"Monumental shift’ in store
Contractors and contractor-related businesses either downsized or departed.
Where construction was once king, a simple economic fact deposed the monarch. We probably won’t again see construction or development influence the local economy the way it has until now, say local businessman and businesswomen.
“You shouldn’t confuse what’s going on here with the national economic trends,” says Harry Frampton, former president of Vail Associates and a principal in East West Partners, a development and management firm. “Everything that was high-end, ski-in and ski-out resort property is now finished. It’s a fundamental change. At the same time this was going on, the economy changed, too.”
Frampton said Eagle County’s construction and development was driven by four major development projects – Beaver Creek, Bachelor Gulch, Arrowhead and Cordillera – all of which are now completed or substantially built out. The economic downturn, Frampton says, has little or nothing to do with the economic climate. It’s more related to the end of the resort-based building boom.
“It’s a monumental shift,” he says. “We, as a community, have been addicted to development in a thousand ways. No matter what, it won’t approach the levels of before because the (developable land) is not there.”
He suggests the local economy is making a transition from real-estate sales and development to an economy based on the hospitality services and to a lesser degree, redevelopment.
“You only have a need for so many contractors, architects and engineers, he says.
For Beth Slifer of Slifer Designs, which employs 65 people, down from 100 in 2000, says the effects were many and they happened quickly.
“It changed what Slifer Designs does,” she says. “We became more aggressive in opening new markets for residential properties in other locations around the country, and with hospitality projects around the country, to offset the decline in the growth of projects here.
“In 2000 the wheels were practically coming off we had so much business,” she adds. “In 2001, things started to slip and buildout became apparent; in 2002, there simply were fewer new properties and unfinished properties in the marketplace.”
Slifer says she has been changing her business plan to rely more on the “cocooning” phenomenon, in which people pay more attention to their homes because they’re a perceived haven from the new threats of the world.
“This place is a sanctuary and will continue to be a sanctuary – and may become even more so,” she says.
Slifer says her business now has spread across much of North America to wherever there are resorts, golf courses or fractional-fee ownership projects. She believes the area’s economy will rebound with resales and more remodeling, she says, as people invest in their real estate and, perhaps, in their peace of mind.
“Make it up on volume’
Contractor Harry Gray of Gray-Stone Construction in Minturn, who at one time had 30 employees and now is down to two, says he finds the market pretty competitive.
“There’s a ton of people looking for just a few jobs,” say Gray. “This year could be one of the slowest seasons. Nothing is going to happen until we get this war thing ironed out.
“The spec stuff is still out there,” he adds jokingly. “If you want to build an $800,000 house, you can sell it for $600,000 and make it up on volume.”
Gray says he doesn’t know when the demand for new housing will rebound, but he remains optimistic.
“What was driving demand was the great excess of money flowing out of the stock market,” he says. “When will we see that again? It’s liable to be a long time.”
Gray, Frampton and Slifer all say the mountains, communities and resorts of Eagle County continue to provide a powerful draw to many urbanites and that development will continue – but just not the the same level it attained at the in the late 1990s.
“Now anyone can live in the mountains. You can get a four-wheel-drive and heated driveways and anyone can live here comfortably,” Gray says.
“There’s still some development, in Edwards and Avon and elsewhere,” Frampton adds.
A change on Main Street
The “fundamental change’ Frampton describes has been felt by Mike Walter of Edwards, who leases and manages retail and commercial property. He says it will change how most new retail development will look.
“All the big projects are now gone,” Walter says. “We have had to adjust our strategy.”
In 1999, Walter says, he conducted a survey that found one in three retail businesses in Edwards and Avon were tied to resort development. That ratio is now one in four or five, he says.
“It’s a shakeout. We’re transitioning from a retail to a service and management economy,” he says. “We’re losing the retail and office tenants tied to the development.”
In a way, the county may be experiencing the buildout Vail experienced in the early 1990s. It’s a change that the town of Vail has been feeling for nearly a decade.
“I truly think the economies of these places have changed,” says Vail’s town manager, Bob McLaurin. “We’re no longer truly a recreation-based economy. We’re more lifestyle-based.”
That change has affected Vail’s municipal budget, forcing the town to cut its $34 million budget this year.
Frampton says even the development of 2,400 residential units and nearly 650,000 square feet of commercial space at the Village at Avon won’t re-start the local construction industry, Frampton said.
“We will see some development, but we will never approach the Arrowhead/Bachelor Gulch or Beaver Creek phenomenon. There’s no replacement for them,” he says. “I don’t think it’s a horrible thing. It’s just difficult for people who were purely in the development business.”
The multi-million-dollar redevelopment of Vail will be a part of the local construction and development industry for many years. But because of the difficulty of redevelopment, it’s not going to ignite any sort of boom,” Frampton says.
“Redevelopmnent is extremely difficult,” he says.
The local building industry, meanwhile, has already begun to work on remodeling and redevelopment. Slifer says retail sales for her company this year have increased dramatically, possibly as a result of the cocoon phenomenon. Her company also has begun to do more remodels, she says, having relied before on new construction.
“It’s a new phenomenon for us,” she says. “We’re doing more than just changing the paint. We’re doing fireplaces, bathrooms and in some cases even gutting entire properties, particularly in Vail Village and Beaver Creek.”
The number of new building permits and the valuation of new projects in Eagle County for 2002 show there were more projects that the previous year, and many were remodeling projects. There were 460 building permits issued by the county in 2002, up 12.5 percent from 2001, but their valuation, $135 million, was less than half that of 2000’s $322 million.
And now “big boxes’
Walter and others says they expect another wave of change to roll through the business sector of the valley when the big boxes – Home Depot and a Wal-Mart Supercenter – open in Avon later this year. The two stores will bring a discounter’s mentality to their 300,000 square feet, or almost 7 acres, of retail space, and many believe they will cause a shakeout in the countywide business community.
“There are five paint stores in the valley,” says Walter. “Home Depot will have that much paint in aisle 17.”
Kevin Deighan, a principal in Timberline Commercial Management, which leases properties in Avon’s Chapel Square and elsewhere, agrees.
“The big boxes are going to have a profound impact on the existing retail climate,” he says. “Once Home Depot and Wal-Mart come online, the vacancy rates (for businesses) will go up. There’s no way around it.”
Deighan says lumber stores in Denver were forced out when Home Depot arrived.
“Their ability to sell and purchase considerably below the cost of competitors gives them a market advantage,” he says.
But, he says, eventually the businesses in Avon will benefit.
“Avon stands to gain because it will eventually become a regional retail center,” he says.
“Transition” or “shakeout,” whichever term is used, will create new opportunities for properly niched businesses, most experts agree.
Cliff Thompson can be reached at 949-0555 ext 450 or email@example.com
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