South Coast Commercial Real Estate Year-End Review - 2015€¦ · 222 E. Carrillo Street, Suite 101 • Santa Barbara, CA 93101 805 563-2111 • HayesCommercial.com Year-End Review

GOLETA • ISLA VISTA • SANTA BARBARA • MONTECITO • SUMMERLAND • CARPINTERIA

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South Coast Commercial Real EstateYear-End Review - 2015

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COMMERCIAL SALES

For the South Coast commercial sales market, 2015 marked the fourth consec-utive year of exceptional volume. All told, the year produced 97 sales and maintained most of 2014’s unprecedent-ed momentum. High demand from both investors and owner-users was met by sellers looking to capitalize on relatively elevated prices. While the dollar volume ($333 million, excluding hotels) was 9% lower than the prior year, it was still the second highest annual total on record. If there is ever going to be a “golden age” of commercial sales on the South Coast, we are probably in it now.

Retail property sales volume exceeded $86 million, led by two transactions in downtown Santa Barbara: the REI building at 314-324 State St sold for $21.15 million, and the Saks Fifth Ave building at 1001 State St sold for $15.5 million in an off-market deal at the end of the year. Developers are busy on the South Coast these days. A plethora of projects are in varying degrees of completion in Goleta, including housing, retail and a hotel. On Upper State Street, the former Sandman Inn site at 3714 State St is being trans-formed into 73 residential condos and 5,000 sf of retail. Concurrently, a three-story, 89-unit apartment complex is well underway at 3885-3887 State St. Given the challenges and costs of development on the South Coast, this level of construc-tion indicates confidence in the local economy.

The standout office property sale (and largest commercial sale) for the year was the 119,695 square foot oceanfront campus at 6303-6309 Carpinteria Ave, sold for $25 million. Longtime home to CKE Restaurants, the property was purchased by an investor despite being 39% vacant. Six months later the property was fully leased. Three high-priced mixed-use properties were purchased in 2015. In addition to the two Icon projects in Isla Vista that sold for $38.5 million combined, the newly completed office/apartment property at 901 Olive St sold for $17.85 million. The appetite among investors for this asset class has rebounded significantly compared to six or seven years ago. Hotel properties with high-quality renovations are also finding buyers. The Canary Hotel at 27 W. Carrillo St sold for $78.4 million, providing a hefty return for the seller, who bought the property for $31.8 million in 2012. The Goodland Hotel at 5650 Calle Real, which was a Holiday Inn purchased for $24 million in 2013, is now a renovated, 158-room Kimpton hotel that fetched $40.9 million two years later.

Looking ahead, the first question is what impact the recent increase in interest rates will have on demand. Given that the December increase had been antici-pated and any additional increases in 2016 are expected to be incremental, we do not expect interest rates to signifi-cantly dampen demand in 2016. The second question is where we are on the

Market Indicators

Highlights

Commercial sales produced a fourth consecutive year of exceptional volume with 97 transactions totaling $478 million.

Carpinteria’s office vacancy plummeted from 14.6% to 1.7%, helping South Coast office vacancy dip below 7% for the first time since 2007.

Retail leasing generated unprecedented volume of 83 retail leases securing more than 275,000 sf, although State Street is seeing elevated vacancy and turnover.

2015 Change

Sales Transactions 97 -6%

Vacancy 3.3% -2%

Asking Rates +3%

Achieved Rates +3%

Net Absorption 21,644 sf

Change percentages and net absorption are since 1/1/2015.

Figures above include all commercial property types.

222 E. Carrillo Street, Suite 101 • Santa Barbara, CA 93101(805) 563-2111 • HayesCommercial.com

Year-End Review - 2015 | Page 2

price curve after several years of high volume. Looking at the price per square foot of commercial buildings sold in 2015, inflation-adjusted prices are 17% below 2007, which was the last market peak. At the same time, cap rates are in a range that leaves room for more price growth. Conditions are favoring another active year of sales.

MULTIFAMILY SALES

For a review of the apartment sales market, see page 9.

OFFICE LEASING

Office vacancy on the South Coast decreased slightly during 2015 and ended the year at 6.9%, the first dip below 7% since 2007. Santa Barbara and Goleta both saw slight increases in inventory while Carpinteria’s vacancy fell off a cliff. Expansion by local companies, most notably AppFolio and Procore, accounted for substantial absorption. Our brokers report strong activity and healthy demand for most office product. In terms of vacancy and pricing, the market looks a lot like it did in 2007.

Downtown Santa Barbara saw brisk activity in 2015. Notable renewals by Morgan Stanley Smith Barney and UBS were secured at relatively high rents, which landlords were able to negotiate largely due to the

scarcity of comparable spaces on the market. Other tenants made “flight to quality” moves, including five leases that filled 22,488 sf of newly remodeled office space 801 Garden St, once occupied by Antioch University. The shared office concept is picking up steam downtown with Regus leasing 11,400 sf at 7 W. Figueroa St and ImpactHub laying claim to the 11,196 sf retail space at 1117 State St. The downtown market continues to be popular with internet companies, evidenced by RightScale’s renewal of 26,339 sf at 402 E. Gutierrez St as well as leases by Local Market Launch, Bright Market (FastSpring), and LogicMonitor, to name a few. On the other end of town, CenCal Health expanded into the remaining 11,742 sf at 4050 Calle Real and now occupies the entire building.

Goleta saw transaction volume and rental rates both on the rise in 2015. There were 42 leases signed, while achieved rates increased to $1.74 per SF. AppFolio had the South Coast’s fastest growing real estate presence of any local company, gaining 32,000 sf at Castilian Tech Center.

Despite the increase in activity, vacancy is still high at 10.4% in Goleta due to a series of moves by large tenants in recent years: Allergan and Mentor left the area, adding more than 200,000 sf of availability. Meanwhile, Flir and Citrix have been migrating into properties that they purchased for their operations. These moves have

South Coast Sales South Coast Leases



vacated approximately 170,000 sf of space. As a result, the market has yet to absorb the glut of large spaces that are available, including 238,000 sf currently available in three buildings, which represents 46% of all available space. Flir has grown to approxi-mately 500 employees in Goleta as it consolidates

into its headquarters at 6769 Hollister Ave. Citrix Online is in the process of spinning off from Citrix Systems. The spin-off (yet to be named) will be headquartered at the 160,000 sf campus that Citrix owns at 7414-7418 Hollister Ave and keep hundreds of high-tech jobs in Goleta for the foreseeable future.

Carpinteria’s office market was transformed in 2015, with more than 127,000 sf leased (a new high mark) and the vacancy rate plummeting from 14.6% at the end of 2014 to 1.7% (a new low mark). Three of the largest leases were existing tenants expanding: LinkedIn leased the entire 31,755 sf building at 1000 Mark Ave; Procore expanded into 28,310 sf at 6307 Carpinteria Ave; and PlanMember Services expanded into 12,350 sf at 6185 Carpinteria Ave. Carpinteria is a relatively small office market which is currently dominated by a handful of large tenants – including LinkedIn, Agilent, and Procore – which means if one of those tenants makes a move it will have a dramatic affect on overall vacancy.

Looking ahead, we anticipate further tightening of vacancy across the South Coast in the first half of 2016. Demand for office space in Santa Barbara will continue to be met with limited supply. In Goleta, finding tenants for the large available spaces will continue to be a challenge, but on the bright side the series of large spaces coming to market appears to be coming to a close, and demand for medium and small spaces is healthy. The near total absorption of Carpinteria’s available office space in 2015 should limit leasing activity in the near term. The South Coast’s 6.9% vacancy rate looks lean compared to neighboring Ventura County, which has vacancy in the 15% range.

RETAIL LEASING

Both in number of transactions and square footage, 2015 was the South Coast’s biggest year for retail leasing in recent memory. There were 83 leases signed securing more than 275,000 sf. Given that vacancy was at a record low 1.8% at the beginning of the year, the deal volume that emerged was surprising. As one would expect with tight inventory and high transaction activity, rental rates have been on the rise. Achieved rates in Santa Barbara have climbed 45% since the low point of the recession five years ago. However, they are still 9% below the pre-recession level in 2007.

Thanks to 2015 leases, you can score hockey equipment at Centre Ice, pick up same-day purchases at the Amazon location in Isla Vista, get toned at Mad Fitness, slurp a bowl of Ramen at Sachi, and sip a locally-brewed beer at, well, take your pick. Marshall’s renewed its lease on the 38,105 sf building at 900 State St, the year’s largest deal in terms of square footage. Riding the national surge in automobile sales, after years of dormancy a new lease of the approximately 15,000 sf property at 350 S. Hitchcock Way is a Lexus dealership.

Although it proved to be a strong leasing year for the South Coast as a whole, the prime retail corridor in downtown Santa Barbara has been marked by relatively high vacancy and turnover, exacerbated by muted demand from national retailers. The 600 to 1000 blocks of State Street currently have nearly 30,000 sf of vacancy, the highest level since 2011. One factor contributing to this lull is the ascendency of other retail areas, especially the Funk Zone and Coast Village Road.

Looking at wider trends, sluggish growth in consumer spending combined with the continuing shift in market share toward online purchases have made national retailers of soft goods (clothing and accessories)

Retail Vacancy: 2.0%

Available Space: +12%

Gross Absorption: +21%

Asking Rates: +5%

Achieved Rates: +4%

Change percentages are since 1/1/2015.Figures are for the entire South Coast.

Office Vacancy: 6.9%

Available Space: -8%

Gross Absorption: +1%

Asking Rates: +3%

Achieved Rates: +3%




cautious about opening stores. Some industry analysts are citing a generational shift that is creating challeng-es for brick-and-mortar sellers of soft goods. In their view, compared to older generations, “Millennials” are not only more likely to buy merchandise online, they also tend to spend more of their discretionary income on leisure services such as restaurants, bars, travel and entertainment at the expense of soft goods. At the local level, most of the retail leases signed on the South Coast in 2015 were service-based concepts rather than soft goods. In addition, there were few leases by national retailers of any kind. Restaurant, wine and beer uses made up a large share of leases signed, in some cases spilling over into industrial space. Fitness and chiropractic uses were also well represented.

Another trend among national retailers is experiment-ing with smaller stores, often combined with in-store pick-up service for merchandise purchased online. As a result, demand for larger retail spaces has been decreasing. In downtown Santa Barbara, several large retail vacancies have been converted to satisfy high demand for office space. For example, 614 Chapala St was vacated by Samy’s Camera and converted by Sonos into office space. Same with 419 State St, which was a Territory Ahead store. The former rug store at 1117 State St is slated to become ImpactHub, a shared office use.

There are changes and new looks in progress at many of Santa Barbara’s malls and multi-tenant destinations. Paseo Nuevo is under new ownership with plans to increase the ratio of restaurants to soft goods stores, coupled with remodeling common areas, lighting, and signage. Now fully leased, The Mill at Laguna and Haley streets is home to numerous artisan tenants and ready to bring a refined variation on the Funk Zone aesthetic to the Haley Street corridor. The Public Market has been working through some growing pains as it adapts to its location and the challenges of taking a big-city concept and scaling it down for a small city. The restaurants at La Cumbre Plaza are in flux with Marmalade Café closing its doors within a few weeks of Lure opening for business.

Despite the high volume of leasing, the South Coast’s vacancy rate increased slightly in 2015 to 2.0% with a noticeable increase in vacancies on the prime blocks of State Street. Demand from national retailers for downtown space has been relatively soft, and we expect that to continue. Outside of the downtown core, local and regional operators have been driving healthy leasing activity. If the local economy continues its gradual improvement, we expect retail leasing to sustain momentum in 2016.

INDUSTRIAL LEASING

After four years of remarkably heavy industrial leasing volume, 2015 proved to be a slow year by comparison, with gross absorption down 48% from the prior year. The market dynamics in this sector have been fairly consistent for a few years. Inventory is very low with just 12 spaces available, and demand is high. South Coast vacancy is 1.6%, a level that has held steady for more than two years. During 2015 there were 57 leases signed, including 14 renewals.

Gradual shifts in use have been accelerating demand in Santa Barbara, where space that was tradition-ally purposed (and zoned) for manufacturing and warehouse uses has been leased to retail or office users. The City has also re-designated some manufacturing-zoned property for high-density residential develop-ment. As a result, the industrial vacancy rate in Santa Barbara has been below 1% for more than two years and is currently 0.29%. There were only 15 leases completed in Santa Barbara – the lowest count in seven years – and the average space size was 3,565 sf, which is the smallest average in at least ten years. The year’s largest lease was 10,600 sf at 305 S. Calle Cesar Chavez by Riva Pacific.

There was a high volume of transactions in Goleta, though the bulk of the activity was smaller spaces, and year-over-year gross absorption decreased 33%. A few of the notable new

Industrial Vacancy: 1.6%

Available Space: +7%

Gross Absorption: -48%

Asking Rates: -2%

Achieved Rates: -2%




leases were 14,276 sf at 6466 Hollister Ave signed by Santa Barbara Motorsports and 9,500 sf at 460 Ward Dr secured by Deployable Space Systems.

Carpinteria also produced a relatively large number of transactions, most of which were for spaces less than 5,000 sf, and gross absorption was down 26% compared to 2014. There was one sizable renewal of 24,030 sf at 6384 Via Real by Northrop Grumman.

What effect has persistent low vacancy had on rents? Achieved rents on the South Coast have appreciated 20% over the last five years, and in Santa Barbara the increase is 60%. To illustrate this trend in terms of

dollars, consider a hypothetical tenant who signed a five-year lease in 2010 on a 5,000 sf industrial space in Santa Barbara at the average 2010 rent. If they renewed their lease in 2015 at market value, their annual rent would be $37,200 more than it was in 2010.

Demand has overcome minimal supply surprisingly well during most of the past three years, but the laws of economics are catching up with the industrial leasing market. Following a record year for gross absorption of industrial space, 2015 brought a 48% decrease in square footage leased. We expect another year of relatively modest industrial leasing, as the lack of inventory continues to constrict deal flow.

2015 Commercial Sales of Note Highest Priced Properties For Sale

6303-6309 Carpinteria Ave, Carpinteria$25,000,000

314-324 State St, Santa Barbara$21,150,000

71 S. Los Carneros Rd Goleta Office • 105,257 sf $28,000,000

600 Pine Ave Goleta Office • 83,479 sf $28,000,000

6725-6745 Hollister Ave Goleta Land • 8.3 Acres $15,908,112

6750 Navigator Way Goleta Office • 46,430 sf $14,300,000

1212-1216 State St Santa Barbara Office • 77,368 sf $11,575,000

55 Castilian Dr Goleta Office/R&D • 37,116 $9,200,0002320 Bath St, Santa Barbara

$18,400,000901 Olive St, Santa Barbara

$17,850,000

COMMERCIAL SALES

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OFFICE LEASING

Market

Santa Barbara

Goleta

Carpinteria

Totals

Available Change* Gross Absorption

Change* Asking Rate Change* Achieved Rate Change*

219,778 7.6% 390,719 1.5% $2.93 3.1% $2.70 5.5%

472,616 1.9% 352,930 -10.3% $1.75 0.7% $1.76 4.7%

11,908 -88.1% 127,913 54.3% $1.67 -4.7% $1.72 -16.0%

704,302 -8.3% 871,562 1.2% $2.12 4.1% $2.18 3.2%

* Since 1/1/2015. Average rate totals are weighted by square footage.* Since 1/1/2015. Average rate totals are weighted by square footage.* Since 1/1/2015. Average rate totals are weighted by square footage.* Since 1/1/2015. Average rate totals are weighted by square footage.

Office Vacancy vs. Achieved & Asking Rates

$ ps

f GR

Vaca

ncy

$1.00

$1.50

$2.00

$2.50

$3.00

2008 2009 2010 2011 2012 2013 2014 2015

Vacancy Rate Asking Rate Achieved Rate200820092010

2011

2012

2013

2014

2015

4.46% $2.65 $2.65

5.92% $2.33 $2.27

5.37% $2.45 $2.31

6.11% $2.36 $2.26

6.10% $2.43 $2.36

4.96% $2.59 $2.37

4.06% $2.85 $2.56

4.37% $2.93 $2.70

Asking Rate Achieved Rate

Vacancy Rate

0%

2%

4%

6%

8%

Vacancy Rate

Santa Barbara

$ ps

f GR

Vaca

ncy

$1.00

$1.25

$1.50

$1.75

$2.00

2008 2009 2010 2011 2012 2013 2014 2015


2011

2012

2013

2014

2015

10.90% $1.78 $1.75

11.22% $1.66 $1.68

12.03% $1.64 $1.66

10.71% $1.69 $1.57

10.38% $1.59 $1.61

9.50% $1.73 $1.72

9.50% $1.74 $1.68

10.41% $1.75 $1.76


Vacancy Rate

5%

7%

9%

11%

13%

Vacancy Rate

Goleta

$ ps

f GR

Vaca

ncy

$0.25

$0.75

$1.25

$1.75

$2.25

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

6.27% $1.70 $1.79

8.08% $1.71 $1.81

17.87% $1.53 $1.50

16.56% $1.70 $1.58

12.62% $1.61 $1.97

12.12% $1.62 $1.68

12.12% $1.76 $2.05

1.74% $1.67 $1.72


Vacancy Rate

0%

5%

10%

15%

20%

Vacancy Rate

Carpinteria

$1.00

$1.50

$2.00

$2.50

$3.00

2008 2009 2010 2011 2012 2013 2014 2015


2011

2012

2013

2014

2015

4.46% $2.65 $2.65

5.92% $2.33 $2.27

5.37% $2.45 $2.31

6.11% $2.36 $2.26

6.10% $2.43 $2.36

4.96% $2.59 $2.37

4.06% $2.85 $2.56

4.37% $2.93 $2.70


Vacancy Rate

0%

2%

4%

6%

8%

Vacancy Rate

$1.00

$1.50

$2.00

$2.50

$3.00

2008 2009 2010 2011 2012 2013 2014 2015


2011

2012

2013

2014

2015

4.46% $2.65 $2.65

5.92% $2.33 $2.27

5.37% $2.45 $2.31

6.11% $2.36 $2.26

6.10% $2.43 $2.36

4.96% $2.59 $2.37

4.06% $2.85 $2.56

4.37% $2.93 $2.70


Vacancy Rate

0%

2%

4%

6%

8%

Vacancy Rate

$1.00

$1.50

$2.00

$2.50

$3.00

2008 2009 2010 2011 2012 2013 2014 2015


2011

2012

2013

2014

2015

4.46% $2.65 $2.65

5.92% $2.33 $2.27

5.37% $2.45 $2.31

6.11% $2.36 $2.26

6.10% $2.43 $2.36

4.96% $2.59 $2.37

4.06% $2.85 $2.56

4.37% $2.93 $2.70


Vacancy Rate

0%

2%

4%

6%

8%

Vacancy Rate

2015 Office Leases of Note Largest Available Spaces

326 Bollay Dr, Goleta38,851 SF – Inogen

1000 Mark Ave, Carpinteria31,755 SF – LinkedIn

71 S. Los Carneros Rd, Goleta 105,257 sf Allergan sublease

70 Castilian Dr, Goleta 86,246 sf in Castilian Tech Ctr

301 Mentor Dr, Goleta 70,282 sf in Mentor building

5425 Hollister Ave, Goleta 54,593 sf in Mentor building

27 E. Cota St, Santa Barbara 31,000 sf Brooks sublease

7402 Hollister Ave, Goleta 28,015 sf in Hollister Business Park

5540 Ekwill St, Goleta 28,000 sf in Santa Barbara Tech Ctr

55 Castilian Dr, Goleta 27,991 sf in Castilian Tech Ctr

6300 Lindmar Dr, Goleta 19,000 sf

6307 Carpinteria Ave, Carpinteria28,310 SF – Procore

402 E. Gutierrez St, Santa Barbara26,339 SF – RightScale



SCALE: $2.00/sf Gross $3.00/sf Gross $4.00/sf Gross $5.00/sf Gross

Market

Santa Barbara

Goleta

Carpinteria

Totals



218,189 13.6% 202,205 27.7% $4.20 2.3% $3.78 5.0%

66,598 -2.6% 69,289 5.0% $3.46 16.5% $2.52 -4.6%

12,553 123.8% na na $2.84 18.5% na na

297,340 11.7% 271,494 21.0% $3.98 5.2% $3.46 4.2%


RETAIL LEASING

2015 Retail Leases of Note Notable Available Spaces

900 State St, Santa Barbara38,105 SF – Marshalls

350 Hitchcock Way, Santa Barbara15,000 SF – The Horowitz Group

7121 S. Hope Ave, Santa Barbara 28,419 sf in La Cumbre Plaza

222 N. Milpas St, Santa Barbara 22,000 sf Fresh Market sublease

7000 Hollister Ave, Goleta 19,425 sf in Hollister Village

5955 Calle Real, Goleta 10,715 sf SB Motorsports

3925 State St, Santa Barbara 7,908 sf in 5 Points Center

Calle Real Center, Goleta 7,476 sf in Calle Real Center

733 State St, Santa Barbara 6,148 sf American Apparel

820 State St, Santa Barbara 5,849 sf G By Guess

700 State St, Santa Barbara 5,753 sf Panera Bread

6533 Trigo Rd, Isla Vista2,751 SF – Amazon

717 State St, Santa Barbara1,822 SF – SFO Forecast

2015 Retail Leases Sized According to Gross Rental Rate

Fig

uero

a St

Vic

tori

a St

Ort

ega

St

Hal

ey S

t

Can

on P

erd

ido

St

Gross rental rate represented by the diameter of the circle.

State St



INDUSTRIAL LEASING

Market

Santa Barbara

Goleta

Carpinteria

Totals



13,708 -28.2% 53,472 -74.9% $2.03 29.9% $1.66 14.5%

125,561 25.9% 131,936 -32.7% $1.33 -3.0% $1.23 -4.7%

28,800 -25.2% 89,853 -25.5% $0.83 -26.3% $1.14 5.3%

168,069 6.8% 275,261 -48.1% $1.30 -2.5% $1.28 -1.8%


Industrial Vacancy vs. Asking & Achieved Rates

$ ps

f GR

Vaca

ncy

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

1.15% $1.52 $1.23

1.71% $1.35 $1.27

1.26% $1.33 $1.04

1.70% $1.28 $1.24

0.93% $1.14 $1.19

0.56% $1.37 $1.33

0.40% $1.56 $1.45

0.29% $2.03 $1.66


Vacancy Rate

0%

0.5%

1.0%

1.5%

2.0%

2.5%

Vacancy Rate

Santa Barbara

$ ps

f GR

Vaca

ncy

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

7.23% $1.23 $1.20

8.27% $1.10 $1.10

7.91% $1.17 $1.04

7.41% $1.07 $1.08

5.29% $1.20 $1.20

2.42% $1.33 $1.15

2.35% $1.37 $1.29

2.96% $1.33 $1.23


Vacancy Rate

0%

2%

4%

6%

8%

10%

Vacancy Rate

Goleta

$ ps

f GR

Vaca

ncy

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

2008 2009 2010 2011 2012 2013 2014 2015

Vacancy Rate Asking Rate Achieved Rate

200820092010

2011

2012

2013

2014

2015

4.91% $1.34 $1.2213.56% $1.16 $1.0613.75% $1.02 $1.184.83% $0.96 $0.964.04% $0.94 $0.95

2.59% $0.97 $1.00

2.90% $1.13 $1.08

2.17% $0.83 $1.14


Vacancy Rate

0%

3%

6%

9%

12%

15%

Vacancy Rate

Carpinteria

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

1.15% $1.52 $1.23

1.71% $1.35 $1.27

1.26% $1.33 $1.04

1.70% $1.28 $1.24

0.93% $1.14 $1.19

0.56% $1.37 $1.33

0.40% $1.56 $1.45

0.29% $2.03 $1.66


Vacancy Rate

0%

0.5%

1.0%

1.5%

2.0%

2.5%

Vacancy Rate

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

1.15% $1.52 $1.23

1.71% $1.35 $1.27

1.26% $1.33 $1.04

1.70% $1.28 $1.24

0.93% $1.14 $1.19

0.56% $1.37 $1.33

0.40% $1.56 $1.45

0.29% $2.03 $1.66


Vacancy Rate

0%

0.5%

1.0%

1.5%

2.0%

2.5%

Vacancy Rate

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

2008 2009 2010 2011 2012 2013 2014 2015


2010

2011

2012

2013

2014

2015

1.15% $1.52 $1.23

1.71% $1.35 $1.27

1.26% $1.33 $1.04

1.70% $1.28 $1.24

0.93% $1.14 $1.19

0.56% $1.37 $1.33

0.40% $1.56 $1.45

0.29% $2.03 $1.66


Vacancy Rate

0%

0.5%

1.0%

1.5%

2.0%

2.5%

Vacancy Rate

2015 Industrial Leases of Note Largest Available Spaces

6384 Via Real, Carpinteria24,030 SF – Northrop Grumman

6466 Hollister Ave, Goleta14,276 SF – SB Motorsports

7406 Hollister Ave, Goleta 52,855 sf

6385 Cindy Ln, Carpinteria 28,800 sf

5756 Thornwood Dr, Goleta 20,794 sf

749 Ward Dr, Goleta 17,200 sf

30 S. La Patera Ln, Goleta 11,467 sf

132 Robin Hill Rd, Goleta 11,059 sf

130 Los Aguajes Ave, Santa Barbara 7,300 sf

75 Robin Hill Rd, Goleta 5,866 sf

1 N. Calle Cesar Chavez, Santa Barbara 5,258 sf

30 S. Calle Cesar Chavez, Santa Barbara10,600 SF – Riva Pacific NW

460 Ward Dr, Goleta9,500 SF – Deployable Space Systems



Following an unprecedented 29 sales in 2014, the number of sales in 2015 dropped to 18. The decrease wasn’t for a lack of demand. Off-market sales represented 55% of the total, the highest proportion on record. The primary constraint was lack of inventory, and in nearly all cases of actively marketed properties, multiple offers were received.

The seller’s market persists, buoyed a surplus of tax deferred exchange buyers, continued increases in apartment rents, and lenders offering low interest rates. The elevated pricing seen in 2014 held steady, and many properties sold for well over $300K per door in 2015. Higher prices have placed downward pressure on cap rates, which decreased 20% percent to an average of 3.7%.

The big story of the year was the purchase of three student housing properties in Isla Vista by the UC Regents with a combined price tag of $156 million. The sheer size of these apartment sales makes them statistical outliers in the context of the South Coast apartment market and will skew the data. Including the UC Regents’ purchases, the dollar volume of apartment sales increased dramatically from $137 million in 2014 to $206 million in 2015. With these three sales removed, the dollar volume for the South Coast was relatively subdued at $49 million.

Looking ahead, we expect the basic market trends to continue. Properties are still attracting multiple offers; however, in 2015 the number of sales over the listing price decreased. With so few properties on the market, lack of sales is something to be vary of moving into 2016.

2012

2013

2014

2015

Sales Price per Unit Cap Rate* GRM‡

16 $212,088 5.39% 12.07

21 $225,668 4.79% 13.45

29 $292,221 4.56% 14.03

18 $284,680 3.67% 16.96

* Capitalization (Cap) Rate: net operating income divided by value or price. The “yield” of the property without reference to debt.

‡ Gross Rent Multiplier (GRM): value or price divided by annual gross operating income.

0

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Gross Rent Multiplier (GRM)

5 - 9 Units 10 - 24 Units 25+ Units

1%

2%

3%

4%

4%

5%

6%

7%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Capitalization (Cap) Rate


$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Price Per Unit


MULTIFAMILY SALES


SALES

6303-6309 Carpinteria Ave Carpinteria Office – 118,394 SF Listing Price: $32,500,000 Brokers: DeJohn, Hayes

Downtown Office Building Santa Barbara Office – 25,000± SF Listing Price: Off-Market Brokers: Bartholomew, Martz, Roth

424 S. Patterson Ave Goleta Land/Office – 24,419 SF Listing Price: $9,250,000 Brokers: DeJohn, Hayes

6300 Lindmar Dr Goleta Office/Industrial – 38,000 SF Listing Price: $7,250,00 Brokers: Celmayster, DeJohn, Hayes

1219 State St Santa Barbara Retail – 13,050 SF Listing Price: $5,450,00 Brokers: Celmayster

1521 S. Bradley Rd Santa Maria Retail – 46,610 SF Listing Price: Off-Market Brokers: Martz

7230 Hollister Ave Goleta Office/Industrial – 29,720 SFListing Price: $4,178,000Brokers: DeJohn, Hayes

749 & 759 Ward Dr Goleta Industrial/Office – 29,200 SF Listing Price: $4,250,000 Brokers: DeJohn, Hayes

130-132 Robin Hill Rd Goleta Office/Industrial – 37,427 SF Listing Price: $4,950,000 Brokers: Celmayster, DeJohn, Hayes

915 E. Anapamu St Santa Barbara Land – 40,055 SF Listing Price: Off-Market Brokers: Celmayster

6790 Navigator War Goleta Office – 9,334 SF Listing Price: $3,100,000 Brokers: Celmayster

401 E. Haley St Santa Barbara Industrial – 4,384 SF Listing Price: Off-Market Brokers: Bartholomew, Murphy

618 E. Gutierrez St Santa Barbara Industrial – 7,238 SF Listing Price: $2,200,000 Brokers: DeJohn, Hayes, Roth

450 Por La Mar Dr Santa Barbara Apartment – 6 Units Listing Price: $2,400,000 Brokers: Celmayster

1201 E. Main St Santa Maria Retail – 4,297 SF Listing Price: Off-Market Brokers: DeJohn, Hayes

7 E. Anapamu St Santa Barbara Retail/Restaurant – 2,398 SF Listing Price: $2,125,000 Brokers: DeJohn, Hayes, Martz

1032 Santa Barbara St & 208 E. Figuera St Santa Barbara Office/Res Income – 2,460 SF Listing Price: $1,925,000 Brokers: DeJohn, Roth

2245 Lillie Ave Summerland Land – 1,296 SF Listing Price: $1,750,000 Brokers: DeJohn, Hayes

5290 Overpass Rd Goleta Office – 4,416 SF Listing Price: Off-Market Brokers: DeJohn, Hayes

2270 Lillie Ave Summerland Mixed-Use – 2,550 SF Listing Price: $1,450,000 Brokers: DeJohn, Hayes, Martz, Roth

699 Linden Ave Carpinteria Retail – 2,976 SF Listing Price: $1,575,000 Brokers: DeJohn, Hayes, Moll

300 S. Stratford Ave Santa Maria Medical – 2,795 SF Listing Price: $1,250,000 Brokers: Bradford

1330 Cacique St Santa Barbara Office – 5,500 SF Listing Price: $1,395,000 Brokers: Celmayster, DeJohn, Hayes, Ward

1376 Walter St Ventura Office – 7,304 SF Listing Price: Off-Market Brokers: DeJohn, Hayes

1220 San Andres St Santa Barbara Land/Res. Income – 21,890 SF Listing Price: $1,095,000 Brokers: Celmayster

5892 Hollister Ave Goleta Retail – 2,500 SF Listing Price: Off-Market Brokers: Martz, Roth

23 Hitchcock Way Santa Barbara Office – 4,668 SF Listing Price: $950,000 Brokers: Bradford, DeJohn, Hayes

626 E. Gutierrez St Santa Barbara Industrial – 4,404 SF Listing Price: $895,000 Brokers: Celmayster, Roth

217 W. Gutierrez St Santa Barbara Office/Industrial – 1,566 SF Listing Price: $395,000 Brokers: Martz, Ward

SIGNIFICANT TRANSACTIONSby Hayes Commercial Group 2015


SIGNIFICANT TRANSACTIONSby Hayes Commercial Group 2015

LEASES326 Bollay Dr Goleta Office – 38,851 SF Inogen Brokers: Hayes, DeJohn

495 S. Fairview Ave Goleta Office – 30,240 SF Plains All American Pipeline Brokers: Bartholomew

6307 Carpinteria Ave Carpinteria Office Suites – 47,381 SF Various Tenants Brokers: DeJohn, Hayes

801 Garden St Santa Barbara Office Building – 22,488 SF Various Tenants Brokers: Bartholomew, DeJohn, Hayes

55 Castilian Dr Goleta Office – 20,051 SF FLIR Brokers: DeJohn, Hayes, Roth

6305 Carpinteria Ave Carpinteria Office – 20,000 SF ProCore Brokers: DeJohn, Hayes

90 Castilian Dr Goleta Office – 18,635 SF AppFolio Brokers: Bartholomew, DeJohn, Hayes

1740 Jones Way Oxnard Industrial – 17,576 SF Rincon Technology Brokers: DeJohn, Hayes, Roth

130 Robin Hill Rd Goleta Office – 16,112 SF AECOM Brokers: Celmayster

6466 Hollister Ave Goleta Office – 14,276 SF Santa Barbara Motorsports Brokers: Bartholomew, DeJohn

120 Cremona Dr Goleta Office – 13,313 SF Deckers Outdoor Corporation Brokers: DeJohn, Hayes

1033 Anacapa St Santa Barbara Office – 12,939 SF American Riviera Bank Brokers: Bartholomew, Martz

823 E. Mason St Santa Barbara Land – 11,250 SF Boucher & Dollman Brokers: Celmayster

26 Castilian Dr Goleta Office – 11,085 SF Hawk Applications Corp. Brokers: Hayes, DeJohn, Roth, Murphy

1351 Holiday Hill Rd Goleta Office/Industrial – 10,485 SF Cubes, Inc. Brokers: Roth, C. Celmayster

130 Castilian Dr Goleta Office – 10,484 SF Calient Brokers: Bartholomew, DeJohn, Hayes

406-416 E. Haley St Santa Barbara Retail Complex – 3,069 SF Various Tenants Brokers: Bartholomew, Murphy

111 Castilian Dr Goleta Office/Industrial – 10,200 SF Seek Thermal, Inc Brokers: Bartholomew

6464 Hollister Ave Goleta Land – 10,080 SF Indian Orchard Trucking Brokers: DeJohn, Hayes, Martz, Ward

460 Ward Dr Goleta Office/Industrial – 9,500 SF Deployable Space Systems Brokers: Moll

1005 Mark Ave Carpinteria Industrial – 9,250 SF Agilent Technologies Brokers: Moll, McCahill

619 Olive St Santa Barbara Industrial/Retail – 8,162 SF Goodman Reed Motorcars, LLC Brokers: Bartholomew, Celmayster

820 State St Santa Barbara Retail – 5,849 SF CitCo Enterprises, Inc. Brokers: DeJohn, Hayes, Martz

2720 De La Vina St Santa Barbara Retail – 4,000 SF Handlebar Coffee Roasters, Inc. Brokers: Martz

6533 Trigo Rd Isla Vista Retail – 2,751 SF Amazon Brokers: Martz

116 Santa Barbara St Santa Barbara Industrial/Retail – 2,400 SF Good Beer Company, LLC Brokers: Murphy

6530 Seville Rd Isla Vista Retail – 1,970 SF Ike’s Place, Inc. Brokers: Martz, McCahill, Roth

1187 Coast Village Rd Montecito Retail – 1,620 SF The UPS Store Brokers: DeJohn, Hayes

717 State St Santa Barbara Retail – 1,822 SF SFO Forecast. Inc. Brokers: Martz, Roth

1235 Coast Village Rd Montecito Retail/Office – 1,084 SF Whistle Club, LLC Brokers: McCahill

We wish to thank our clients for making 2015 our most successful year to date! We are grateful for the opportunity to help you achieve (and exceed) your real estate goals, and we look forward to serving you in 2016 and beyond.

34 SALES valued at $110 MILLION

250 LEASES totaling ONE MILLION SQ FT

Francois DeJohn805-898-4365

[email protected]. 01144570

Stephen Hayes805-898-4370


Greg Bartholomew805-898-4395


Christos Celmayster805-898-4388


Paul Bradford805-898-4364


Dylan Ward805-898-4392


Liam Murphy805-898-4385


Kristopher Roth805-898-4361


Michael Martz805-898-4363


Dan Moll805-898-4380


Caitlin McCahill805-898-4374


HayesCommercial.com

Commercial real estate done right.Since 1993

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Documents

South Coast Commercial Real Estate Year-End Review - 2015€¦ · 222 E. Carrillo Street, Suite 101 • Santa Barbara, CA 93101 805 563-2111 • HayesCommercial.com Year-End Review