By Summer Knight
2025 President
Santa Barbara Association of Realtors
The commercial real estate market in Santa Barbara has been a hot topic of discussion, especially as we move into 2025. At our recent Santa Barbara Association of REALTORS® Real Estate Forecast, Gene Deering, a partner at Radius Commercial Real Estate, shared valuable insights into the current landscape of commercial real estate on the South Coast. I had the opportunity to ask Gene to dive deeper into the trends, challenges, and opportunities shaping our market today.
How would you describe the current state of the commercial real estate market in Santa Barbara?
“The commercial market on the South Coast is a bit disjointed,” Deering explains. “The retail market, with the exception of Downtown/State Street, is actually very strong. Lease rates have been rising, especially in neighborhood centers. The retail market in Montecito is as hot as I have ever seen. On the other hand, office leasing is very slow, particularly for larger tech office spaces. Industrial remains incredibly strong for both leasing and sales.”
Are you seeing more investor interest in certain types of commercial properties over others?
“In general, there are fewer investor transactions than in previous years. Most of the buyers in the market today are either users or buyers with a value-add or use-conversion strategy. In 2024, we saw very few pure investment buyers. As I highlighted in my speech, a number of investment properties were on the market last year but never sold—even though many of them were reasonably priced.”
What are the biggest challenges facing commercial property owners and investors right now?
“The cost of money. Investors are earning 5% in their money market accounts with zero risk, so it is difficult for them to justify buying real estate at a 5% return, especially when borrowing costs exceed 6%. Much of our sales market has been driven by 1031 exchanges, and once the market slowed down, many of those buyers disappeared.”
Are there any new commercial or multifamily developments in the pipeline that you’re particularly excited about?
“We need more housing in this area. The most exciting potential development is the transformation of the Macy’s building in Downtown Santa Barbara into apartments. This project could provide a massive boost to the entire downtown area. Additionally, I am looking forward to the opening of Linden Square in Carpinteria.”
What advice would you give to investors looking to enter the Santa Barbara commercial real estate market in 2025?
“Don’t be afraid to write offers. You never know which seller might be motivated, especially if their property has been on the market for a long time.”
Moving Forward in 2025
Gene Deering’s insights highlight both the challenges and opportunities in our commercial real estate market. While high borrowing costs and cautious investors have slowed certain sectors, strong retail demand outside of State Street and continued industrial growth present bright spots. Additionally, new multifamily developments could bring much-needed housing to our community, potentially revitalizing key commercial corridors.
As we navigate these changes, the Santa Barbara Association of REALTORS® remains committed to keeping our members and the community informed about market trends and opportunities. We look forward to seeing how our commercial real estate landscape evolves in the year ahead.
Summer Knight is a Santa Barbara native and top producing Realtor at Sun Coast Real Estate. Summer has been a member of the Santa Barbara Association of Realtors for over 20 years and currently serves as the President of the Board of Directors. Reach Summer at 805-886-1261 or summer.k.knight@gmail.com.