Santa Barbara News-Press: Panel: Target derailed, but CRE outlook solid for 2015
|2014 Radius Forecast Speaker Mark Schniepp
Economist Mark Schniepp addresses the audience at the seventh annual Radius Real Estate & Economic Forecast at the Fess Parker Doubletree. NIK BLASKOVICH/NEWS-PRESS
Leaders of one of Santa Barbara’s top commercial real estate firms issued a bullish forecast Thursday for continued development and investment in the region, saying the area’s strong economy and available credit have set the stage for more retail, office and multi-family property deals in 2015 — both leases and sales.
Radius Commercial Real Estate & Investments hosted the seventh annual economic forecast at a steak-and-eggs breakfast at Fess Parker’s Doubletree Resort, an event that drew more than 350 of the area’s top business professionals and local government and elected officials.
The keynote speaker was Santa Barbara Acting City Administrator Paul Casey, who presented an update on a variety of timely topics and new development projects in the pipeline.
Economist Mark Schniepp presented local, regional and national information relevant to professionals engaged in commercial real estate, as well as to area business owners.
While a healthy flow of capital into the region has been significant in 2014, as evidenced by the major leases and sales transactions touted, not everything’s coning up roses, said the panelists.
One ripple going through the room was news that a much-desired Target store in Goleta is decidedly off target — at least for now.
“Any future Target store deal is on the rocks,” said Paul Gamberdella, a Radius broker, who provided an update of office, retail and industrial leasing on the South Coast. Mr. Gamberdella, who at one point placed odds on Target opening at 50-50, said the merchandising giant spent years unsuccessfully negotiating lease terms at a proposed site at Hollister Avenue and Los Carneros Way.
“Unfortunately, a Target won’t happen at this site,” said Mr. Gamberdella, who doesn’t preclude the possibility that another property with the available land to satisfy the retailer might be identified.
While Target is out of the picture, other retailers are moving forward. On the food front, Mr. Gamberdella said the former Ruth Chris Steak House at La Cumbre Plaza will soon see a new tenant: Lure Fish House. Mr. Gamberdella said the Ventura-based restaurant chain has signed a lease for 6,500 square feet of space at the shopping center and is obtaining permits from the city for tenant improvements.
Another restaurant group also is negotiating with the Santa Barbara Municipal Airport officials to open an eatery in the shuttered Elephant Bar space.
Signs of the commercial real estate recovery include significant sales activity in 2014 — $324 million in purchases of office and industrial buildings to date, many by tenants wanting to be owners and able to swing the terms to purchase. In 2013, Radius recorded $213 million in sales, according to Radius co-founder Steve Brown.
Other signs of a resurgent development environment include the resumption of work on the La Entrada de Santa Barbara mixed-used project on lower State Street; reconstruction of the Santa Barbara Inn; a 34-room extension planned at the Harbor View Inn; and bridge repairs along Cabrillo Boulevard, said Mr. Brown.
Expected to cause traffic delays and some impacts to local businesses in the wharf/harbor area, Mr. Brown believes this level of development downtown is “a sign that the economy is running on all cylinders.”
All the projects will help generate many new construction jobs and benefit local vendors.
Mr. Schniepp, in a presentation which he called “Stories from the Recovery,” said despite recent volatility in financial markets, the recent U.S. and California evidence have been encouraging.
Five years into an expansion, Mr. Schniepp detailed growth in employment, consumer spending, exports, corporate profits and the stock market.
Though labor market momentum has slowed this year, he said Santa Barbara County is still on pace to create 2,000 total wage and salary jobs in calendar 2014.
Statewide, the drought has cost the state $2.2 billion so far, with nearly all the economic pain epicentered in the San Joaquin Valley. But for the crops that are getting harvested and to markets, the value of California agriculture is at an all-time high.
Mr. Schniepp showed one article noting the benefit of less precipitation for one sector: drought produces tastier wine grapes for growers.
Another silver lining to Santa Barbara’s unseasonably warm and dry winter months: visitors fleeing the Polar Vortex in droves and patronizing the region’s hotels, which resulted “in exceptional rates” in the so-called off season. Hotel room sales are strong, representing a value of $410 million value to the county in 2014, according to Mr. Schniepp’s forecast data.
The coming year could be another strong one for hoteliers and cruise ship visits are expected to increase.
Schniepp’s reading of the economic indicators is two more years of expansion. “There is no recession in sight,” he said. “Just pray for rain and El Nino to strengthen,” he said.
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