Market momentum continued from 2013 right into the new year. Sales and leasing activity continued its steady pace, nothing extraordinary, but solid activity in each submarket, and across all product types. There is no doubt that the South Coast markets are all in healthy condition, with low vacancy rates, and finally signs that lease rates are trending upwards. This has been the case for sales valuations for the past couple years, and seeing upward trends in lease rates bodes well for local investors. Higher rental rates boost returns for investors that have purchased assets at extremely low capitalization rates, which has characterized the market recovery.
Once again, it is the emerging technology sector that is driving the market in office and industrial properties. In many cases, the firms making leasing decisions are doing so for the first or second time in their brief existence. It is amazing how quickly new technologies take root, and begin to grow. This requires moving from their place of origination into significantly larger facilities. The downtown Santa Barbara office market is the location of choice for these firms. In the past, most of this growth was accommodated in Goleta, but as technology trends more towards software, rather than hardware development, these firms desire the amenities of downtown.
Another interesting trend is firms purchasing rather than leasing their office or manufacturing buildings. Evidence of this is Citrix, Network Hardware, CMC Rescue, and other significant employers choosing to invest in real estate, along with their business. Some of this is due to very attractive financing, and in the case of Goleta, relatively low prices for both industrial and office properties. With a limited supply of properties, which can be purchased, this trend may be hard to sustain.
Pacifica Commercial Realty has offices in Santa Maria and Paso Robles, and as the only full service commercial brokerage firm serving the Central Coast, it affords our clients a unique perspective into the entire market. Of note we are seeing resurgence in residential development, and home prices throughout the Central Coast. Manufacturing employment in these markets is also steadily improving, with Santa Maria adding a record number of new jobs in the past year. It is our opinion that the economy will continue to expand throughout this region, creating opportunities for investment throughout the region. You can count upon Pacifica Commercial Realty for qualitative market data and insight to give you a competitive advantage in all aspects of the commercial real estate market.