Radius Commercial Real Estate had a Zoom edition of its annual Real Estate and Economic Forecast on Nov. 10, including analysis from principals Steve Brown, Steve Golis and Brad Frohling, as well as a presentation by UC Santa Barbara economics professor Peter Rupert.
The forecast went through some of the major trends of a year in a real estate market deeply affected by COVID-19. Golis expects the biggest sales of the year have already been made, and said that while there was a lot of capital and demand for property, investors face limited opportunities to capitalize on those demands.
“There would be more sales if there was more inventory on the market,” Golis said.
Radius also works with landlords and tenants, and Frohling spoke about the issues those groups faced because of the pandemic. Between restrictions, shutdowns and eviction bans, many people were left unsure of what it meant for their leasing situation or how to operate safely.
“It’s new territory for all of us,” Frohling said.
COVID is most likely going to have a considerable effect on how and where people work. Santa Barbara is an attractive spot because it’s not a large metropolis, so it faces fewer of the issues bigger cities are facing, including restrictions on how many people can be in an elevator at one time and how that impacts high-rise buildings. It might attract some new businesses because of that, but there aren’t any new office buildings on the horizon, which limits the amount and types of businesses that can come in.
Additionally, individual corporations can have large impacts on the amount of space available. Microsoft and Amazon both have large footprints in the area and are taking entirely different approaches. While Microsoft is shedding massive amounts of office space in larger cities, Amazon is leasing more and trying to get people back to in-person work as soon as possible.
Because of the changing demands, Santa Barbara might see more retail space converted to office space, like what Amazon did when it converted 1001 State Street from a former Saks Off Fifth to its current use as an Alexa development hub. Landlords, though, will be looking for businesses that provide Internet-proof services, like restaurants or salons.
Frohling also called closing portions of State Street absolutely necessary, but said there needs to be more of a plan for going forward. That might mean narrowing which blocks are included in the closed-off corridor.
Rupert, the executive director of the UCSB Economic Forecast Project, gave his presentation shortly after, and spoke about the difficulties involved in quantifying the economic effects of the pandemic and the shutdown, which he called the “pancession.”
“We have never been in this situation before,” Rupert said.
Rupert compared some key economic markers, like unemployment and GDP, from the Great Recession to now, and went into detail about how current factors meant people needed to take a more nuanced look at the data. The area lost a lot of jobs, and while it has started to recover some of those lost positions, there are still many who haven’t been able to go back to work.
“We’re not back to where we were,” Rupert said. “We’re nowhere near.”
Still, Rupert thinks Santa Barbara is well-positioned to move forward.
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