Insights from the 2024 UCSB South County Economic Summit
UCSB Economic Forecast Project’s 2024 South County Economic Summit provided a comprehensive analysis of the current state of today’s economy, with a special focus on downtown Santa Barbara’s revitalization, regional job growth, and inflation. American Riviera Bank is proud to be a sponsor of this important program that brings expert economists and industry leaders together for public discussion of current events that impact our community.
This year’s speakers included: Gene Deering, Radius Commercial Real Estate; Peter Rupert, UCSB Economist; and Rick Caruso, Real Estate Developer and Founder of Caruso. The summit included forecasts based on key economic indicators such as employment rates, inflation, commercial real estate market trends, and housing.
Gene Deering began his presentation with a review of State Street and the status of commercial real estate in the downtown area. He reflected on State Street’s evolution from the early days of horse and buggy traffic through present day, noting that as the community needs evolved, so did the demands tied to downtown businesses. Notably referenced was the ‘energy transfer’ of activity from La Cumbre to downtown to, presently, the Funk Zone and how there is a need to attract locals back to State Street to transfer energy back downtown.
Throughout his presentation Deering covered the vacancies, challenges, and successes of each block along the downtown corridor. He also reflected on the cost to transform challenged portions of State Street and the realities of a complete overhaul, referencing as an example the underpass project’s estimated $11 million cost. Solutions themes weaved throughout his presentation included:
- Adaptive Reuse: Current buildings that are underutilized or abandoned can be easily updated to a new purpose that is more cost effective than new construction. Drift Hotel, for example, was a dilapidated office building and former church but will now deliver downtown hotel guests to area businesses, and front small retail as well. Additionally, TOT tax generated from the new hotel will help fill the city budget gap.
- Housing: 78 apartments are currently being constructed just around the corner of State Street on Gutierrez, bringing approximately 300 residents to the downtown core by Spring 2025. These residents should invigorate economic development along State Street through increased foot traffic and community development. He believes that housing will serve as a catalyst for revitalization and lead to a dynamic and diverse mix of residential, commercial, and recreational opportunities.
- Partnership: He emphasized the need for the City to approve creative ideas and initiate speedy processes that allow development without unnecessary roadblocks. He noted an 8 month increase in permit wait time from 2014 to present. That, mixed with the increased construction costs, are making projects challenging to financial pencil out.
Peter Rupert next explained various economic indicators and how they relate to our current and future economy.
Overall, Rupert emphasized the good news – that the economy is not currently in a recession and the not so good news – that inflation is much higher than the Fed’s target and not to expect a rate reduction in 2024.
He further noted:
- Inflation: The Federal Reserve's target is to stabilize inflation at 2% yet inflation has continued to rise in the last 2 ½ months. There was initial discussion that the Fed would cut rates up to 3 times this year but he predicts no rate cuts now.
- Labor Market: The April report showed that only 175,000 jobs were added, showing a slowdown in the labor market. However, Rupert stressed that there were more jobs than unemployed so while a decrease in available jobs could be an indication of a slowing economy, in his opinion this one data point does not show the broader picture of the economy.
- Employment in Santa Barbara County: The labor force is coming back to pre-pandemic numbers but are not equal to where they may have been had we not experienced COVID. Demand for health care sector jobs is the highest of all categories with Cottage, and other healthcare providers, among the largest job posters (aside from UCSB who is the top job poster in the County).
Rupert led a panel discussion with Deering and Rick Caruso, a Los Angeles based developer who is regionally known for building the Rosewood Miramar Hotel. Caruso reflected on how his properties are all built to enrich guest and resident experience, something he stresses is a focus at Miramar. He added that demand for retail at Miramar is high and that retail spaces are 100% occupied on all properties. When discussing how to revitalize State Street, Caruso suggested an open forum for residents to provide input and engage in the discussion which will allow for developing a community space.
Lastly, all three speakers expressed support for workforce housing, not as a tax on a developer but through incentivization. Caruso stated he was ‘bullish on workforce housing’ and has dedicated units on property and subsidizes rents for Miramar staff.
The South County Economic Summit at the Granada Theatre was once again packed with local leaders, residents, and business professionals all eager to better understand the economic landscape and evaluate solutions to current challenges. For more information about the UCSB Economic Forecast Project, visit: https://efp.ucsb.edu/.
