A record number of downtown Aspen core commercial transactions took place in 2012 highlighting investor confidence in the long term growth and sustainability of Aspen real estate as well as the slowly improving overall state of the Aspen economy.
Highlights of downtown Aspen commercial market presentation by Randy Gold/Principal of Aspen Appraisal Group to Aspen Board of Realtors Jan 30, 2013 (Notes from presentation by Tim Estin)
- Vacancy rates in the best downtown locations are 1-2%
- 2012 downtown Aspen had strongest past 24 months activity ever. In 2012, there were (11) commercial sales…none of which were bought for income. Fundamentally, they represent land value. As example, the Gap and Bidwell Buildings plan for no residential component (penthouse condos) in their redevelopment plans submitted to the City of Aspen.
- Cap Rates: This is the foundation for understanding commercial real estate. It is Net Income divided by Sales Price equals Cap Rate. There are (3) main elements of assessing the value of income: quantity, quality and durability of income. The Volk and Elli’s Buildings sold at 4-5 % cap rates (a 1% move in the Cap Rate changes the value significantly. Most Aspen properties yield a 5-6% cap rate.)…The buyers saw solid appreciation going forward and the possibility to increase $ rents in the future. They didn’t buy for their current income but for future redevelopment possibilities.
- In 2011, the best downtown commercial spaces were renting at approx. $200 sq ft; in 2011, it was approx. $150 sq ft.
- For office space leases, the best location in Class-A spots have vastly improved; in lesser locations – Main Street, ObermeyerBuilding, North Mill St locations, there is 6-8% vacancy.
- Currently, there is a huge amount of construction going on downtown much tied to the new Aspen Art Museum on the corner of Hyman and Spring Streets scheduled for completion in late 2014. Plus a lot of new buildings are being planned in the next few years…very positive outlook for the entire market and area.
The surge of commercial sales at year end also can be viewed as an approval stamp for residential property ownership as most of Aspen commercial purchases are based on achieving long term investment goals and/or motivated as safe harbor investments. The significant availability of funds for both commercial and residential lending purposes by local banks and mortgage companies also indicates the degree to which they find the Aspen market an attractive business opportunity.
Link to article by Catherine Lutz, Feb. 22, 2013 ABJ
631 E. Main Street, Aspen. The old Stage 3 Three Movie Theatre building site has been redeveloped into a mixed use building with retail, offices and penthouse condominiums, one of which sold on 2/19/13 for $7.5M