Commercial space supply, demand in balance
By the numbers
1.53 percent: Commercial space vacancy in Vail Village and Lionshead.
3.81 percent: Vacancy rate in Avon, Eagle-Vail, Beaver Creek and Edwards.
5.07 percent: Vacancy rate in Eagle and Gypsum.
$7.5 million: Most expensive commercial sale — for a self-storage facility in Avon.
Source: NAI Mountain Commercial, second quarter report.
EAGLE COUNTY — Commercial real estate can be a lot different than the residential real estate business, but there’s one constant: location, location, location.
NAI Mountain Commercial is an Avon-based firm that specializes in commercial real estate. That firm recently released a market report for the second quarter, the period between April 1 and June 30.
The report shows a handful of trends that have lasted for some time now.
As you might expect, Vail Village and Lionshead Village have the least space available — just less than 16,500 square feet of available space in market of 1.05 million square feet.
Lease rates in those resort areas have also fully recovered, and in many cases have passed, the previous highs of 2007, before a world-wide economic slump that hit in 2008.
In Vail Village, per-square-foot lease rates for prime retail space passed the peaks of the previous decade in 2013 and have been climbing since. The curve on the graph is similar for secondary retail space — although those rates are significantly lower than what’s charged for prime space.
In Lionshead, rates for secondary space also passed their previous highs in 2013, but prime space in that area matched its previous peaks just last year.
The story changes, sometimes significantly, in areas west of Dowd Junction. From Eagle-Vail to Gypsum, lease rates still lag below their previous highs. Beaver Creek space is just lower than its 2007 peaks, on average, but has held just under those highs since 2013.
The only exception to the slow recovery is “flex” space — space that can be used for multiple purposes, from shop space to retail — in Edwards.
The amount of space leased — what the NAI report calls “absorption” is also fairly steady.
Erich Schmidt, the vice president of brokerage at NAI, said the commercial market has roughly mirrored the residential market through the first half of 2016, with a slight slowdown in activity.
“Fewer people are looking for space,” Schmidt said, adding that leasing activity has been steady and he expects the market to remain in roughly stable the rest of this year.
Lagging rates may explain continued interest in buying space.
John Nichols, a broker with Vail Realty, has both residential and commercial property among his listings. Nichols said he’s hearing continued interest from people interested in buying commercial space.
“A lot of times you’ve got a company that’s been growing, and they’re getting to the point they can own,” Nichols said.
Nichols said a good bit of his business is properties that don’t end up in the listing books. He works with clients who may be interested in shopping around.
While Nichols works mostly in the middle of the Vail Valley, he keeps an eye on space up and down the Eagle River.
“I’m kind of surprised more hasn’t happened out by the (Eagle County Regional Airport),” Nichols said. “I’m surprised we don’t see more distribution centers there.”
Those deals haven’t happened yet. And, Schmidt said, it may be some time before we see more retail space, given the demand.
Two-thirds of the old Wal-Mart building in Avon is now empty. One-third of that, the old Office Depot site, has been vacant since late 2012. With Sports Authority closing its doors this summer, that leaves only Pier One Imports in the building.
That may not change for a while, Schmidt said.
“I’m not going to say the big box world is ending, but it’s changing,” he said. “Macy’s just announced the closure of another 100 stores — that’s about 15 percent of them. And Wal-Mart just acquired jet.com to take on Amazon.”
With all that in play, Schmidt said it could be some time before that building may be redeveloped.
Again, it’s about supply and location. And, Schmidt said, our location isn’t particularly attractive to national retailers. There simply aren’t enough year-round residents.
All that said, Schmidt said his company has been busy.
“Supply and demand are pretty balanced,” he said. “That’s why you haven’t seen any new commercial development in the past few years.”
Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, firstname.lastname@example.org and @scottnmiller.