[Year End Review for 2010, from the introduction to Pacifica Commercial Realty’s Fourth Quarter Commercial Market Update]
Steady, slow recovery is our best description of the commercial market in 2010, and our prognostication for the coming year. Looking for the positive indicators from 2010, they can be summed up as follows. There was a significant increase in the number of property sales and corresponding value, which more than doubled the 2009 level. And we saw steady leasing of all property types, albeit at lower effective rental rates. Increasing transaction volume is a key positive signal, and is certainly preferable to the alternative.
Commercial sales consisted of a healthy mix of investment transactions, as well as owner-users, which signals confidence in both of these key sectors. Low interest rates certainly helped, but borrowing still proves to be a hurdle with very tough underwriting by both local and institutional banks. The Federal government stepped up the SBA (Small Business Administration) loan program, which helps local firms qualify for financing. We expect this to continue in 2011, and although there is upward pressure on interest rates, they still remain historically low.
Once again, the shining light in our community is the Technology sector, driving leasing activity in all three sub-markets, Santa Barbara, Goleta and Carpinteria. We expect the most significant leases in 2011 will be technology related firms growing and providing momentum to this slow recovery.
The retail market showed signs of a continuing recovery in consumer confidence and spending. There were many significant leases as reported in the Retail section of this report. Santa Barbara remains an attractive choice for vacationers as evidenced by increasing hotel occupancy and the corresponding Transient Occupancy Tax (TOT).
The new Santa Barbara Airport is scheduled to open this spring, and we hope to see more service to our market. We at Pacifica Commercial Realty believe it is time for savvy investors to get back in the market, and for the community’s business sector to capitalize on more affordable rental rates and sales valuations and make moves to accommodate their business in the near and long term.