Santa Barbara South Coast Chamber Magazine 2024 - 62

This newly built 50,532
sq ft building at 301
Coromar Dr in Goleta
was leased by Inogen
in 2019 but then
underutilized during
the pandemic. In
2023 Inogen leased a
smaller space nearby
and subleased this
building to Sonos.
PHOTOS THIS PAGE: STEVE GALBREATH FOR HAYES COMMERCIAL
Commercial Real Estate
South Coast market holds strong despite economic turbulence
Our
coastal
community enjoys
a certain degree
of insulation from
broader trends in
the economy, but
in recent years the
disruptive effects
of the pandemic,
remote work,
and high interest
rates have had
an
impact
commercial real estate along the Santa Barbara South Coast.
Commercial sales volume was profoundly hampered by interest
rates during 2023. After many years of cheap financing, the wave
of major interest rate increases that arrived in 2022 undercut the
purchasing power of buyers, while sellers' expectations were slow
to adjust. As a result, the market for high-priced sales slowed
dramatically, and the average price for investment sales dipped to
about half the historical norm. Owner-user buyers also typically rely
on borrowed funds to purchase property, and the number of sales
transacted by owner-users through September of 2023 was 27%
below the prior 5-year average. In all, dollar volume of commercial
sales through Q3 decreased 42% compared to the prior 5-year
average. On the other hand, those buyers not needing financing-
cash buyers and 1031 Exchange buyers-were (and continue to be)
in the driver's seat.
Hospitality properties have been popular among investors since early in the
pandemic, when the huge drop in tourism caused upheaval in the industry.
The Castillo Inn on west beach sold for $9.25 million in 2023, more than $440K
per guest room.
62 SOUTH COA ST MAGAZINE SBSCChamber.com
on
As for commercial leasing, available space in the office market
expanded by 47% compared to pre-pandemic levels as the
number of employees choosing to work remotely mushroomed.
Several of the South Coast's large tech and bioscience tenants
have contracted into smaller footprints-in one case even going
100% remote-while offering large spaces for sublease. Industrial
space was less affected by the pandemic or remote work, and
has been the most resilient space type in terms of vacancy and
rent. For retail property, thanks to emergency funding for small
businesses, most retail and restaurant tenants were able to weather
the pandemic, and occupancy in most neighborhood shopping
centers on the South Coast is high. However, Santa Barbara's two
regional shopping centers-Paseo Nuevo and La Cumbre Plaza-
have lost three of their four anchor stores and are both struggling
to keep a roster of vital retail and restaurant tenants, as is the State
Street corridor downtown.
By Hayes Commercial Group (HayesCommercial.com)
Sales and leasing of South Coast
commercial real estate slowed
as the market adapts to higher
interest rates and the remote
work phenomenon.
http://www.HayesCommercial.com http://www.SBSCChamber.com
Santa Barbara South Coast Chamber Magazine 2024

Table of Contents for the Digital Edition of Santa Barbara South Coast Chamber Magazine 2024
