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Santa Barbara News-Press: CRE deals, leases a snapshot of improving economy

April 22, 2014

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Santa Barbara News-Press: CRE deals, leases a snapshot of improving economy

NewsPress-030514_Historic Bekins building sold to local investor

The sale of the Bekins building was a notable transaction in the first quarter STEVE MALONE / NEWS-PRESS FILE
Santa Barbara, California – Published 4/22/2014
Santa Barbara News-Press
Santa Barbara News-Press: CRE deals, leases a snapshot of improving economy
By Steve Sinovic, News-Press Staff Writer

This year started well for commercial real estate on the South Coast, with vacancy rates for office space dropping in Santa Barbara, Goleta and Carpinteria.

The first quarter report, released Monday by Radius Commercial Real Estate & Investments, shows not only healthy leasing activity – a key indicator of business expansion – but also record sales of choice properties.

The first quarter of 2014 was undoubtedly the strongest from a sales standpoint in three years, said Bob Tuler, principal/broker for Radius, as the 23 commercial transactions recorded easily trumps first-quarter deals in 2012 (11 sales) and 2013 (14 sales).

An improving stock market has drawn investor interest, said Mr. Tuler.

Click here for the complete report: “Radius Insight: Q1 2014 Report”

“I have a buyer right now who wants to diversify, he wants to invest part of his portfolio in commercial real estate,” Mr. Tuler said.

Investors are poised to pounce, vying for the area’s limited supply, he said.

Some of the investors in turn are finding eager tenants, such as wireless sound system maker Sonos, which inked a 10-year lease to occupy the landmark Bekins Moving & Storage Co. building at 25 E. Mason St.

The company, which is on a hiring binge, will move some of its Santa Barbara staffers into the space once tenant improvements are completed.

The unnamed landlord/investor purchased the Funk Zone structure in February for $21.5 million. The transaction, brokered by Radius, was the largest deal for a downtown office building since 2007.

Comparing the fourth quarter 2013 and the 2014 first quarter numbers, Mr. Tuler said office space vacancies stand at 4.3 percent in Santa Barbara (down from 5.2 percent), 10.3 percent in Goleta (dropping from 11.4 percent) and 11.4 percent in Carpinteria (falling from 16 percent).

“We haven’t seen numbers like these in seven years,” he said, adding that current vacancies nearly mirror historic averages.

When the 2008 recession hit, businesses abandoned leases in droves – unlike previous downturns where vacancies rose slowly. Back in 2008, things just “bulleted up,” Mr. Tuler said.

“Tenants started off-loading space right away” as the economy tanked.

Now with limited supply, companies whose fortunes have improved – along with new firms in the market, many of them technology driven – are battling for limited office supply, especially in amenities-rich downtown Santa Barbara.

“When someone rents new space, frequently there are additional hires and renovations,” Mr. Tuler said. “Design firms and contractors most immediately benefit.

Another barometer is the purchase of office furniture.

“Tri-County Furniture reports that they are very, very busy with new orders,” related Mr. Tuler. “It’s all part of the trickle-down effect” benefitting local business.

Click here for the complete report: “Radius Insight: Q1 2014 Report”

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