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.

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