Commercial property market strengthens
By the numbers
1.6 percent: Commercial vacancy rate in Vail Village and Lionshead.
2.7 percent: Vacancy rate in Avon and Edwards.
5 percent: Vacancy rate in Eagle and Gypsum.
$120 million: Approximate value of roughly 600 building permits issued in Eagle County in 2015.
Source: NAI Mountain Commercial
EAGLE COUNTY — As Eagle County’s economy has improved during the past few years, the demand for commercial real estate — including storefronts, storage and offices — has also improved.
A recent report from NAI Mountain Commercial, which specializes in commercial real estate sales, shows an improving market for that space, especially in the middle and western parts of the Vail Valley. Of course, that’s where the opportunity is.
Erich Schmidt, a vice president of brokerage at NAI, said that commercial space in Vail Village and Lionshead Village has always been hard to come by, even during the financial slump that hit the valley in earnest in 2009.
While the overall vacancy rate in Vail is a tight 1.6 percent, the NAI report shows some growth in lease rates for retail space outside the “prime” areas in Lionshead Village. In fact, lease rates for all areas of Vail Village and Lionshead Village have now met or surpassed the peaks seen in 2007.
But, Schmidt said, while lease rates are rising, they still need to be realistic.
“We want rates to be in line with sales,” Schmidt said. “Now that sales are turning around, that gives us the ability to (raise rents).”
While there’s always some turnover in Vail’s resort areas, the real growth in occupancy is coming from Avon west. Vacancy rates have fallen, and, as in Vail, lease rates have started to pick up, although in most cases, rates are still well off their 2007 peaks.
After some recovery since bottoming out in 2010, rental rates in Eagle and Gypsum have been essentially flat since 2011, averaging between about $11 and about $13 per square foot.
That stability in rates has driven some growth, Schmidt said. He pointed in particular to Caddis Corner, a small shopping center near Costco in Gypsum.
That complex has had a lot of vacancies throughout the years, Schmidt said, but is virtually rented-out now, anchored by longtime tenant Heidi’s Deli at the south end and now bookended by Domino’s Pizza on the north.
The demand for space in the lower valley is focused in large part on light industrial or flex space that allows for retail, office and other uses, Schmidt said. Subcontractors are busy now, and need space.
Longtime area developer Rick Mueller owns the Edwards Crossing commercial building. In an email, Mueller wrote that he’s seen a general overall improvement in the attitudes of people who might need commercial space.
“People are struggling less and some are thinking of expanding,” he wrote. “That’s a positive sign.”
While attitudes are improving, Mueller wrote that the business model for commercial property is also changing, and the market needs to change with it, to serve customers in both the younger millennial generation and the aging Baby Boom cohort.
To serve an aging market — and their families — Schmidt said the growing medical-services business in the valley is a positive development. An under-construction building in Avon will add nearly 50,000 square feet of space, much of which has already been leased to local physicians’ group Colorado Mountain Medical and to Centura Health, the state’s largest health services provider. Kaiser Permanente, the state’s largest health insurance company, also last year leased 6,000 square feet of space in Edwards.
“That helps the community,” Schmidt said. “It will help drive insurance premiums down because of competition.” Perhaps even better, Schmidt said the jobs associated with those facilities are good-paying white collar jobs.
That could drive even more growth as those people need and want goods and services.
Mueller, who has built both commercial and residential projects in the valley, said with no new housing built in the last several years, it’s going to take a few more years before either residential or commercial growth takes hold again.
For the immediate future, though, Schmidt said he expects the steady growth to continue, despite some current volatility in some sectors of the national economy.
“We’ll see what happens on the affordable housing front,” Schmidt said. “We’ll see if (the valley) can get something started with that.”
Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, firstname.lastname@example.org and @scottnmiller.