Wednesday, February 21 , 2018, 9:09 am | Fair 47º



Santa Barbara’s Funk Zone Signals Revival for Commercial Real Estate Market

After a years-long lull, local experts foresee continued interest and activity in the mixed-use neighborhood by the beach

As commercial real estate activity picks up in Santa Barbara’s Funk Zone, some local experts predict there is more to come.

Radius Commercial Real Estate co-founder Bob Tuler said there has been more activity in the area in the past 18 months than in the past eight years.

“There’s real development down there,” he said. “The Funk Zone is going to continue to upgrade and grow over the next five years with the acquiring and renovating of the existing properties there.”

The Funk Zone is a mixed-use neighborhood by the waterfront, bordering lower State, Garden, Yanonali and Mason streets, that used to be a marine industrial and manufacturing hub. The area is now comprised of an urban wine trail, restaurants, condominium projects, artists and galleries.

But for several years, the Funk Zone was home to stalled projects and minimal development, according to Mark Mattingly, executive vice president of Pacifica Commercial Realty.

“It was an area that languished for a long time,” he said.

In 1986, the area was rezoned to comply with state and local coastal policies, which created the Hotel and Related Commerce (HRC) Zones.

The city proposed a Local Coastal Program amendment in 1998 to balance redevelopment priorities and maintain the area’s character and ambiance. The amendment included rezoning a part of the HRC Zone area (from Helena Avenue to Garden Street, excluding the Cabrillo Plaza) to Ocean-Oriented Commercial (OC), which removed the potential for future hotels and general office uses.

It wasn’t until 2008 that the city and the California Coastal Commission agreed to the development standards within the OC zone, including allowing new residential development with a mandatory mixed-use requirement for parcels 5,500 square feet or greater.

“I’m not sure how this big metamorphosis toward residential fits into the Funk Zone,” Mattingly said, but he added that it is moving in a positive direction.

In the past year and a half, commercial investors have shown more interest than in years past.

A new four-story, mixed-use building is nearing completion at 116 E. Yanonali St., the renovated Hotel Indigo recently opened at the former Hotel State State location at 121 State St., and developer Brian Kelly of Eastern Real Estate LLC purchased the 47,411-square-foot industrial property at 25 E. Mason St. — with the Brooks Institute of Photography occupying two-thirds of the $9 million building.

“This section of State Street has been struggling for several years,” said Stephen Leider, managing principal of Lee & Associates of Santa Barbara and who represented Eastern Real Estate. “The Mason Street sale will be an integral part of the area’s ongoing revitalization.”

Mattingly said the Funk Zone’s sustained revival will also depend on projects such as the 2.4-acre La Entrada site and the sale of 75,000 square feet of space at 21 E. Mason St.

“The increase in the Funk Zone’s activity is two-fold,” Tuler said. “The economy is doing better and people are buying more all over, and its location — it’s a hip place to buy property.”

Other than the Funk Zone, Leider said there aren’t many affordable investment opportunities with property that’s two blocks from the beach.

“There will be a lot more interest in the near future,” he said.

Noozhawk business writer Alex Kacik can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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