Experts in the commercial real estate industry expect to continue to see a steady demand for office and industrial spaces in 2019 as cities explore more ways to develop mixed-use housing.
Housing, especially workforce housing, continues to be a huge regional need. Downtown retail corridors in San Luis Obispo, Santa Maria and Santa Barbara look to mixed-use housing as the future driver of traffic and business health.
Overall economic growth in the region is stymied by a lack of political will to build more housing in coastal communities, a leading California economist previously said at a 2019 commercial real estate forecast event in Santa Barbara.
Funding for affordable housing in San Luis Obispo was approved by county supervisors in December in order to implement an affordable housing plan in conjunction with the region’s Coalition of Housing. SLO city staff will continue to explore strategies for housing in the downtown area, seeking to keep that area populated for retailers and businesses.
In Ventura County, a lack of affordable housing has contributed to the county’s lagging economy, Matthew Fienup, executive director of California Lutheran University’s Center for Economic Research and Forecasting, previously reported at a conference in Camarillo.
Another leading California economist reported separately that rising construction costs perpetuate the lack of housing supply as developers struggle with cost adjustments, labor increases and tariffs.
On the bright side, Fienup pointed out successful planning and zoning efforts by the city of Thousand Oaks to spur infill development of housing along Thousand Oaks Boulevard and Highway 101.
The Junction at Wagon Wheel, slated for more than 1,500 housing units and almost 50,000 square feet of retail space, will offer market-rate units for sale and lease with projects wrapping up and breaking ground in 2019.
The Harvest at Limoneira may offer its first homes for sale later in the year in the largest single housing project under way in Ventura County.
Startups and seasoned tech companies alike are looking for warehouse space turned office park — where workers can utilize collaborative spaces with high ceilings and natural light as well as onsite or nearby amenities, including local eateries and cafes.
The leasing of Saks Fifth Avenue OFF 5TH to Amazon boosts Santa Barbara’s downtown claim on growing tech companies, such as Sonos, Invoca and LogicMonitor.
But Goleta continues to increase its appeal as an alternative with projects such as the Cabrillo Business Park, which houses Inogen and is slated to add another 145,000 square feet of office and flexible R&D and space in hopes of catching startups and tech companies out of UC Santa Barbara, Paul Gamberdella, a partner at Radius, previously told the Business Times.
“The key is developing a working environment that’s really attractive, if you’re talking about tech,” he said, noting that companies were starting to notice top talent migrating to areas near a downtown corridor where they can experience a “hub of activity.” Older business parks will have to focus on spaces that “foster creative thought” if they hope to attract tech tenants, he said.
In Ventura County, the CRE market is relatively positive and controlled by supply and demand, a trend Bill Kiefer, a broker with NAI Capital, said he expected to continue in 2019. Office space has seen an improvement in supply, with high vacancy rates diminished, he said. Rental rates will continue to stay firm, and in the case of retail, low vacancies are likely to remain common among A-listed properties.
Industrial properties will continue to see low vacancies with escalating rents, he said, but the demand in 2018 has been consistent with last few years, “not on fire, but doing well.” A “pent up demand” for industrial space during recession years will continue pushing rates up to where they were before the Great Recession.
The best indicator for office and industrial space is white collar and manufacturing job growth, he said.
WHAT TO WATCH FOR
A few bigger developments to watch in the Tri-Counties include the fate of the vacant Macy’s building on State Street in downtown Santa Barbara as well as the Santa Maria Town Center’s strategy for filling vacancies under new management in a downtown with huge potential.
In Ventura County, the Conejo Spectrum in Thousand Oaks is filling out its tenant list, and mixed-use development along the Thousand Oaks Boulevard could jump start a revitalization effort in an area where demand traditionally is strong.
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Summary of market insights and analysis from Q2 2019 South Coast commercial sales and leasing activity: Download the complete report here …