Lee & Associates Central Coast reported Feb. 23 that total fourth-quarter 2016 commercial sales volume didn’t match what happened in 2015, but reached almost $300 million in Santa Barbara.
Lee’s Q4 report showed mixed-use development activity is booming with several projects that include multi-family, office and retail.
“The steady influx of new residents is fueling a housing shortage, which is boosting residential development throughout the region,” Lee reported.
For example, the Kor Group has completed the first part of the Marc, a 89-unit luxury apartment complex near La Cumbre Plaza. The project was approved under the city’s Average Unit Density program, which allows developers to add more units per acre with fewer parking spaces.
“This has given the Upper State Street area a boost, reinvigorating nearby shopping centers and attracting national credit tenants,” Lee reported.
Smart & Final Extra leased a 35,000-foot-space in the Five Points Shopping Center. Blaze Pizza moved into the center’s retail pad.
“Despite the positive signs, landlords are becoming more concerned with an increase in store closings and the depth of new prospects to backfill vacated space,” Lee reported. “Retail space in heavy tourist areas like the Funk Zone and Waterfront district are still in high demand, whereas the State Street corridor continues to see further vacancies.”
Examples of this include an empty storefront at the corner of State and Gutierrez streets because the former tenant, Big Dogs retail clothing, moved into 651 Paseo Nuevo. And, after opening five years ago on the 700 block of State Street, Goorin Bros. Hats closed this month with no new tenant moving in right away. Those hats had pretty big price tags. Never saw many people walking out of that shop sporting a new fedora.
“Vacancy in the downtown core seems to be an issue of changing consumer dynamics rather than the local economy, which continues to improve,” Lee reported. “While online retailers have weakened the success of brick-and-mortar stores, it has done little to hamper the areas growing success of hospitality, restaurants and nightlife.”
That could be seen in the city’s transient occupancy tax revenue, which increased 4.6 percent from the past year.
Retail vacancies in Santa Barbara jumped 26 basis points in Q4 to 2.75 percent after slight upticks throughout the year, Lee reported.
“Momentum in activity for large office requirements has slowed, fortunately, smaller users are remaining active,” Lee reported. “Collaborative work environments are choosing downtown sites to grow their operations.”
The report pointed to the best examples of this trend: the 11,196-square-foot lease to Impact Hub, 1117 State St., and the 3,240-square-foot lease to The Sandbox, 414 Olive St. Sites like these are expanding to meet the pent-up demands for the small-office user who may still be working at home or at a coffee shop.
Impact Hub plans to open the long-awaited Satellite Wine Bar and Café next month and a second office location in the Funk Zone later this year.