Real Estate: Aspen’s downtown core is on the mend
July 11, 2011
Over the past three years, I’ve reported on the changing landscape of Aspen’s retail and office market as the economy slowed after the boom years of 2005, 2006 and 2007. From 2008 through most of 2010, Aspen’s downtown commercial core felt the negative effects of the Great Recession with declining retail and restaurant activity, increasing vacancies and a significant decline in rental rates for commercial spaces. From 2007 through mid-2010, the vacancy rate of Aspen core commercial space rose from under 1 percent to a peak in late summer of 2010 of about 10 percent.
At the same time, commercial rental rates declined about 30 percent to 50 percent or more depending on the location of the space. Landlords saw property values decline 50 percent or more as a result of the dramatic drop in rental rates and a substantial increase in investment capitalization rates. Despite the difficulty of the last three years, the signs of improvement are very apparent.
The City of Aspen has reported steadily improving sales tax receipts throughout most of the past year; and most retailers and restaurateurs report a better winter season this year versus last. In addition, the overall prime vacancy rate (not including space available for sublease) of commercial retail and office space in the Aspen downtown core has declined from about 9.1 percent as of July 2010 to about 6.2 percent currently.
A closer look at the numbers reveals some interesting trends. In July 2010, there were 44 retail spaces and 18 office spaces available for lease with another nine retail spaces and three office spaces available for sublease for a total of 85,115 square feet of available commercial space.
Today there are about 36 retail spaces and 19 office spaces for lease directly from the landlord, and only about five retail and office spaces available as subleases for a total of 62,886 square feet of available space, a roughly 39 percent reduction in total available space. Besides the overall drop in available space to lease, there was a significant reduction in the retail space for lease (about 42 percent) whereas there was a small decline in office space for lease (about 24 percent). The substantial drop in sublease space from about 18,200 square feet in July 2010 to about 5,100 square feet currently would indicate that much of the shrinkage of existing businesses has taken place.
All these factors seem to indicate that the worst of the impact on the Aspen commercial core from the Great Recession is likely behind us, and the local retail and office economies have stabilized. Despite the consolidation and slow economic recovery, close to 80 new retail and office leases were signed in the downtown Aspen in the past year. Interestingly, most of these new leases were local businesses moving to reduce costs, or start-ups, with only a handful of tenants coming from outside the Aspen area.
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Of the few national and international retailers opening stores in Aspen, virtually all are smaller boutique chains. Although the past three years have been painful for both landlords and tenants, Aspen’s retail core has survived the Great Recession and a rebirth is taking place with a lot of fresh new retail and restaurant spaces.
William Small, JC,CCIM specializes in working with investors, developers and tenants looking for opportunities in resort and second home markets with a particular emphasis in the Aspen-Snowmass area. As Managing Director of Frias Commercial Real Estate, he has over 25 years of experience in all aspects of commercial-investment real estate from major cities as Washington, DC and Denver to smaller resort communities.