The tri-county commercial real estate market can expect to see rising vacancies and dwindling sales numbers and asking rates in 2009, according to several recent reports.
Radius Group Commercial Real Estate, Hayes Commercial Group and NAI Capital all published market outlooks for the new year indicating that the pendulum is swinging from landlords to tenants.
The recession and financial turmoil hampering the broader economy began to hit the South Coast commercial market in 2008, translating into higher vacancy rates, increased sublease percentages, lower asking rates and a decline in sales activity – all things Radius Group said will become more prevalent in 2009.
Prior to 2008, Santa Barbara enjoyed a five-year average sales volume of $164 million, posting $184 million in 2007. The volume for 2008 was $75 million, a 59 percent decrease.
Hayes Commercial Group expects the local commercial sales market to continue to soften, with sales volume and pricing down again in 2009.
Although South Coast leasing dollar volume and achieved rates both ended the year up from 2007, available space increased 57 percent to a vacancy rate of 4 percent.
The office sector was hit particularly hard in Goleta, where available space nearly doubled, reaching 10.9 percent vacancy by year’s end. Asking and achieved rates have not yet reflected this increased vacancy and remained remarkably flat through 2008.
The South Coast retail market held up pretty well in 2008 with vacancy below 2 percent and rental rates up from 2007, but vacancy is rising and asking rates are starting to come down.
Even with a 24 percent rise in available industrial space in Santa Barbara, vacancy is still relatively stable at 3.5 percent, with no apparent change in lease rates.
“There is simply no way to sugarcoat our expectation that 2009 will be a difficult year for most commercial enterprises in our area,” said the Hayes Commercial report. “We hope we are wrong.”