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Santa Barbara News-Press: Lack of housing could slow California economy, experts warn

November 02, 2017
Santa Barbara, California – Published 11/2/2017
by David Minsky

The Santa Barbara area real estate market remained strong going into the third quarter of 2017 with solid commercial sales along the South Coast, although a growing amount of available leasing space and lack of housing could signal a downturn for California’s economy in the years to come, industry insiders said Wednesday.

The information was part of a forecast presented by Santa Barbara-based Radius Commercial Real Estate and Investments to a crowd at Fess Parker’s Doubletree Resort.

According to data provided by Radius, leasing vacancy rates for retail space on State Street more than doubled from 15 in 2015 to 31 so far in 2017. In that same two-year period, available square footage jumped dramatically from 47,040 to 268,805.

Throughout the entire city, retail space increased to 405,800 from 143,100 square feet in one year, according to Radius.

Industrial and office leasing space remained relatively stable compared to retail, according to data, although 2017 appears to be showing a slowdown in commercial real estate sales compared to the last three years, while prices are increasing.

Only 74 commercial real estate transactions have occurred in 2017, compared to 101 last year.

On average, industrial properties are selling at an average of $409 per square foot this year in Santa Barbara, while retail and office space is going for averages of $701 and $524 per square foot, respectively.

Sales of multi-unit family dwellings, such as apartments, in the county have slowed this year compared to 2016 and vacancy rates in South County remained low, around 1.2 percent in Santa Barbara compared to the national average of 4.5 percent.

Rents are another story as they remain stable throughout the county, although Lompoc and Santa Maria experienced modest increases, according to Radius’ Steve Golis, adding that San Luis Obispo County will see slightly larger increases.

Mr. Golis cited a tight inventory, or a complete lack thereof, among multifamily units. However, Mr. Golis mentioned some notable sales, such as a 48-unit complex at 120 N. La Cumbre Road that sold Oct. 5 for $11,550,800.

Mr. Golis highlighted Carpinteria, where a unit located at 685 Maple St. had 48 offers and sold for $2.1 million, with an original asking price of $1,050,000.

“Carp is hot right now,” Mr. Golis said. “Carp is a great market.” Despite the low inventory on multifamily units, lending is strong with interest rates hovering around three-to-four percent.

“They’re awesome right now,” Mr. Golis said. “Dollars are readily available.” Yet an impending labor shortage on a national level and lack of housing options in California could spell not-so-good news for the state down the road, according to Chris Thornberg, an economist for Los Angeles-based Beacon Economics.

“There’s not enough workers in the state because there’s not enough housing in the state,” Mr. Thornberg said, adding that jobs are plentiful. “California’s slowing down because we don’t have enough workers.

“We don’t need to worry about jobs, we need to worry about workers.”

Immigrant labor could fill the gap, he said, criticizing President Donald Trump’s policies on illegal aliens, particularly those who came to the U.S. while they were children and were allowed to stay under the Deferred Action for Childhood Arrivals program, which Mr. Trump is ending.

Mr. Thornberg suggested that people become more informed and more active in their local governments.

“If you aren’t part of the solution,” he said, “you’re part of the problem.”

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