The 2011 2nd Quarter South Coast Commercial Real Estate Review

The South Coast Leasing Market returned mixed results during the second quarter even as leasing activity remained strong. Vacancy rates increased slightly in all sectors (office, industrial and retail) in Santa Barbara while the Carpinteria and Goleta office sectors experienced decreases. Although RightScale leased over 26,000 SF of Santa Barbara office space it did not impact the vacancy rate due to the fact that the was space was occupied by many small tenants on month to month leases at the Santa Barbara Technology Incubator. Goleta witnessed the largest improvement overall, slowly inching back towards single digit vacancy rates. This is the fourth straight quarter of declining vacancy rates in the Goleta Office sector. Carpinteria also posted positive gains in their office and industrial sector. We forecast that leasing activity will remain steady during the 3rd quarter of 2011.

There was a decline in the number of sales during the second quarter when compared to the first quarter of 2011. The Sales Market only produced 11 sales compared with 26 in the previous quarter. The highlight sales included a 70,000 SF building formerly owned but still occupied by Mentor at 301 Mentor Drive that sold for $19.4 million and a 29,000 SF building that currently houses Spectrum Fitness on Calle Real sold for $3.9 million. Even with only 11 sales during the second quarter the outlook is bright for the number of commercial sales to exceed 60 for the entire year. This would be first time since 2007 that this kind of activity has occurred on the South Coast.