As demand for investment properties on the supply-constrained South Coast heats up, the worry is no longer that the commercial real estate markets aren’t able to match their pre-recession highs. Instead, investors may soon face a dearth of properties.

That was the takeaway from Radius Commercial Real Estate & Investments in its 2013 market recap. There were 83 commercial sales on the South Coast last year, just shy of the 15-year peak in 2005, the firm said. “Sales activity has returned to pre-recession levels, and investors are now purchasing prime property for record prices,” Radius said. “More and more investors are competing for a very limited supply of real estate in the Santa Barbara area.”

A number of large deals are expected to close escrow in the first half of this year, and overall investment in 2014 should be on par with last year, the firm said. With the rush to buy prime property, however, there is the worry that some investors will be left out of the frenzy. “Perhaps the biggest challenge we may face in the investment sales arena is compressed inventory making it more difficult for many sellers to find suitable exchange properties in order to avoid paying capital gains taxes,” Radius said.

On the leasing front, the office markets appear to be returning to a healthier state, Radius said, although the office vacancy rate in Goleta is still high at 11.4 percent and even higher in Carpinteria at 16 percent. Santa Barbara’s retail vacancy remains enviably low at 1.2 percent, and the South Coast’s small industrial sector is also tight with vacancy rates in all markets below 3 percent. The preceding article references the recently released “Radius Insight: 2013 Year-End Report”. Click here to read the complete report.