During the second quarter of 2010 there were 11 new office leases larger than 3,000 square feet completed in the city of Santa Barbara, accounting for 53,000 square feet of absorption. Add to this the 29,500 square feet of space that was removed from the market by Santa Barbara Bank & Trust and one would think that the Santa Barbara office market would have experienced a major reduction in vacancy since the first quarter.
This was not the case, however, as vacancy fell only slightly, to its current rate of 5.6 percent from 5.9 percent. The decline in vacancy was mitigated by the addition of new vacancy coming to the market.
For the Santa Barbara office market to experience a more pronounced reduction in the office vacancy rate, we will need to see continued leasing activity among the smaller office spaces coupled with a decline in new office space coming to market. Currently, office tenants seeking space under 2,000 square feet in Santa Barbara have quite a few options.
Most major office markets throughout the country are experiencing 10-year highs in office vacancy.
The city of Santa Barbara can take some comfort in the fact that the current office vacancy of 5.6 percent is well off the 10-year high of approximately 8 percent office vacancy that was seen in mid-2003.
The resiliency of our Santa Barbara office market can be traced to a lack of new product and the high concentration of wealth on the South Coast. Companies that service that wealth (financial services, accounting, legal, etc.) are the businesses that drive and sustain the Santa Barbara office leasing market.
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— Bob Tuler, Paul Gamberdella and Gene Deering are with Radius Group Commercial Real Estate.