Business Monday: A mixed outlook for Aspen’s commercial real estate arena
With last week’s $28 million sale of the downtown building developed by Aspen Core Ventures and a bevy of redevelopment projects set to take flight this year, real estate appraiser Randy Gold believes somes shifts are coming for the commercial landscape.
“It’s interesting to me what will happen with the vacancy and rental rates this year,” Gold told an audience at the St. Regis Aspen Resort as part of the last week’s Aspen Board of Realtors 2018 Annual Market Update Luncheon.
Prime retail space availability is plenty scarce, with a vacancy rate of 1 percent, Gold noted. The vacancy for non-prime real estate hovers between 2 and 4 percent. Office space in both downtown and its outskirts has between a 3 percent and 5 percent vacancy rate.
Rental rates currently are averaging $100 to $175 per square foot for retail, with one leased rate over $200 last year, Gold said, noting that does not include triple-net, which are maintenance costs the landlord passes down to the tenant.
The retail vacancy rate for prime space, as low as it is, chiefly has been due to the mostly vacant 20,000-square-foot building at 535 E. Hyman Ave., which Aspen Core Ventures built in 2015 and sold last week to a group of Dallas-based investors who have a strong retail track record in Texas.
“With the new ownership,” Gold said, “the street level is spoken for and they’re getting close on their office space … and in the next few months we’re going to see that space come to life.”
Stephen Summers, the operator-manager of the building’s new owner, CT018 Aspen LLC partnership, told The Aspen Times last week that the push is on to bring tenants to four of six retail units currently available.
Developer Mark Hunt, the face behind the ownership of roughly $100 million worth of Aspen commercial property, also is poised to break ground this year, Gold said. That includes the 16-room boutique hotel at the old Crystal Palace building on East Hyman Avenue as well as the demolition of the former Aspen Daily News building on East Hopkins Avenue. Hunt also could begin redevelopment of the Buckhorn Arms building on East Cooper Avenue for his economy hotel, as well as the Conoco service station on Main Street, which he plans to demolish in favor of a new commercial building.
“All of this could be moving forward this year,” Gold said.
Meanwhile, sales of commercial buildings in Aspen totaled $76 million last year, $39 million in 2016, $89 million in 2015, $55 million in 2014 and $49 million in 2013, Gold said.
Of the 20 commercial property acquisitions last year, six were for buildings and 14 for commercial condominiums and parking space. The $23 million sale of the Meyer Business Building in December was the most expensive commercial transaction last year.
The capitalization rate — which essentially is return on investment — for the Meyer building was 2 percent, which Gold said is “really kind of comical.”
The new owners, 447 East Cooper Avenue Holdings LLC, is a billionaire family that “were not buying it for income,” Gold said. “They really are just making a long-term investment in Aspen and to control their destiny, and they were able to do that for only $23 million.”
The average cap rate in Aspen currently is about 4.5 percent, Gold said.
“In 2016 and 2017 our characterization of the Aspen commercial market is that it is stable and there is muted enthusiasm,” he said. “The vibrant energy the last two years unquestionably has been tamped down by two things: the first is there hasn’t really been much available, and second, you’ll remember the city put a moratorium on downtown development in February 2016 and that legislation (the revised land-use code) was all enacted in 2017.”
The City Council’s message with the tighter development restrictions, Gold said, is that “Aspen effectively is a no-growth town for commercial developers.”
The differences between Pitkin County Sheriff Joe DiSalvo and Michael Buglione — whether professional, political or personal — were on full display at Thursday’s candidate debate held in Aspen.