Friday, August 14, 2009

SF Fed Branch Issues Report on Commercial Real Estate

The San Francisco Federal Reserve branch issued a new report on residential and commercial markets. The message is "There are some positive signs in housing markets, although pressures on homeowners will not abate for some time. CRE is further from a bottom than housing. Income property markets are starting to struggle from the weak economy, pressures on rents & steep value declines. The CMM model suggests rising loss rates over the next several years for longer-maturing loans, but also predicts loss rates should remain relatively moderate. Refinance risk of maturing CRE loans, on the other hand, remains high. Unless the economy and credit markets recover more quickly than expected, CRE credit losses on some of these loans could become significant."

I am including a link to the report for all to see.

July CPI Numbers Released

The CPI numbers for July have been released and the year over year continues to show a decrease. For July it was 2.6% for the Los Angeles-Riverside-Orange County MSA that covers Santa Barbara. The month to month numbers from June to July show a slight increase and that continues the trend starting in April.

Investors who have been worried about possible inflation should remain comfortable for the time being. Even though the economy appears to be stabilising there haven't been enough indicators to make the Fed adjust rates and the markets haven't seen a lot of price pressure. This bodes well for the remainder of the year but at some point we will have to see the Fed make the decision to begin raising rates in order to stave off a fast rise in prices as the markets turn around in 2010.

Thursday, July 30, 2009

East Beach Wine Tries Downtown On For Size

If you haven't heard or noticed, East Beach Wine is moving from lower Milpas to La Arcada. They are taking over the space that used to be the designer home furniture space across from the old Stateside. I sure hope they can keep their following there. The rents are kept lower in La Arcada (a trend the descendents of the old owners have kept going) and the feel of the alley is cozy and local.

If we could only get a new restaurant that could generate the kind of following necessary to make it in a size like the old Acapulco (Stateside) space. There is a lot of real estate in there and they need a lot of bodies on a daily basis to make it work. Too small and off State for most national restaurant brands but maybe someone will prove me wrong.

On a final note, make sure if you go that you get a haircut at the barbershop. I was in the other day and I would hate to lose Frank and Hank. They aren't spring chickens anymore but they are Santa Barbara institutions.

Wednesday, July 22, 2009

June CPI Numbers Released

It's a week late but I am finally getting out the June CPI numbers for our region. The year over year continues to show a drop and for June it was 2.2%. Investors continue to be more worried about a recession than inflation.

The CPI increased on a monthly basis from May to June by .6% and that is higher than we have seen in some months. The monthly increase is mainly made up of increases in the energy portion of the index and not by food or other consumer goods. Another sign that inflation is not currently a threat.

What all of this means for commercial real estate is that any annual increases that were set to occur for June won't happen unless there was a minimum annual increase specified in the lease.

Tuesday, July 21, 2009

California's Budget Gets "Balanced"

And by balanced I mean screwed up further. To hear governmental officials talk you would think that the solution has been there all along. Oh, we're just going to make some very tough cuts in services and education and do a little drilling and it will all be okay. As near as I can tell the cuts in spending (and yes we need to cut spending but who knows if these are the right cuts) will only account for about half of the deficit reduction. The rest of it comes from stealing from local cities and counties, creative accounting methods that would normally send people to jail and efforts to push the crisis off further into the future. At some point Arnold won't be governor anymore and he can say it is someone else's problem now.

Over the past 30 years we have let ballot initiatives, term limits, gerrymandered electoral maps and Proposition 13 turn the state into the mess it is in today. I'm not calling for a repeal of Prop 13 but this 2/3 vote requirement for any tax increase is ludicrous. Additionally, politicians have little interest in making the tough decisions when they can just put an item on the ballot and let the knowledgeable people of California make the decision. That way the politicians can focus on the next office seat they will be running for since they are term limited in their current spot. "Today I am a State Senator, tomorrow I could be Attorney General. Not that I am qualified for either spot."

The mess we are in is going to get worse. The cuts in the budget will make local governments spend more of their budgets covering shortfalls. Unemployment will rise and revenues will fall. The state hasn't even seen the bottom of this economic downfall yet so we will probably have another round of the budget battle in a few months. See you then.

Monday, July 6, 2009

Downtown Vons is Closing, Whole Foods Sign is Up

The Vons store at Chapala and Victoria is closing on August 8th. Previously, they were set to close in January at the close of escrow by the new buyer. They were able to extend for some extra time though.

The new owners are planning a mixed use redevelopment and while it could take several years for something to be built the ownership will consider short term leases for the space. It could be perfect for a short term Farmer's Market or other use that needs a lot of open space and parking. Someone could find a home for 1-2 years while the development happens.

On the flip side, the Whole Foods on Upper State now has a temporary sign out in front letting people know they are coming to town. It will still be many months before the store is ready to open (think 2010) but they want the buzz to build. I know I can't wait for them to open. This is just what Santa Barbara has been waiting for. Sorry Gelsons and Lazy Acres.

Tuesday, June 23, 2009

National Retail Landlord Releases List of Risky Tenants

Madison Marquette has released a list of tenants with varying levels of risk associated with defaults, downturns in business and other factors. Santa Barbara does not have too many retail tenants that are in the high risk bracket. We have already lost most of those like Circuit City and Z Gallerie. However, on that list are companies such as Cost Plus World Market (which plans on closing 26 stores this year) and Chico's which operates brands like Chico's and White House/Black Market (both in Paseo Nuevo).

This doesn't mean that Santa Barbara will lose any of these stores anytime soon but it is interesting to see who is high on the list and who is low. The full list can be seen here: