Pacific Coast Business Times: Real Estate: Potential office glut in Santa Barbara

The Santa Barbara commercial real estate market has faced its ups and downs this year, according to Radius Commercial Real Estate General Manager Brian Johnson.

Speaking at Santa Barbara Executive Roundtable’s annual economic forecast on Nov. 11, Johnson said leasing in the area is down “heavily.”

The third quarter of 2021 produced just 49 new transactions, about 30% below the 5-year average, Johnson said.

“The first quarter started slow as the vaccine rollout began,” he said. “Then in the second quarter, things picked up steam as we saw reopenings happening and life returning into the business sector.”

As the highly infectious Delta variant of the coronavirus became more prevalent, Radius “saw things slow down in the third quarter,” Johnson said. However, the commercial sales market is “at least as healthy and strong” as it was before the pandemic struck in March 2020, and Johnson expressed optimism for the future.

“We’re hopeful the year can finish off strong, and the momentum can carry over into 2022,” he said.

Santa Barbara’s office vacancy rate remained above 2% in the third quarter of 2021, for the third straight quarter, Johnson said, though that doesn’t include the vacant and recently sold Nordstrom building, which may be converted into office space.

“Now, if that happens, we will potentially have approximately 150,000 square feet of office space being marketed in Paseo Nuevo,” he said. “I don’t think that’s the kind of adaptive reuse that anyone had in mind when they were looking at the evolution of State Street.”

In Goleta, the office vacancy rate rose only slightly to 6.9% and is showing signs of recovery, and in Carpinteria, the office market is very tight, with a 1.9% vacancy rate.

“Even though companies may not be bringing employees back fully yet, they’re planning for it, and that means larger office deals on average,” Johnosn said.