Vail Valley Voices: Vail’s building dilemma
Vail, CO, Colorado
Editor’s note: The following is an excerpt from the Vail Homeowners Association monthly report in February. We plan to publish weekly excerpts from the association, which keeps a close eye on economic and political trends in and outside of the town.
The volume of real estate inventory waiting to be sold throughout Eagle County is unprecedented. Current sales trends in Vail and Eagle County are moving in a positive direction. However, foreclosures are also on the rise.
As of mid-February, the town of Vail has 456 active residential listings with 20 percent pending under contract. Sources report that of those under contract, 70 percent are in large redevelopment projects in Vail Village or Lionshead. There are 17 active listings for land, with one under contract.
Boom to bust: The local political climate, some say, is in flux, affected by an evolving public perception that Vail’s billion dollar boom has gone bust.
Even when confronted with the stark evidence, there are those in the community who are reluctant to let the construction boom times go. A town press release bemoans with bittersweet regrets the last towering construction crane departing the skyline.
Getting back down to earth: If there is no ongoing major construction, the recession has created for some a lack of confidence. Others see opportunities for redevelopment to resume, but first Vail has to use its refurbished image to rebuild and expand the resort customer base.
There is less belief and enthusiasm that more large-scale development in the short-term is possible or even desirable. Some are saying no more high-flying, big-spending development projects until the resort side of the economy is once again sustaining the community.
Discounting opens wallets: The vigor of the real estate market will depend on the effectiveness of sellers reducing their asking price to within the 20 percent to 40 percent discount standard from the 2007 market high, advised by some brokers.
Nationwide, mountain resort real estate is seeing buyers moving back into the market. The community still faces considerable challenges in making headway to stimulate the construction industry and expand its base of destination guests.
Solaris is emerging from its plastic wrapping. April condo owners may start moving in; retail set to open on July 4th.
Once the closings occur for those units currently under contract in the large projects, all eyes will be watching to see how successfully large development projects will fair in selling their remaining inventory in a highly discounted market.
The rule of thumb that some large developers follow is that the predicable churning in the resale of sold units will cause accelerated appreciation of discounted units, bringing them more quickly into par with high value units.
The hoped-for result is that the inventory of unsold units will regain their value more rapidly and prime the pump for more development. Some say without heavy discounting, the value of all units will bump along at their lowest value prolonging the malaise and further constricting the construction industry.
Historical perspective, lanning for a soft landing: There are those asking in hindsight what was the community thinking? Didn’t anyone anticipate the downside of a boom? The community has been in a comparable circumstance before. The late 1970s saw a very similar boom and bust cycle, which had lingering effects well into the 1990s.
In the early 1970s, the town cushioned the impact of a coming recession, which occurred later in that decade, when it adopted a growth policy rooted in the economics of scarcity.
The town then had the foresight to reduce development density by one third through extensive land acquisitions and zoning density reductions across the entire community. Less development density lowered future available inventory, which in turn maintained higher values, sustained by the consumer’s desire for exclusivity.
Turning a blind eye: Some believe that the hard landing that the Vail business community is now experiencing is a direct result of the town not accurately calibrating or anticipating the ability of the community to absorb the amount of density, which was opened for development through the liberalization of the town’s zoning controls at the turn of the century.
The move from quality to quantity has caused some to question whether real estate development should remain a fundamental tenet of the community’s economic development strategy. Others ask, what other options are out there?
Local government initiative funded by private development: In the view of some, too much emphasis was placed upon generating revenues to finance controversial government initiatives through private development thereby avoiding voter scrutiny.
The initiatives addressed, among other things, labor force affordable housing and most recently, environmental sustainability. There are those who say these government initiatives are an impediment to breathing life back into the construction industry.
“More is better” being questioned: Some business interests assumed that the more commercial space that was built, the cheaper lease rates would become and the more sales taxes would flow into the town’s coffers.
Little, if any, consideration was given by officials to the downside implications of expanding inventories of commercial and residential properties beyond realistic levels of demand. This mindset remains operative.