Vail Valley commercial property is in pretty short supply

EAGLE COUNTY — We all know Vail is an economic powerhouse. If you need proof, just look at the retail vacancy rate in town: .45 percent.

That’s right, less than .5 percent of Vail’s retail space was vacant in 2018, according to a report from NAI Mountain Commercial. Vacancies are low in the rest of the valley as well: 2.6 percent for Eagle-Vail, Avon, Beaver Creek and Edwards and 2.2 percent for Eagle and Gypsum.

The rate in Denver was 5.2 percent in 2018.

The Vail vacancy rate is also driving rent increases in town. While commercial rent in the rest of the valley is still lower than the peaks seen in 2007, rent in Vail has for the past few years surpassed that high-water mark from the previous decade.

‘No vacancy’

“There’s virtually no vacancy (in Vail),” NAI Mountain Commercial Vice President and Managing Broker Erich Schmidt said. In fact, he said, businesses rarely move out of prime spots in Vail. When that happens, someone new often comes in before anyone can hang a “for rent” sign.

And rental rates for prime space in Vail Village can approach $120 per square foot. In Lionshead, prime space can be as high as $65 per square foot.

The story is different in the rest of the valley. While vacancy rates are low, there are spaces lingering on the market.

Avon, in particular, has some significant spaces available, including the site of the former Montana’s and Outback restaurants, as well as the space formerly occupied by Office Depot.

Schmidt said those larger spaces will be hard to fill.

“When we get above 2,000 to 2,500 square feet … national retailers aren’t really expanding, and when they are, they’re expanding in metropolitan areas,” Schmidt said.

Smaller spaces are also difficult, due to factors including the changing retail environment, the cost of space and difficulty finding employees.

Vail Valley Partnership CEO Chris Romer said members of the regional chamber of commerce are telling him that they’re mostly standing pat in the spaces they have now.

Leasing’s picking up

But, Schmidt said, his firm has seen an uptick in leasing interest and activity in the past few weeks.

“Leasing always picks up as we go to spring — especially in a strong ski year,” Schmidt said. “We’ve seen a pickup in activity, especially in Traer Creek Plaza (in Avon), both for retail and office space.”

Interest in Edwards continues to be strong, but Schmidt said there isn’t a lot of space available.

The other side of the retail coin is that UPS has expanded its operation in Gypsum, and now holds about 40,000 square feet of warehouse space near the Eagle County Regional Airport.

Other warehouse and commercial space is also being leased or sold in the western part of the valley.

Those businesses are often looking for space with tall garage doors. Some new building is taking place in those areas, but not a lot, Schmidt said.

The relative lack of available space, as well as the high cost of construction, also seems to be driving prices when a commercial property comes up for sale. Schmidt said another driver is businesses relocating from Denver or the Front Range to the Western Slope.

The biggest of those sales in 2018 was the sale of the West Vail Mall. That sale — for $14 million — closed in the fourth quarter of the year. A pair of sales — of the separately-sold A and B buildings of the Northstar Center in Edwards, also topped $14 million. Another sale, of a roughly 500 square foot retail space in the Lodge at Vail, topped $1 million. That’s about $2,000 per square foot. According to data from Land Title Guarantee Company, 2018’s highest price per square foot for residential property was a unit in Solaris that sold for $3,095 per square foot.

The cost to rent, buy or build, combined with an employee shortage, is crimping potential economic growth in the valley, Romer said.

“It’s a perfect storm of challenges in an economy that’s overall doing pretty well,” he said.

Vail Daily Business Editor Scott Miller can be reached at smiller@vaildaily.com or 970-748-2930.

via:: Vail Daily