Is State Street Retail Sliding?
SANTA BARBARA—For the first time in decades, Santa Barbara’s esteemed retail street has several vacant storefronts and dwindling demand. In this EXCLUSIVE story, Lee & Associates’ Clarice Clarke and Steve Leider tell us how State Street is changing.
Santa Barbara’s famed State Street—a retail high street in the downtown market—may be sliding. For the first time in a decade or longer, the esteemed retail center has 25,000 to 30,000 square feet of storefronts in a range of sizes available for lease. The phenomenon is a combination of l
ow foot traffic, high rents and arguably more appealing locations in the nearby Montecito and Funk Zone submarkets.
“State Street was the place to go for retail; it was the Wilshire Blvd. or Rodeo Drive of Santa Barbara,” Steve Leider, a principal in Lee & Associates Central Coast, tells GlobeSt.com. “Now, State Street landlords have had unreasonable expectations from a rent standpoint, homelessness is a problem, although it is a problem that Santa Barbara has had and hasn’t dealt with for many years, and retail is competing with ecommerce sites on the Internet. We used to have a lot of mom-and-pops and small boutiques, and today, in the prime blocks, we are going to have 25,000 to 30,000 square feet of storefronts in various sizes available on State Street. We haven’t seen that in 10 years. Even through the recession, we didn’t see that.”
While foot traffic may have declined, tourism has not. Santa Barbara still receives 32 ocean liners per year and Leider says that 8 million tourists spend at least four hours traipsing through the submarket. Yet, some mom-and-pop retailers are either closing or choosing to move to other markets. Boutique clothing store K Frank, currently on State Street, is one example. The owners are moving the store to an upscale shopping area in Montecito, where it says a lot of its customers are now based. “Things are shifting around quite a bit, and a lot of the high-end retailers are relocating to Coast Village Road in Montecito or to the Funk Zone, which is the new hip area,” Clarice Clarke a principal and the president Lee & Associates Central Coast, tells GlobeSt.com.
Other larger retailers, like Saks Fifth Avenue may be shuttering altogether. “Saks converted the store from a full-line Saks Fifth Avenue to an Off Fifth, and that isn’t doing what we thought,” says Leider, adding that there is no official news that Saks will close its doors at the end of its lease term. The building traded hands late last year to a private investor that hoped Saks would renew its lease term.
One issue is that the ownership is very fragmented, Clarke says that some families that have owned the individual storefronts for several generations. The market needs a catalyst to revive demand, and Clarke says that the Paseo Nuevo Mall might be just that. “Paseo Nuevo Mall has a new equity partner, and I think that will be the catalyst for change,” she explains. “They are planning to do some very positive things that will reinvigorate the mall and bring in a new and very effective tenant mix. They are really open to bringing back some of the successful mom and pops and they are renovating the exterior facades and signage, and it really needs that. I think that may be the impetus to start drawing people back in, because that is really the prime Downtown area.”