The Saks OFF 5th building located in downtown Santa Barbara was recently sold to an unnamed, out-of-area investor for more than $15 million.
The 47,000-square-foot property is located on the corner of State and Carrillo streets. As Saks Fifth Avenue, the building had been a centerpiece of high-end shopping in downtown Santa Barbara until its parent company Hudson’s Bay decided to convert it to an outlet, Saks OFF 5th, in October.
The seller, State Street Properties, said that the sale had to do with estate management and removing items from the family trust. Whether an outlet or not, the Saks building is still a major property in downtown Santa Barbara. But some real estate observers say that State Street never would have let go of the location if Hudson’s Bay not converted it into an outlet Saks OFF 5th.
State Street Properties certainly got a good deal for the corner location: according to property records, the Saks building was assessed at a value of $7.45 million in 2015. Whoever bought the property paid a premium.
Hudson’s Bay, for its part, also made a smart move by converting the Saks Fifth Avenue into a Saks OFF Fifth. Between November 2014 and October 2015, sales from its Saks Fifth Avenue brand decreased by 3.6 percent while sales from the Saks OFF Fifth outlet brand increased by 2.8 percent. Total sales for the retailer from all of its brands increased by 34.1% during the same period, amounting to a $653 million increase.
The decision by Hudson’s Bay to convert the Saks Fifth Avenue into a Saks OFF Fifth is part of a larger trend toward outlet stores and large national chains over local and regional storefronts.
Hudson’s Bay is not the only high-end retailer that is converting its Santa Barbara locations into outlets. Coach recently converted its State Street location into an outlet.
Marshalls and H&M recently took over storefronts formerly operated by Borders Books and Barnes & Noble, respectively. In the case of bookstores, the internet is certainly to blame for the changing retail landscape of downtown Santa Barbara. Rents are rising, driving out smaller players with lower margins, and vacancy is on the rise.
A study by the Seattle-based consulting firm Downtown Works commissioned by Santa Barbara’s Downtown Organization noted that the city’s downtown is losing some of its vibrancy.
The study warns that Saks and Coach turning over full-line stores to the discount versions is a sign of weak sales, and could be a precursor to them leaving the market altogether. The current retail market has many shoppers reluctant to spend, putting stores in between falling sales and increasing rents.
Business owners are putting their hopes for downtown Santa Barbara in the upcoming La Entrada hotel located in the former Californian on lower State Street and the continuing expansion of Santa Barabara’s own hipster enclave, the Funk Zone, to draw more foot traffic to the downtown area.
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(all data current as of 5/25/2017)
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