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Pacific Coast Business Times: Real Estate: Commercial activity picked up in fourth quarter of 2020

February 26, 2021

Though 2020 was unpredictable in commercial real estate, it ended in a strong finish on the South Coast of Santa Barbara County, according to Radius Commercial Real Estate’s recently released fourth quarter market report.

Santa Barbara, California – Published 2/26/2021

The area saw 85 total commercial sales in 2020, just six below 2019’s total and solidly above the 15-year-average of 77.1 commercial sales per year.

The year ended above average in part because of the strong final quarter, with 29 total transactions, compared to 32 deals in the last quarter of 2019. Sales volume was also fairly comparable: The fourth quarter of 2020 saw $198 million in deals, against $217.1 million the year before, a decrease of about 8.8%.

Those numbers were boosted by significant transactions in the last quarter of the year. In December, the Amazon building at 1001 State Street sold for $36.2 million in what was likely the largest commercial sale in the history of downtown Santa Barbara, and in Goleta, the three-building office campus at 50-90 Castilian Drive sold for the second time in a year, closing at $61 million.

There was one major downtown Santa Barbara hotel that sold during the fourth quarter, The Wayfarer Hotel in the Funk Zone, which changed hands for $7.63 million. Additionally, 17 acres of land off Los Carneros Road in Goleta sold for $13.5 million with the expectation that the land will be developed into apartments.

A notable trend that Radius noted in its report is that investors drove the market in the last portion of the year. Almost 60% of the transactions in the fourth quarter of 2020 were investors, compared to just 30% in the same time period of 2019. The region also saw an about-even number of owner-user sales (44) versus investor sales (41) in 2020, while in 2019 there were 57 owner-user sales and 34 investor sales. Radius suggested the cause could be more 1031 exchanges—a swap of one investment property for another in which capital gains taxes are deferred—as well as excess investment dollars from the local residential boom that happened earlier in the year.

Other major developments in the county include a 208-unit apartment complex in Santa Maria, which sold just before Christmas for $56.5 million. That translates to about $270,000 per unit at a 4.8% cap rate. The property had been recently renovated for around $4 million, and almost 50 interested buyers checked the property out.

Ventura County also saw a couple of major multifamily residential property movements on the market. In November, two major complexes sold in Camarillo. One of the complexes, at 352 Townsite Promenade, included 213 units in a recently renovated property and sold for $95.75 million, or almost $450,000 a unit. A second complex, at 659 N. Las Posas Road, included 106 units in a property that sold for $30.5 million, or almost $290,000 per unit.

The biggest lease of the fourth quarter in the Santa Barbara area was from Google, which leased almost 18,000 square feet at 5385 Hollister Ave. in Goleta. The property Google leased is next door to the one it recently purchased, and considering that Amazon and Microsoft have also recently made significant expansions into the South Coast, it bodes well for the economy.

The area gained a significant amount of retail space in La Cumbre Plaza as the old Sears building came to market. The Sears building added 149,000 square feet of space, and the addition of the Sears building to the market pushed the region’s total retail vacancy to more than 500,000 square feet of space. The extra space also pushed up the vacancy rate, from 3.9% at the end of 2019 to 5.0% in 2020.

Retail on State Street also suffered from higher vacancy rates. At the end of the year, almost 1 in 5 storefronts were available for lease, including several locations that weren’t vacant yet. However, the area also saw several new leases, including two pop-up locations, two new restaurants and the Community Environmental Council’s new location at 1219 State St.

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