CARLSBAD, CA—The Carlsbad and surrounding markets are rolling into the new year with increasing multifamily and residential property values, but can they be sustained in 2016? Lee & Associates broker Blair Havens weighs in on the subject exclusively with GlobeSt.com.

GlobeSt.com: What have you noticed about the commercial real estate market in North County San Diego?

Havens: In 2015, Carlsbad and surrounding North County saw a tremendous year in the real estate market. As residential and commercial-property prices surged, property owners realized significant gains. The trend continues to build momentum, rolling into the new year with increasing property values.

GlobeSt.com: Can these increases be sustained in 2016?

Havens: The 2015 average price per square foot for a detached home in the city of Carlsbad's 92008 zip code increased 13.4% from $410 per square foot in 2014 to $465 per square foot. Land prices continued to move upward as developers looked to capitalize on the residential sales velocity in the market. Multi-family properties also continued to trade at aggressive cap rates led by high investor demand and low interest rates. While it may be difficult to sustain continued growth because of the substantial gains that took place in 2015's market and economy, the outlook for Carlsbad real estate remains positive.

GlobeSt.com: What notable development took place in 2015, and what is in the pipeline for this year?

Havens: Several new projects came to the Carlsbad market in 2015, and many significant upgrades were made to the city. State St. has taken on a new identity since several old commercial buildings were removed and the State Street Townhomes were constructed on the north end of the street. The project consists of 41 live/work and six inclusionary two- and three-story townhomes ranging in size from 1,194 square feet to 3,155 square feet and priced from $475 to $700 per square foot. Seven of the project's 47 units have been sold or are currently under contract since hitting the market in mid-2015. Additionally, in 2015, the Summerhouse Condos located on Ocean St. came to market. The project, built by Zephyr Development out of San Diego, consists of 35 two-story luxury condos with subterranean parking and shared amenities such as a pool/spa, clubhouse and exercise room. The condos are priced from $1.1 million to $2.1 million and have scenic views of the wetlands and ocean.

The growth will continue in 2016 as further residential and commercial projects are underway. Specific to Carlsbad Village, the grading and construction of the future site of 14 townhomes has begun on the corner of Garfield St. and Walnut Ave. This development project is one block from the ocean and will contain 14 three-story detached luxury condos. Sizes will range from 1,600 square feet to 2,500 square feet and prices are expected to range from $500 to $700 per square foot. Several other residential projects are also on the agenda, including a mixed-use project on the corner of State and Oak sts. This project is fully approved for four stories of condos, timeshares and retail on the bottom floor. The property has been on the market since early 2015; however, there is not a buyer currently in place and no plans for immediate construction. Across the freeway on El Camino Real, grading and construction have begun on Robertson Ranch West. The project, owned by Toll Brothers, will consist of 239 single-family homes, 175,000 square feet of commercial retail anchored by a grocery store, and 414 multifamily units. The multifamily units will consist of 314 market-rate rentals and 100 senior apartments.

More changes are in the future for Carlsbad's commercial sector in 2016. Springhill Suites by Marriott will be constructing a new hotel where the current Armenian Café resided on Carlsbad Blvd. The 99-room hotel will be three stories with a multi-earth-toned modern industrial style design. The El Corral Pottery Shop on Carlsbad Blvd, located next to Cessy's Mexican Restaurant, will also be revitalized with a new design. The building, which is under lease negotiations for a restaurant-type user, will be of a modern architectural design for Carlsbad residents and visitors to enjoy.

GlobeSt.com: What was the investment market like for this submarket in 2015?

Havens: From a commercial perspective, 2015 was a year of growth. Several commercial transactions occurred in the multifamily and retail sectors, and substantial real estate gains were seen across commercial property types. Specifically, in the multifamily sector, 935 Laguna, a 45-unit apartment complex, sold at $222,000 per door, and 381-391 Oak St., a 16-unit apartment complex, sold at $260,000 per door. We are seeing more commercial and multifamily properties come to market as owners look to test the market and take advantage of the low cap rates combined with the high demand for investment property.

GlobeSt.com: So, what is your outlook on valuations in this market for 2016?

Havens: 2016 will bring many new and exciting projects to the market in Carlsbad. The city will continue to balance the preservation of its small beach town ambiance with growth in development. Time will tell if real estate prices can sustain the growth of 2015 or if we will begin to see the market pull back and correct.

Stay tuned for Havens' explanation of both sides of the controversial Agua Hedionda 85/15 plan in Carlsbad and the upcoming election to help settle the issue.