State Street is Home of $4-SF Triple Net Leases, Long-Vacant Shops

(SB City Desk, Oct. 30, 2015 discussing State Street real estate)

The most that can be said about State Street these days is that it appears $4-a-square-foot triple-net leases continue to drive away tenants and keep storefronts empty longer.

And even though paying that much for a lease, which includes rent, utilities and services, may seem like a lot, some building owners continue to ask for even higher rates. With the end of the year fast approaching, not many vacant storefronts will be filled before January.

The most obvious example, and there are a few, is the space at 930 State St., next to the Apple Store, which used to house the GBMI shoe store. It’s been empty about seven years because the owner wants almost $5 a square foot in a 2,650-square-foot store. You have to sell a helluva lot of shoes to pay that triple net.

However, nearby at what used to be Saks 5th Avenue, the retail outlet has morphed into an Off 5th outlet store due to open Oct. 8. Looks like Saks decided to keep up with the Forever 21-style retail shops on State Street.

Ironically, just next to the Saks parking lot on Carrillo Boulevard and Chapala Street sits the derelict bus depot that had been vacant for several years after Greyhound fled to the Amtrak train station. Telsa Motors opened a pop-up showroom at the old depot, but moved to a permanent location on Hitchcock Way.

Anyway, no permanent takers are in sight for the vacant depot, which is prime retail property.

From Hayes Commercial Real Estate:

“With nearly 30,000 square feet available on the 600 to 1000 blocks of State Street, there is more vacancy along Santa Barbara’s retail corridor than we have seen since 2011. American Apparel and Panera Bread both vacated the 700 block this year, adding 11,753 square feet to the market. …

“At the same time, demand for spaces on the prime blocks – especially among national retailers – has been tepid. ‘There used to be five or more credit tenants looking at any available space on these blocks,’ Hayes Commercial partner Michael Martz said. ‘Now the interest level is noticeably quieter.’ …

“During the recession, the arrival of lower price point retailers such as Marshall’s and H&M diminished the image of State Street as a boutique shopping destination. The perceived increase in sidewalk panhandling reinforced this trend. …

“Tourists who might have bought clothes and accessories as gifts on State Street five years ago seem just as happy to take home bottles of wine from the Funk Zone now,” Martz said.

“While State Street has lost a bit of its luster, the retail outlook for the South Coast as a whole remains far from gloomy. Vacancy is about 2 percent – an enviable rate by national standards. Goleta’s Camino Real Marketplace has found a winning strategy by signing leases with proven local brands. Jane, Pascucci, Natural Café, and Core Power Yoga signed leases in 2015 and will join Los Agaves, Blenders and Kahuna Grill. The High Sierra Grill will open in December in the 8,695-square-foot space at 521 Firestone Road, formerly the Elephant Bar.”

Retail isn’t a panacea. The former Guess clothing store at 820 State St. is now a seasonal World of Magic Halloween paraphernalia shop, which also is using a store front at 633 State St., as a warehouse. Funny use for a storefront, it will be vacant after Halloween.

Other comings and goings include the demise of the British goods shop at the corner of State and Figueroa streets. Not selling enough crumpets? However, at the former Crankey’s Bike Shop at 1014 A State St., another rug store has just opened. That’s sure to be a going concern.

Meanwhile, the former Panera Bread site at State and Ortega streets has no new tenant in sight. However, the former Pierre Lafond Café 516 State St. at has a replacement: Café Primo was supposed to open by now, but the owners says he has some permit issues to take care of first.

A block away at 418 State St., India House restaurant and furniture store has a “For Sale or Lease” sign on it. The place rarely drew a crowd except for “Bollywood Night.” The owner’s website says, “Current tenant is interested in selling his assets.” Asking price for the property is $4.2 million.

And next door, the former Killer Shrimp and Sharkee’s spot remains vacant even though the triple next is only $2 a square foot.

Speaking of empty restaurants, the Nuance next to Hotel Indigo, 121 State St., looks pretty empty these days as does the former Bay Roadhouse at State and Yanonali streets. However, the new children’s museum across the street is rising and should open in the New Year.

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