There’s a lot of fascinating stuff going on these days with the commercial and high-end segments of the local real estate market, says longtime local appraiser Randy Gold of Aspen Appraisal Group. Randy, who is as enthusiastic as he is well versed on these topics, has the added challenge of summarizing them in the 20-30 minutes he has allotted to him at the 2014 Aspen/Snowmass State of the Real Estate and Tourism Economy Symposium, on August 14.
It’s something he plans to do with lots of “cool graphics,” focusing a little bit on history but more on “what we think is happening now and moving forward,” says Randy, who gave The Aspen Skinny a preview tease of his Symposium presentation.
In terms of the commercial market, all eyes are on Aspen’s retail core, which is undergoing a transformation due to a slew of new buildings and a buying spree in the last three years by Chicago developer Mark Hunt.
“The commercial core is expanding,” says Randy, pointing to all the new buildings on Spring Street (anchored by the recently opened Aspen Art Museum) and other activity on what used to be considered the periphery of downtown. “But it remains to be seen if retail patterns are going to shift to support the expanded commercial core.”
Randy explained that while people like to talk about record-high retail rents — several leases are being written for $150 to $225 per square foot — downtown rents in general “are not uniform. They’re really choppy, location sensitive and building sensitive.”
As such, locations are sometimes referred to on a percentage scale. So the 100% location, for example, have traditionally been found on the L-shape formed by about two blocks of Galena Street and one to two blocks of Cooper Avenue. The block of Hunter Street closest to the Gondola Plaza and part of Durant Avenue near there comprise 90-95% locations, says Randy, as do the Cooper and Hyman malls. Restaurant Row, on Hopkins between Mill and Monarch, is considered an 80% location, and “the rest is really B-location stuff,” says Randy.
Even within these somewhat well defined areas, however, rents vary by as much as $75 to $200 per square foot within one block, Randy notes. And even as vacancy rates are at an all-time low, aberrations exist. The old Roots space, for example, on the mall portion of Galena just two doors south of the prime Galena/Cooper corner, has been vacant for six months.
A lot of the downtown changes are happening in the previously peripheral areas of downtown. The Muse and Aspen Core buildings, both large mixed-use buildings topped by penthouses, are on Hyman Avenue east of the prime retail core. Hunt, who with his investors has spent some $80 million on downtown buildings since 2010, has within his portfolio the Buckhorn Arms (or Johnny McGuire’s) Building by City Market, a gas station on Main Street, and the Aspen Daily News building on east Hopkins. Of the dozen properties he has acquired, only one — the Aspen 1 Building at Galena and Hopkins — has been redeveloped. And aside from the Bidwell Building at Cooper and Galena, none have redevelopment plans in the works.
“He’s bold, he’s got a long-term plan, and he’s clearly in it for the long haul,” says Randy, who thinks Hunt probably paid too much money for most of his buildings based on today’s values. “But in the long run, he knows the fundamentals of the Aspen market are incredibly strong, and he’s betting on that. It seems like a pretty smart move to me.”
Randy, who has further thoughts on what Hunt might do with his properties, will discuss the potential and implications of downtown expansion in more detail at the Symposium, as well as how the current climate of virtually no vacancy, low capitalization rates, and really strong demand might affect things.
He will also delve into some analysis of the high-end residential market, which has been quite strong since 2011, when 19 sales above $10 million were recorded in the Aspen area. With ten such sales closed or under contract so far in 2014, this year may end up close to 2011, says Randy.
But while “the $10 million plus market is continuing to strengthen,” he says, other factors that might play out could affect what happens, such as the dwindling inventory of quality high-end homes and how developers might respond to that.
How national and international events bear on the Aspen/Snowmass market is another potential factor. The local market has become increasingly tied to the ups and downs of Wall Street, which is influenced by international dynamics as well as domestic ones.
“What does the Putin/Ukraine situation do to our stock market?” Randy asks. Wall Street has been at an all-time high for weeks, but if [the Ukraine situation] creates nervousness on Wall Street, that will have a ripple effect in other areas. As we’re more connected in general with other people, the world is kind of flat in a lot of ways.”
The main thing to remember, says Randy, who has 35 years of local experience, is that “real estate is cyclical, it always has been, and it always will be.” That means that Aspen is probably headed for another downturn, probably triggered by something, in 2017 or 2018.
To hear more on this and other real estate trends and forecasts, click here to purchase your tickets to the 2014 Aspen/Snowmass State of the Real Estate and Tourism Economy Symposium. Joining Randy in analyzing the local market will be Michael Adams, BJ Adams and Company president and chief number cruncher. The keynote speaker is Mark Harmon, managing partner and founder of Auberge Resorts, which includes among its collection of exceptional properties Aspen’s Hotel Jerome.