Why is Coast Village Road a Success and State Street a Failure?

I went to the UCSB Santa Barbara Economic Summit held at the Granada Theatre. The place was packed and the presentations were great. 

The speakers, Gene Deering, a principal at Radius Commercial Real Estate, host UCSB econ professor Peter Ruppert, and real estate entrepreneur Rick Caruso, were informative and hit on some of the problems facing Santa Barbara, especially about State Street.

Their presentations triggered thoughts about why Coast Village Road (CVR) in Montecito is thriving and why State Street is dying. What are they doing right in Montecito? Another way of looking at it is, what are they doing wrong with State Street?

In full disclosure, I have a background in real estate. As a lawyer I represented a lot of real estate investors. And as a real estate investor I’ve been a builder, owner, and manager. I was director of finance for a local developer. I also taught real estate investment at SBCC for seven years. Locally we own some stores on Coast Village Road and we still have a share in El Paseo on State Street. I’ve been doing this for 50 years.

Coast Village Road

What is different about Montecito’s CVR? The street is short; the drive from Hot Springs Road to Olive Mill Road is about .7 miles. There is a green median and traffic goes both ways. There are parking spaces behind the medians. There is a mixture of retail, banks, real estate offices, hotels, and great restaurants. Not much different than State Street. We got rid of the restaurant parklets and our attractive architecture is much more visually appealing. I see folks walking up and back, window shopping, walking their dogs, heading for a restaurant, or just stretching their legs. 

We don’t have much of a homeless problem on CVR. A local organization, Hands Across Montecito, has been actively helping by bringing services to those with mental illness and addiction issues.

CVR now has a reputation of exclusivity which draws in tourists and local shoppers. It wasn’t always that way and the CVR community has worked hard over the years to make that happen. Even with traffic problems due to freeway and roundabout construction, we still draw people in.

There are almost no vacancies along CVR. They are snapped up quickly. Our rents are high, ranging from about $6.00 sq. ft. (NNN) to $9.50-$10.00 sq. ft. (NNN). Rents are high because demand for space is high. And demand is high because businesses thrive here. 

While we are a part of the City of Santa Barbara, they put up few barriers and our success was achieved mostly on our own. Recently because of the formation of a CVR business improvement district the City has been working with us to improve our street and medians. 

It is a busy place with shoppers, diners, and traffic. It gives off a vibe that the place is thriving and that’s where people want to be.

State Street

The problem with State Street is that the City has created barriers to success.

State is dying because shoppers are not coming and retail businesses and restaurants are leaving. Vacancies are high. Gene Deering of Radius Group pointed out that there are 37 vacant storefronts from Gutierrez to Sola, a roughly 15% vacancy rate. Macy’s and Nordstrom in the Paseo Nuevo mall are vacant. Many national and local retailers have left.

There are solutions to the problems, solutions that will revive State as the centerpiece to Santa Barbara. I wrote about this back in April. The solutions are: open State to one-way traffic, get rid of the junky parklets, and make it easy for entrepreneurs to bring new businesses to the street.

The City Council has the power to open the street back up to one-way traffic. But they are afraid to make a decision because they spent $800,000 for a consultant to come up with a plan that, I believe, will only justify what the Council has already done.

What they next must do is make it easier for business entrepreneurs to remodel stores that are now functionally obsolescent (too big). As Mr. Deering of Radius pointed out, the permitting process has increased from 19 months to 27 months over the past 10 years – 19 months is way too long, but 27 months is a brick wall for those creative folks wanting to bring life to State Street.

And one more thing. Who thought that increasing parking rates downtown would help the problem? That flies in the face of basic economics. You already have a problem bringing people downtown and now you want to charge more for them to come? Perhaps the City could solve their $7 million deficit by finding ways to cut spending rather than shoveling more dirt on State Street’s grave.

Our City Council should take a page from the success of Coast Village Road and undo the damage that has been done to State Street. Remove the barriers to recovery and you will see downtown revitalized.