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:

http://blog.places-magazine.com/?p=369

Friday, June 19, 2009

California Unemployment Hits 11.5%

California's unemployment rate hit 11.5% for the month of May. That puts it at it's highest all time level. California is ranked 5th in the country of highest unemployment rates behind Michigan, Oregon, Rhode Island and South Carolina.

On a more local front, Santa Barbara County's unemployment level stands at 7.6%, the same level it was last month. More positive news is that Goleta and Santa Barbara's levels of unemployment remain below 5.5% while Lompoc and Santa Maria are in the double digit range. Overall, we are handling the current recession fairly well. Santa Barbara County ranks 2nd in the state for lowest unemployment levels behind Marin County. Ventura and San Luis Obispo are 9th and 4th respectively.

Z Gallerie Asks Leases To Be Cancelled

Z Gallerie has asked the US Bankruptcy Court to cancel 25 of its 77 leases around the United States, including the one at 917 State Street. I had previously reported that Z Gallerie was declaring bankruptcy and closing around a third of its stores in April.

The request by Z Gallerie would alleviate their responsibilities to the owners of the property who have a lease that runs for another 5 years. The owners have been marketing the property for lease on their own in hopes of finding a tenant to let Z Gallerie off of their lease but with this request into the court it probably means that Z Gallerie has stopped all payments of rent to the ownership.

There are always plusses and minuses when dealing with a national tenant. Typically, the plusses outweigh the minuses. This is an instance of when dealing with a big company with lots of lawyers will end up hurting a property owner. Most of the owners in Santa Barbara are smaller, more personal entities. They are not large corporations with massive holdings and often cannot afford to go after delinquent tenants. Sometimes that gets forgotten around here.

Thursday, June 18, 2009

Santa Barbara's Medical Office Market Could Expand

A report published by Marcus and Millichap forecasts the need for an additional 10 million square feet of medical office space, nationally, over the next few years.

The report sites the potential increase in the number of insured people that could be created if the Obama administration is successful in health care reform. Currently, baby boomers account for about 1/3 of doctor's visits but make up about 29% of all people uninsured. If the number of insured rises to the 90% to 95% levels that the government wants then we could see the number of physicians needing to grow by over 5,000 across the country.

Santa Barbara doesn't have a large number of baby boomers without insurance but we do have a large population of uninsured people across all age groups in the lower economic classes. That would mean additional medical offices throughout the area and an increase in the services that Cottage and others are able to offer.

Medical office space is already extremely tight in the South Coast. We are under 1% vacant for medical office throughout Santa Barbara and Goleta and the only new spaces coming on line are from Cottage's expansion efforts. Those will be directly tied to the hospital or for physicians associated with the hospital. There is definitely a market for private development of additional space locally. The question is will there be enough potential returns to attract the developers.

Wednesday, June 17, 2009

May CPI Numbers Released, No Signs of Inflation Yet

The May CPI numbers were released today and for the areas around Santa Barbara we saw a decrease of approximately 1.8% from May of last year to May of this year. The upside is that inflation is still not a concern yet, however that could change by the end of Summer.

What this means for local landlords is that any annual rent increases tied to CPI will see no change this year unless they have a minimum increase in their lease. This is the 4th decrease of the year so far. There was only month showing an increase and that was February.

We actually saw a 0.3% increase in the CPI from April to May. However, on a seasonally adjusted basis, the increase was only 0.1%.

Tuesday, June 9, 2009

Should California's Businesses Foot The Bill?

There has been a lot of talk lately about California's mounting debt problems. We have seen everything from talk of cutting education and health spending to closing state parks, selling state assets and privatizing some of the state prisons.

All of these discussions tend to lead back to Proposition 13 and the effects it has on the state budget. Prop 13 effectively put a cap on rising property taxes until a property changes hands. That happens a decent amount for residences around the state. Sure, there are lots of properties that stay in trusts for generations and evade the rules, but for the most part the housing market is dealing with Prop 13. The big issue tends to be in the commercial world where properties can sit for very long periods before changing hands. Some argue that there should be more incentive to shift the tax burden to businesses and commercial property owners by changing Prop 13 to allow commercial properties to be reassessed. In my opinion, this would be a nightmare.

We already have some of the strongest prohibitions in the country when it comes to operating a business in California. Besides the environmental controls, massive permitting issues involved and the NIMBY attitudes of many communities, we might now face the idea that taxes need to be increased. If owners of commercial properties are faced with this they will simply pass on the increased cost to their tenants. These tenants will find doing business in California that much harder and consider other states that aren't so strict. Maybe the state starts to see some increases in revenue due to the tax increase but what about sales taxes, income taxes and business taxes? Those are bound to decrease as companies abandon California.

Would the last company to leave California turn the lights off please? If you hear so much as an inkling of this from your local representatives, give them an earful. The current system of governance in California has to change but you cannot find one silver bullet to cure it all. Businesses need to be at the forefront of leading California forward.

Monday, June 8, 2009

J Jill Being Sold and Closing Some Stores

Talbots is selling their interest in the J. Jill stores around the U.S. to Golden Gate Capital. The sale price is expected to be about 15% of what Talbots paid for the stores in 2006. There are 279 stores total in the U.S. and Golden Gate Capital is buying 204 of them. The remaining 75 stores will be closed.

It is unclear whether the J. Jill store (targeting women 35 and over) at La Cumbre Plaza will remain open or close. The typical size for a store is approximately 3,800 SF. Golden Gate Capital is also known for their purchase of the Express chain of stores from The Limited in 2007.

Wednesday, June 3, 2009

MIT Enterprise Forum Central Coast Event June 17th

Please join us at our next MIT Enterprise Forum Central Coast event on June 17th at 5:00pm. The event will feature Richard Sanford of Sanford Winery and Alma Rosa Winery and Rob McMillan, Exec VP & Founder, Silicon Valley Bank Wine Practice to discuss entrepreneurs in the world of winemaking in Santa Barbara.

Here is the link to the event: http://www.mitcentralcoast.com/Event-Details.aspx?EventId=132

April Unemployment Drops

The unemployment numbers for California were released last week and the state saw a decrease in unemployment from 11.2% in March to 11% in April. Continuing the downward trend was Santa Barbara County which saw a decrease from 8.6% to 7.6% in the last month.

Overall, the Cities of Santa Barbara and Goleta remain relatively strong with unemployment numbers under 5.5%. There have not been any huge blows to the labor markets locally despite tourism numbers down and retail sales continuing to lag.

Historically, unemployment numbers tend to rise slightly in the summer months so we could see some indicators of that when May numbers are released two weeks from now.

Thursday, May 28, 2009

Anchor Blue Files Bankruptcy

Anchor Blue, which has a location at 820 State Street, has filed for bankruptcy protection. It has approximately 177 stores nationwide. The chain originated as Miller's Outpost in the 1970's but changed its named to Anchor Blue in the 1990's.

The fate of the stores is up in the air. Levi Strauss is the largest unsecured creditor and they are taking over Anchor Blue's chain of outlet stores called MOST. It is unsure if they will follow suit with the Anchor Blue locations.

The location at 820 State Street is approximately 5,800 SF and was opened in late 2003. Vacancy rates in the prime blocks of State, 700 to 900, are still very low. There should be a number of national tenants that would be willing to back fill the Anchor Blue space as it is a very desirable location. It is situated on the ground floor of a five story building that houses 24 Hour Fitness and a number of office tenants. It is also at the entrance to El Paseo and across the street from one of the entrances to Paseo Nuevo.

Tuesday, May 26, 2009

New Gym Coming to State Street

A lease was recently inked for a new gym in the 500 block of State Street, taking over where such tenants as Santa Barbara Consignment and the RADD Thrift Store used to be.

They are leasing approximately 11,400 SF and it is a good sign that landlords and tenants are willing to work together to fill the holes that currently make up a good portion of State Street. Currently approximately 65% of all retail vacancy in Santa Barbara is located in the downtown blocks of State Street.

Before we get too excited about the return of retail, I do have to note that the empty space at 610 Anacapa Street that was to be a new jazz nightclub is back on the market for lease. This is an additional 10,000 SF of space that will be looking for a new tenant. The asking rate is $2.00/SF NNN but if the gym lease is any indicator, a deal will go down at a much lower price than that.

Thursday, May 21, 2009

April CPI Numbers Continue Downward

The Consumer Price Index numbers were released for April and the year over year change from April of 2008 shows a drop of 1.3%. This is the second consecutive month of a reduction in CPI and the third month out of the last four. The good news is that it was there was an actual increase (however modest) in CPI from March to April.

If fuel costs continue to rise, we may see an overall rise in the CPI heading into the later summer months. There is uncertainty over whether the recent increases in oil are due to speculation or a real increase in worldwide consumption.

Wednesday, May 20, 2009

Stateside Restaurant and Bar Now Closed

This is old news from Monday but, Stateside Restaurant and Bar has officially closed. It has been a while coming from what I understand. The place was never really able to make a go of it and the current economic situation didn't help.

If you have an idea for a great retail or restaurant concept, there is a new location now available...

Thursday, May 14, 2009

Chrysler Announces Dealership Closings

Santa Barbara (and Santa Maria) have escaped the executioner's blade with regards to the closing of dealerships by Chrysler. In the court submitted documents (available here)there is no mention of Santa Barbara or Santa Maria. Nearby dealers in Ventura, Atascadero and San Luis Obispo are mentioned. This may not be the final list.

Also, GM is announcing it may cut as many as 3000 dealerships across the country.

A tip of the hat to the Wall Street Journal for providing the link to the court documents.

Wednesday, May 13, 2009

Santa Barbara Retail Update

There has been some movement up and down in the retail market here lately. We thought the Apple Store was going to open last week but they were a little behind on construction so the new date is the 16th. 

Additionally, we have learned that several retailers have given up or will be giving up space soon. Most people know that Haywards has shut down their furnishings store on Santa Barbara Street, just below Figueroa. That is about 10,000 SF. Additionally, Thomasville Furnishings will be closing their store at State Street and De la Vina Street in July. Look for some good closeouts there. Finally, Boater's World on Gutierrez is closing soon. That is about 6,000 SF that will be available. None of this is good news for landlords but the bright spot for tenants is that a recent deal that leased in the 500 block of State Street saw a rate of less than $1.50/SF NNN for 11,000 SF of retail space. That is a price that hasn't been seen there in over 10 years.

If you are a retailer and have a business that is weathering this economic storm, you might want to think about throwing your hat into the State Street arena because there are deals to be made right now.

Thursday, May 7, 2009

Apple Store Opening Delayed Due To Fire

Unfortunately, but it seems like the fire may be behind Apple's delay in opening the State Street store. It was scheduled for this Saturday at 10am but that is off for now. Check their website http://www.apple.com for more details.

Tuesday, May 5, 2009

Apple Store Opens May 9th

Woohoo. The new Apple store is opening Saturday, May 9th at 10am. Here is a link to their website confirming. http://www.apple.com/retail/statestreet/

Let the consumption begin.

Wednesday, April 29, 2009

Local Company, Eucalyptus, Raises $5.5 Million

Locally based cloud computing company, Eucalyptus Systems, has just completed a funding round which raised $5.5 million. After recently completing a move to new office space in Goleta, the company, which creates software for companies to manage computing clouds, will release their first commercial product in the 3rd quarter of this year. The company was founded by Woody Rollins and Rich Wolski with the technology coming out of UCSB.

Thanks to Derrick Harris at Tech Insider for the information.

http://www.salon.com/tech/giga_om/tech_insider/

Friday, April 17, 2009

March Unemployment Numbers Released

They have just released the unemployment numbers for March for California and the state's unemployment is up to 11.2% from 10.1% in February. Santa Barbara County's unemployment is at 8.5%. That is only up slight from 8.3% from last month. Additionally, the City of Santa Barbara is only seeing an unemployment rate of 6.0%. Again, that is a 0.1% increase over the month.

I think this bodes well for Santa Barbara. The state is still in trouble and we will probably see additional budget cuts coming down the pipeline. However, locally, we are staying pretty stable and I think that will help our overall economic picture. This is an additional sign that perhaps things are going to pick up soon.

Wednesday, April 15, 2009

March CPI Drops by 1%

The latest Consumer Price Index numbers have been released and for our area, LA-Riverside-Orange County, the change from March of 2008 to March of 2009 was a drop of 1%. Month to month, the index dropped only 0.1% but analysts had predicted a rise of 0.1% to match last month's momentary rise. The decline is due in large part to energy costs and food costs dropping.

There seems to be little sign of impending inflation since demand for goods has stayed low. We saw March retail numbers released yesterday and there was a 1.2% decline in sales. This was also counter to what analysts were predicting.

Tenants who have no minimum caps on annual CPI increases should be happy with the latest results, however at some point the economy will turn around and there will be inflation concerns if the Fed doesn't watch the markets closely.

Tuesday, April 14, 2009

First Quarter Vacancy Report Available

If you would be interested in receiving our First Quarter 2009 Vacancy Update for the South Coast, please drop me a line and I am happy to forward one on.

To give a quick overview of the report I will start with the office sector. Santa Barbara saw vacancy rise to 5.7% at the end of the first quarter. This is an almost 100% increase since this time last year. That would be distressing if it weren't for the fact that it is only 5.7%. Most markets would kill for that level even in good times. We will probably see that continue to rise but I don't think it will get anywhere near 10% before the markets turn around. Asking prices have fallen less than 10% over the last year as landlords are better positioned for this downturn than the last one a few years ago.

The Goleta office market rose to 12.9% and asking rates haven't dropped much there either. Most of the vacant space is from large vacancies so this has the effect of keeping the vacancy level high even when deals are happening. Rates will need to drop to see much of this space disappear. Look for that to happen in the 2nd half of the year.

Carpinteria is almost too small to discuss right now and they have had very little activity but managed to lower vacancy levels there to 4.8% due to a sublease by Lynda.com moving up from Ventura. This market will probably see higher levels later this year.

Industrial activity has remained low for the 1st quarter. Most of the deals were in Goleta and Santa Barbara. Less than a dozen total deals for the whole quarter. The vacancy rate for Santa Barbara is still only 1% so not much is available and not much is going to come on the market anytime soon. Goleta and Carpinteria are holding at a little over 6% vacant in each market so the levels have stayed steady. Rates should fall going forward.

The sector that is always on everyones mind is retail. Santa Barbara's retail vacancy level rose to 2.3%. This is the highest level since we started tracking vacancies over 12 years ago. This rate isn't what is actually empty but what is currently available in the market. A lot of those stores are still occupied. Additionally, we have some nice openings coming soon, most notably Apple! Asking rates have dropped to pre-2007 levels and will continue to dip. This is possibly the best time for successful local retailers to consider a move to State. They can lock in low rates for a long term lease and get a lot of concessions from landlords.

For the South Coast, sales were also down. We typically see about 65 sales per year but starting off in 2009 we only had 6 sales for the first quarter. Three were land sales (two off market). The highlight sale was the sale of the El Prado Inn on State at Arrellaga. The reported sales price was $14.5 million. That will probably stand as the highlight sale for most of this year.

One bright spot was that for the first two months of the year our leasing volume was approximately 60% of normal. For the month of March we were at 100% of our normal leasing volume. This could be an anomaly or a sign of things to come. Only time will tell.

Monday, April 13, 2009

Z Gallerie Files For Chapter 11 Bankruptcy Protection

In a follow up to the post about our local Z Gallerie closing, the company just entered into bankruptcy procedings on Friday, April 11th. This means the remaining 58 stores and the website will probably be shutting down unless a buyer for the debt can be found. This is an additional example of how lifestyle retail has been affected during the recession.

One can only wonder if we might see something similar from larger chains like Restoration Hardware, Williams Sonoma or Pottery Barn.

Tuesday, March 24, 2009

Early Warning on Governor's Race Issue

An amendment to Proposition 13 allowing for 'split rolls'. It is an idea that has been bandied about by certain people who are entertaining a run for the governor's office in 2010.

Basically, the idea is to allow a larger annual increase in property taxes for commercial properties and keeping residential restrictions in place. This may sound fine for some. Let the commercial market bear the brunt of any potential tax increase. What this is, however, is a job killer. Most landlords here already have figured out that it is smarter to structure your leases so that the property tax burden is shifted to the tenants. If taxes are allowed to increase annually this just passes the burden on to the business owner. If they cannot pass that on through price increases then it affects their ability to operate. California already has enough legislation on the books that makes it difficult for businesses to thrive. Don't do something that will make more businesses decide to consider Texas, Nevada or other tax friendly locations.

Just an early warning. I doubt it will gain any traction but if it does we will let you know.

Tuesday, March 10, 2009

Government Moving Towards Commercial Real Estate Bailout

The Christian Science Monitor has a very good article discussing the addition of commercial backed mortgage securities (CMBS) to the TALF (Term Asset Backed Securities Loan Fund) in order to assist with the growing amount of commercial debt that will be coming up for refinance this year. Some estimates now put the number at $300 billion that developers and owners need refinanced this year. With vacancies rising, values are falling and this could end up costing upwards of $1 trillion in government funds.

Here is a link: http://features.csmonitor.com/economyrebuild/2009/03/09/real-estate-woes-seep-into-malls-office-towers/

Thursday, March 5, 2009

New Unemployment Numbers Released

The latest unemployment numbers have been released for California and individual cities. The statewide unemployment reported in January is up to 10.1% from a revised 8.7% in December of 2008.



More interesting is that the Santa Barbara County unemployment numbers are up to 8.3% for the county as a whole, 5.9% for the City of Santa Barbara and 4.1% for the City of Goleta. Those numbers are still pretty low. We average more unemployment for the County than the US does as a whole but we have some pockets with unnaturally high unemployment like Montecito and Isla Vista. The individual city numbers can be more useful however and they still show a relatively strong market for Santa Barbara and Goleta.



We are confident that unemployment in this area will not see a drastic increase due to the relatively stable industries located here. Some areas that might possibly see some reductions would be continued layoffs in the financial services industry, as well as the tourism industry.

Wednesday, March 4, 2009

Blockbuster next on the block?

Blockbuster has hired Kirkland & Ellis LLP to help them explore a bankruptcy protection filing. This could affect the 7,500 Blockbuster stores around the country, but specifically those in our market. Their stock has dropped over 75% today on word of the exploration.

It is hard to not have seen this coming. With the competition from Netflix and the online streaming of video, Blockbuster in its current incarnation was not long for this world. They could emerge from this with a new business plan but that won't help the investors and landlords that have single tenant locations that will be affected by the loss of this tenant.

Tuesday, February 24, 2009

Z Gallerie Closing Its Doors

It has been rumored that Z Gallerie will be closing their doors soon. This is part of the company's efforts to trim down their number of stores by about a third or 25 stores.

The impact on Santa Barbara will mean an additional 8,500 SF coming on to the market. We previously mentioned that the retail vacancy for Santa Barbara will approach 2% if the spaces currently being discussed like One World Imports and Borders do come on to the market. Adding this to the mix will definitely push the vacancy over the 2% mark.

Monday, February 23, 2009

January CPI Numbers Go Negative

The BLS index came out Friday and for the MSA that covers Santa Barbara the numbers don't look good. Every landlord that has a minimum CPI increase for that month should be happy. The change from January 2008 to January 2009 was a negative .01%. This comes despite an increase from December to January.

Commercial tenants should be arguing as hard as possible against minimum annual CPI increases right now. The flip side of that is what happens if we do have an increase in inflation on the back end of a recovery? The maximum increases that landlords also negotiated of 5% to 6% could disappear and we could actually see much higher increases year over year in the next 2 to 3 years. What's the solution?

Perhaps it is time to go back to fixed increases in certain instances. We will probably see more retail leases done with fixed rent for 3 to 5 years with a 10% to 15% bump after that. Office leases will undoubtedly see some kind of annual increase but perhaps it will mean shorter lease terms for the foreseeable future. That has benefits for the tenant and landlord.

More State Street Retail Available

The newest listings on State Street include One World Imports being available for lease and Borders Books being available for sublease. It is not guaranteed that Borders would leave, just that they are advertising their space for sublease.

Combine that with the long standing rumor of an H&M Clothing store taking over the Barnes & Noble space and that leaves many thinking that the revenge of the independent bookseller may be coming.

Santa Barbara retail vacancy is fast approaching 2%. Incredibly low for any market out there but it will be the highest Santa Barbara has seen in 12 years.

Wednesday, February 18, 2009

Wine Cask Now Closed

After reporting that they were cutting back their schedule, I have found out that the Wine Cask has officially closed.

Tuesday, February 17, 2009

Santa Barbara Restaurant Trends

I am not sure if there is a trend here but if you look back at the last six months of restaurant openings and closures it appears that the ones that are opening are not the traditional sit down restaurants (with a few exceptions like Melting Pot). The closures appear to be the traditional "fork and knife" restaurants and the ones replacing them are often times "on the go" or less traditional type places like Grapevine Foods. We are even seeing some very entrenched locations change their operating structure.

For example, Wine Cask is moving away from a nightly dinner offering. They are going to a Thursday through Saturday dinner service as diners are eating out less. We know Wine Cask is for sale by the same owners who bought the Big Yellow House in Summerland. They even have that property back on the market for sale after doing very little to upgrade that property.

I am sure we will see more closures or name changes over the next 12 months. The current economy should see the normally fickle Santa Barbara diner become even more so.

Thursday, February 12, 2009

New Location

For all of you that have followed my blog at Wordpress.com, I am moving it over to Blogger as it is a little easier for me to use. Here is a link to my old blog and the old postings that I had there. I will keep this around, but won't be blogging there anymore.

http://sbcommercial.wordpress.com