Pacific Coast Business Times: Procore deal raises flag for Carpinteria’s office market
Recent deals in Carpinteria could help the city’s stagnant office market turn the corner.
Procore, which makes cloud-based construction software, recently signed a lease for about 33,000 square feet of newly renovated office space at 6185 Carpinteria Ave. The building, formerly home to now-defunct turbine maker Clipper Windpower, is owned by entrepreneur and philanthropist Paul Orfalea.
“We were fortunate enough to structure a lease that allows our growth in employees to track along with our growth in revenue,” Steve Zahm, president of Procore, said in a news release from Hayes Commercial Group. “This provides us with a trophy office complex for the same price that we might get in a plain campus elsewhere in the county … It also gives us a place to continue our expansion and hiring in the South Coast.”
Procore’s move and expansion come on the heels of a $15 million capital raise from Silicon Valley firm Bessemer Venture Partners. Its headcount has jumped from a half-dozen employees in the depths of the recession to about 100 currently. To accommodate that growth, it signed the largest lease of the quarter on the South Coast. Previously, the firm’s headquarters were split among three buildings in Montecito.
“The Carpinteria landscape has probably changed more than any other office market in the South Coast,” Gene Deering, a broker with Radius Group Commercial Real Estate & Investments, said in an interview. “It’s definitely more volatile than other areas, but as we’ve seen companies expand, some space out on the bluffs is attractive enough to get them to move down from Santa Barbara or Montecito.”
Office space in Carpinteria is also cheaper, and there are larger properties available, than in Santa Barbara.
Procore’s growth in Carpinteria in many ways mirrors that of online education firm Lynda.com, which moved its headquarters to the city from Ventura in 2009. With more than 300 employees in hundreds of thousands of square feet of space, Lynda.com has offered a big boost to Carpinteria’s commercial real estate market.
After dipping below 10 percent with the Lynda.com expansion, Carpinteria’s office vacancy rate has crept back up, even as other tri-county cities have seen their markets tighten. Landlords in Carpinteria often compete directly with property owners in Goleta to lure growing firms, said Liam Murphy, a broker with Hayes who advised Procore in the deal. “As [Carpinteria] competes with Goleta, some firms place extra value on being in Santa Barbara proper … Sonos is an example of that, but solidifying interest in the Carpinteria market are the creative deals like Procore that are bringing energy to the town,” Murphy said.
As of the first quarter, Carpinteria office vacancy rate was 11.4 percent, down from 16 percent at the end of 2013, according to Radius. With only about 500,000 square feet of total office space, it doesn’t take much for the small market’s vacancy rate to dive or hit an upswing.
Still, activity in the office market has paved the way for a potential 85,000-square-foot office development at 6380 Via Real in the Lagunitas Business Campus, just off Highway 101. The list price for the fully entitled 8.6-acre site is $4.7 million.
“It’s a case where [a project] is ready to go and a company could easily come in and buy land to build their own unique building or the current owner will, but not until they have a tenant locked in,” Deering said. “There have been a couple of deals that I believe were close to coming together, but for one reason or another didn’t. The ability to build an incredibly efficient office space is a really unique opportunity.”
With a number of other office deals kicking around, Deering said he expect the vacancy rate to continue to drop over the next three to six months.
Meanwhile, all eyes are on CKE Restaurants, parent company of the fast-food brands Carl’s Jr. and Hardee’s. The company, which has about 120 employees at its headquarters at 6307 Carpinteria Ave., is in negotiations with the landlord over its lease, which is reported to be up at the end of this year. The building is currently for sale, listed at $35 million.
Andy Puzder, the CEO of CKE, has talked about a possible move to Texas, where the chain is aggressively building out restaurants. Rumors of CKE’s departure only increased when the company downsized its Carpinteria offices by almost 10,000 square feet.
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