the quarter, Radius reported. More than half of the transaction volume was related to three office and R&D building sales totaling $65.8 million.

These included the sale of 4050 Calle Real in Santa Barbara, an office building purchased by tenant Cencal Health for $30.5 million; 600 Pine Ave. in Goleta, which houses ATK as a tenant and sold to investors for $21.5 million; and 454 S. Patterson Ave. in Goleta, which sold in an off-market deal for an undisclosed figure.

In Carpinteria, long-time tenant S&S Seeds purchased a 44,250-square-foot bluff-top building at 6155 Carpinteria Ave., reported Hayes Commercial Group. In Goleta, an owner-user purchased 454 S. Patterson Ave, a 26,201-square-foot office building with land for additional development.

Santa Barbara’s office sector offered the most notable difference in leasing activity during the quarter as the vacancy rate jumped to 7.3 percent, its highest level since the 7.9 percent recorded in the summer of 2003, Radius reported.

Although the inventory of properties for sale decreased 14 percent since the peak six months ago, Hayes reported, it remains at a historical high with inventory showing a total of 64 properties for sale. This includes 22 retail properties with 10 located along the downtown Santa Barbara State Street corridor.

Most of the quarter’s sales were off-market transactions, due to owner-user sales as tenants purchased the properties they occupied, both CRE groups reported.

Hayes reported that new vacancies emerged on State Street during the quarter. Apparel retailer Forever 21 formalized plans to vacate a 18,357-square-foot corner building at 901 State St., bringing the available storefront count on the 900 block to seven. Also coming on the market in the first quarter was 8,800 square feet of space at 710 State St., occupied by Restoration Hardware, Radius reported.

There are 32 vacancies along the main retail corridor of State Street from Gutierrez to Sola streets (in the 400 to 1300 blocks), which represents a 12.9 percent storefront vacancy rate, Hayes said. Although vacancy rates are high, they are down from 37 vacancies six months ago.

Including pop-ups and storefronts with operating tenants, the storefront vacancy rate drops to 9.2 percent, Hayes reported. However, Radius said there were fewer pop-up shops in the first quarter, down to three compared to seven in the fourth quarter of 2018.

There were 25 retail transactions along the State Street corridor within the last year, Hayes reported — notably, a lease of 13,428 square feet at 601 State St. by House of Clues, which plans to open an escape room.

VENTURA COUNTY RETAIL RENTS RISING

The retail market in Ventura County is seeing an increase in average asking rents, edging close to the 2007 high of $2 per square foot, reported NAI Capital. The rate moved up by 1 cent per square foot, compared with the fourth quarter of 2018, to $1.99 per square foot.

That’s a 2 cent increase from a year ago, NAI reported, although average rent remains 5.7 percent, or 12 cents per square foot, below pre-recession peak levels.

“A lower rate of growth shows rents may be reaching a plateau at the start of the year,” NAI reported, as a 4.5 percent vacancy rate held steady over the prior quarter. “Low vacancy and limited construction should keep lease rates and sales pricing inching upward throughout 2019.”

The largest project under construction is LA Fitness at The Village at Newbury Park, NAI reported, a 36,900-square-foot, built-to-suit slated for completion in the second quarter of 2019. The project is being marketed for sale as an investment at $407 per square foot.

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