Investing in Commercial Real Estate and Why Santa Cruz is the Perfect Choice

Investing in Commercial Real Estate and Why Santa Cruz is the Perfect Choice

  • Team Zech Properties
  • 01/13/24

Nestled along California's northern Monterey Coast, less than one hour south of the heart of Silicon Valley, Santa Cruz is an emerging cultural and business hub quickly becoming a sought-after destination for commercial real estate investment.

But unlike some towns and cities that grow and thrive on a singular industry or cultural attraction, Santa Cruz's unique blend of natural beauty, economic stability, and vibrant cultural scene positions the city and its outlying communities as a land of opportunity for savvy investors. Let's explore why Santa Cruz is an ideal location and choice for investing in commercial real estate.

Business property investments in Santa Cruz

Santa Cruz's proximity to Silicon Valley and its popularity as a major tourist haven create a strong demand for business properties. Retail spaces, boutique hotels, and unique dining establishments thrive here, fueled by the steady influx of tourists and the affluent local community.

The area is also growing beyond its agricultural roots and branching out to attract more than just tourists. The area's commercial real estate infrastructure currently supports more than 7,000 businesses — many of the newest being tech startups and satellite offices out of Silicon Valley. As such, the area has witnessed a growing number of influential commercial pockets across the region.

The largest concentrations are downtown Santa Cruz, near the University of California, Santa Cruz, medical facility expansion along Soquel Drive, and considerable growth in Scotts Valley. Investors looking to capitalize on high foot traffic and a clientele seeking luxury experiences will find Santa Cruz a fertile ground for business property investments.

Commercial land development opportunities

The city presents untapped potential for land development. With a landscape that includes picturesque beaches and lush redwood forests, developers have the unique opportunity to create commercial spaces that blend harmoniously with the natural environment. Whether it's developing luxury resorts, exclusive shopping centers, or innovative office spaces, Santa Cruz's land development prospects are ripe with potential.

Commercial real estate market analysis

A deeper dive into Santa Cruz's commercial real estate market reveals a stable and growing sector. The diversity of its economy, encompassing sectors like tourism, agriculture, technology, and education, contributes to this stability. This diversity cushions the market against economic downturns and ensures a continuous appreciation of property values.

Since 2021, Santa Cruz has added nearly 300,000 square feet of office space — a 49% increase over two years — totaling just over 850,000 square feet. In the same timeframe, the industrial segment increased by 28.3%, adding more than 400,000 square feet for a current inventory of 1.865 million square feet. Retail space grew by 12% to 355,962 in the prior two years.

By any measure, the market indicates a positive trajectory for the region's local economy and commercial real estate investments.

Critical factors enhancing Santa Cruz's commercial investments

Several factors fuel Santa Cruz's commercial real estate growth. Much of the region's success is due to its relatively quick recovery post-pandemic. Again, much of that is due to the city and county's strategic location. Beyond the tech sector, the growth is multi-dimensional, encompassing demographic expansion, infrastructure development, and a burgeoning business environment.

Demographic expansion

Santa Cruz is experiencing a steady increase in its population, driven by its appeal as a coastal city with a high quality of life. This demographic growth translates into a growing workforce and consumer base, essential for the success of various business sectors. That success reflects Santa Cruz's lucrative job market, where the median household income is $86,618, 16% higher than the national average. The influx of professionals, especially from the tech industry, elevates the demand for commercial space.

Infrastructure and development

The city is actively investing in infrastructure, urban development, and expansion projects, enhancing its appeal as a commercial hub. These developments include upgrading transportation networks, revitalizing downtown areas, and expanding commercial districts.

Further aiding the city's accessibility and capacity to foster national and international business connections is its proximity to major airports in San Jose and San Francisco. Located 40 and 60 minutes from Santa Cruz, respectively, the ease of access is a significant draw for businesses requiring seamless connectivity to other major economic hubs. Such infrastructure facilitates business operations and attracts new companies and investors.

Evolution of the business environment

Santa Cruz is evolving from an economy once driven by tourism and agriculture into a substantial hub of economic diversity. The growth of tech startups, the expansion of educational institutions, and the strengthening of creative industries contribute to a dynamic business environment. This evolution opens up new opportunities for commercial real estate investment as expanding business sectors seek suitable spaces for operation.

Within the past decade, Santa Cruz earned recognition as a top 10 U.S. city for future job growth and a top 5 U.S. city for women-owned businesses. It's worth noting that even with the shift to a more diversified marketplace, Santa Cruz still plays host to approximately 3.5 million visitors per year, who spend roughly $24 million annually.

Strong educational core

The University of California, Santa Cruz, is a cornerstone of the local economy. It brings educational and research excellence to the city and catalyzes the expanding academic sector, including technology transfer and startup incubation. Among its many accolades, Princeton Review ranked the school as the 2nd Best Public University for Making an Impact and is ranked 1st by the Women's Power Gap Initiative for racial and gender diversity. It's also a top 20 school for excellence in undergraduate teaching.

As a bonus, the university's 2,000-acre campus is among the most beautiful in the nation. But education in Santa Cruz starts with its youngest citizens and a roster of excellent public, charter, and private schools to ensure a positive start to a lifetime of enrichment.

Desirable location

As noted, the city's prime seaside location is a significant draw. Beyond the beaches, its proximity to the Monterey Peninsula and Silicon Valley positions Santa Cruz uniquely as a bridge between serene coastal living and high-tech urban dynamism. Additionally, Santa Cruz's reasonable distance from major urban centers like San Francisco and San Jose makes it attractive for commuters and businesses looking to expand or relocate.

There's also a rich cultural vibrancy — the city's history dates back more than 230 years — which includes festivals, art galleries, and music events. This wealth of diverse culture not only attracts residents and tourists but also adds to the city's appeal as a modern destination that continues to celebrate where it's been and where it's going.

Santa Cruz's appeal to investors

The city of Santa Cruz, along with its namesake county, is increasingly being recognized as a prime location for commercial real estate investment. The region's blend of natural beauty, economic diversity, strong educational foundation, and cultural richness makes it a compelling proposition for investors. It could prove highly lucrative as well.

If you're interested in exploring the Santa Cruz commercial real estate market, contact Team Zech Properties today and allow our experience and expertise to help you navigate this dynamic, thriving coastal enclave.

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