EAGLE COUNTY — Most of the real estate conversation in the valley involves residential property — there’s quite a lot of it, after all, and many of us live in those units. Commercial property, on the other hand, tends to be less noticed.
In fact, while a handful of brokers in the valley have commercial expertise, there’s just one company that specializes in commercial property — NAI Mountain Commercial. That company has just released a comprehensive look at where we work.
The report tells a story many of us might guess at if asked — retail space in the resort areas of Vail is scarce and valuable, while being more abundant and far less expensive in downvalley communities.
But pulling that report together took a lot of time and research. Company president Mike Pearson said he used the Multiple Listing Service — a nearly comprehensive list of property for sale in the area — county records and other information to pull the report together.
“I was surprised putting it together that there’s no real source for market data,” Pearson said. “We knew rental rates, but we wanted to learn about occupancy rates, too.”
The somewhat surprising answer is that vacant commercial space — at least as of the end of August — is in relatively short supply from the eastern to western ends of the valley.
The market is tightest in Vail’s resort villages, as you’d expect. Rents are highest there, too. Even “secondary” space in Lionshead is renting for more than $35 per square foot, with prime space in Vail Village renting for just less than $100. The rates in Vail Village and Lionshead are just slightly less than the amount landlords were charging in 2007. In the case of “secondary” retail space in Vail Village, rents have surpassed their 2007 levels.
The result of the strength in the Vail market, and the relative value of Lionshead, may have contributed to an uptick in Lionshead leasing as ski season approached, Pearson wrote.
Rates have yet to fully recover in Avon, Eagle-Vail, Edwards and Beaver Creek. Average rates for retail space in Beaver Creek are similar to average rates in Lionshead — near, or just more than $50 per square foot.
The western valley is still “trying to find its footing,” Pearson’s report states, adding that the market in Eagle and Gypsum has been slower to recover than other areas of the valley. That situation has generated “plenty of inquiries in light industrial spaces, but has yet to yield many closed deals.” Still, average rates haven’t dropped the same way residential prices have during the past few years.
That might be due to the fact that there isn’t as much space available as many people think, Pearson said.
For instance, even in the western valley, there’s less than 140,000 square feet of space available in a market that has a total of 2.6 million square feet.
That’s why Pearson is confident that the space in Avon currently occupied by Office Depot — which will close its doors soon — will be occupied sooner than later. As of Aug. 31, Chapel Square in Avon was fully leased.
While space is limited, Pearson said that doesn’t mean tenants are always stable. “How many restaurants have turned over the last few years?” he asked.
And stability is one of the top items on prospective buyers’ lists.
Scott Schlosser, a broker with Eagle-based Access Real Estate of Colorado, is one of several local brokers who sell both commercial and residential real estate. Schlosser said retail rates have been relatively flat in that market for some time.
People do seem to be showing more interest, Schlosser said. Interest rates remain low, and prices for property seem to have come up a bit from their depths-of-the-recession lows.
But interest, whether from investors or from entrepreneurs, has taken time to develop. In the case of business owners or entrepreneurs who might be looking to buy or rent commercial space, their ability is limited by either discretionary income or business success. Add in the fact that commercial mortgages are generally harder to qualify for than residential loans, and it’s easy to understand what Schlosser called the “lag” between activity in the residential and commercial markets. Once commercial makes up that lag — Schlosser guessed it could be two or three years — there could be enough new population and new demand to spur more building.