Santa Barbara Outfitters
Paul Wellman

The game of musical chairs played by real estate owners and businesses in Santa Barbara’s downtown retail core got a little more competitive in 2012 as many of the vacancies that opened after the recession hit in 2008 have now been filled. According to a year-end review published by Hayes Commercial Group, available retail space in the city decreased by 28 percent as food and fashion retailers gave new life to the ever-evolving nexus of tourists, transients, and townies that is State Street.

Paul Wellman

One of the most conspicuous holes being plugged is the gaping northeast corner of State and Ortega, once occupied by Left at Albuquerque. Vacant for three years, the spot will soon be filled by the second Santa Barbara location of national chain Panera Bread. Lululemon, purveyor of yoga duds and benefactor of Americans’ penchant for wearing comfortable clothing in public, is also opening a new storefront on the 700 block of State (moving from its current Paseo Nuevo digs), along with clothing retailer Lolë.

When the 99¢ Only Store moved into the old Pep Boys at 424 State Street, eyebrows rose, but real estate agent John Thyne said, “People forget that when you have a resort town, you have a resort staff that doesn’t live the life you see in the soap operas.” He said that the 99¢ Only Stores’ most successful location is in Beverly Hills, and following its success on State Street, the chain — at 298 strong — is trying to open a store on Rodeo Drive.

Not an hour goes by when a Santa Barbaran doesn’t moan about local businesses being replaced by national chains. Those in the real estate game aren’t so sure. “We still see a healthy mix of local and regional tenants,” Michael Martz, a partner at Hayes, told The Santa Barbara Independent, pointing out retailers like jeweler Gauthier and home furnishing seller superChic. An agent for Radius Commercial Group, Austin Herlihy, said that mom-and-pops are definitely priced out of the prime shopping district on the 700 and 800 blocks of State Street, but otherwise, property owners often prefer local tenants, who tend to be much more amenable than the big guys.

Still, it was hard to ignore that the first two victims this year of a lackluster holiday season — which typically accounts for 40 percent of retail sales — were Santa Barbara Outfitters and Dave’s Hobby Central, ending a 67-year run. Last year, Santa Barbara success story The Territory Ahead came to an end after being bought out by a Massachusetts company. Both its headquarters and outlet store on State are no more. Word on the street is that a potential tenant is already negotiating for the 1200 State Street space that Santa Barbara Outfitters must vacate by the end of the month.

Nationally, holiday sales were down, as the economy continued to skitter along and the federal government walked up to the edge of a “fiscal cliff.” More budget battles loom in the near future as this week the Democratic president and Republican House began to stake their negotiating positions on a vote to increase the debt ceiling.

“Everybody’s just been a bit beaten down over the last few years. Businesses are still conservative in their hiring and in their spending. Any negative impact on consumers’ take-home pay is going to make them more conservative.”

Martz believes that retail business will continue to see “steady to moderate growth” in 2013 with rents rising slightly. “Everybody’s just been a bit beaten down over the last few years. Businesses are still conservative in their hiring and in their spending. Any negative impact on consumers’ take-home pay is going to make them more conservative.”

The average lease rate in Santa Barbara is $3.27 per square foot, but in the downtown shopping mecca between Carrillo and Ortega streets, rates can top $6 per square foot. Santa Barbara — somewhat insulated from the slings and arrows of the national economy — boasts a 2-percent vacancy rate, according to Hayes.

And eateries are getting in on the action. Restaurant Guy and Independent contributor John Dickson listed 48 restaurant openings and 42 closings across the South Coast. Popular new restaurants downtown include Eureka! Burger, The Blue Owl, Pace, and Cielito. High-end dining destination Ca’ Dario opened a downscale pizzeria on Victoria Street, and another pizza joint, Neapolitan Pizzeria, will soon debut at 905 State Street.

With the strong demand for retail space, consideration (or dollar value) of leases on the South Coast doubled, according to the Hayes research, but rates are still “20 percent below the pre-recession peak.”


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