Q2 2021 Market Report

GOOD NEWS, BAD NEWS

The “good news, bad news” for South Coast commercial real estate is this: recovery from the economic impact of the pandemic is well underway, but there appears to be a long road ahead. Both sales and leasing markets are still in a cycle of extended supply and uneven demand. On the other hand, prices and rents have proven remarkably durable, providing stability in a time of uncertainty. As projected, Q2 proved far more active than Q1, and generated transaction momentum we are optimistic will carry forward through the balance of the year. Here are some summary points:

• After a stagnant first quarter, both sales and leases bounced back in in the second quarter, with total transaction value increasing from $86M in Q1 to $135M in Q2.

• Commercial sales volume showed a dramatic increase compared to midyear 2020, with most of the activity happening in Q2. At midyear, transactions and dollar value were up 37% and 140%, respectively, year-over-year.

• However, commercial sales are still trending below pre-pandemic levels, and inventory is at a record high.

• In most local sub-markets, vacancy hit a “pandemic peak” in Q3 or Q4 of 2020 and has since subsided. The two exceptions are Santa Barbara office and Santa Barbara retail, where vacancy rates are still on the rise.

• Tenant demand, pent-up during the depths of the pandemic, led to a surge of 93 lease transactions in Q2, the highest quarterly count in 5 years.

Read the full report here.