Pacific Coast Business Times: Office deal activity buzzing through tri-county markets
Office property transactions continued a hot streak this week, with area brokerages locking in several large deals from Goleta to Camarillo and predicting that more are on the way.
With inventory in short supply due to stifled development activity over the last several years, class A and some well-positioned class B properties should continue to trade hands as growing companies and investors look for space, brokers said. Leasing activity should also remain steady as firms look to trade up from their current space for newer, more efficient work environments.
“In terms of transactions for sales, there’s a high demand for quality office buildings being bought by both investors and owner-users,” said Bob Tuler, principal of Radius Commercial Real Estate & Investments in Santa Barbara. “Several companies have been long term tenants and are now out looking for their own property.”
Attractive U.S. Small Business Administration financing also continues to drive owner-user sales, he said.
On the investment side, Radius recently brokered the sale of the building at 3537 State St. anchored by Citibank for just under $10 million. The 20,000-square-foot building was sold in 2012 and underwent an extensive renovation. It is now fully leased. The sale was driven in part by a buyer who came to the deal as part of a 1031 exchange, a motive that Radius has pointed out was a major factor for sales activity in the first quarter.
In the Ventura County investment market, Los Angeles-based real estate investment firm ZDI scooped up the Mission Oaks Technology Center in Camarillo for almost $11.2 million. The property sits on a 20-acre site with exposure to Highway 101.
ZDI is in the midst of separating the utility lines for each of the buildings on the campus, with further improvements on the drawing board. The property has sat vacant for the last two years due to the downsizing of Blue Cross Blue Shield of California.
“Right now we could move to sell off the entire property to one company or split the properties individually,” said Tom Dwyer, senior vice president with the CBRE Ventura office who brokered the deal. “But the opportunity is really for one owner-occupier to have identity along the 101. We’re in marketing mode now and should have the utilities split in the next three to four months.”
There has been a lot of activity in 2014 already — much more than what transpired between 2010 and 2012 combined, Dwyer said. One reason is organic growth among regional firms. “Companies have been patient in taking more space,” he said. “But right now, I know over 100 companies from Calabasas to Ventura that are looking for more than 5,000 square feet or more for both lease or purchase.”
In Goleta, a string of large office deals that started last in September of last year is expected to continue, sources told the Business Times. The most recent in that line of deals was the purchase of the 102,006-square-foot former Raytheon building at 1 S. Los Carneros Road. The property was purchased by an undisclosed owner-user and represents the single largest South Coast commercial transaction of 2014 and the largest deal brokered by the Hayes Commercial Group’s Goleta office in eight years, the firm said in a statement.
Three other significant deals, including the purchase of the Hollister Business Park by Citrix, accounted for more than $54 million in sales activity alone over a 10-month period.
Going forward, improved lease rates will play a crucial role in supporting the Goleta office market for further sales deals, said Steve Hayes, managing partner with Hayes Commercial Group. “The leasing market has been pretty anemic and static and only last year we finally started to see some upticks.
More space is getting absorbed and that’s a pretty significant factor to the legitimacy of the numbers and the level of confidence investors would have in being able to back-fill buildings, he said. “I think it’s important to note that the activity seen in the last year from the investment sales side is pretty significant, but the owner-user side is building. By year end, I think we could be rivaling the frothy days of 2005, 2006.”
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