BLOG NOTE: This blog post is from 2011. To view our most recent blog posts, click here.
Over the past year, the Aspen commercial real estate market has stabilized and started recovering from the shock of the Great Recession. The City of Aspen has reported a second year of steadily improving sales tax receipts with 2011 receipts roughly 7 percent ahead of 2010.
Aspen is also seeing a return of major national retail brands as a number of new stores opened in time for the winter season. As the national economy steadily improves, the local Aspen economy seems to be improving as well and that generally means a stronger commercial real estate market.
The Aspen commercial real estate market peaked in the fall of 2007 as retail rental rates exceed $200 per square for the very best retail locations; and the vacancy rates for both retail and office space hovered close to zero. However, from 2008 through 2010, Aspen’s downtown was impacted significantly by the negative effects of the Great Recession.
Between 2008 and 2010, the vacancy rate rose from under one percent to over 10 percent. At the same time, commercial rental rates declined about 30 percent to 50 percent. However, in the past 24 months, the downtown commercial real estate environment has steadily improved.
When the vacancy rate peaked at 10 percent in the summer of 2010, rents subsequently declined. Many tenants with leases up for renewal took advantage of the favorable situation by either negotiating new leases in their current locations, or in many cases, relocated to better and cheaper spaces.
From the summer of 2010 through the summer of 2011, roughly 80 new and renewed commercial leases were negotiated in downtown Aspen. As a result, the overall vacancy rate declined to about 6.2 percent by the summer of 2011.
Over the past six months, the overall vacancy rate for commercial space in downtown Aspen has hovered around 6.2 percent with about 66,000 square feet of space available for lease. When you segment the market into submarkets, an interesting picture emerges.
In the downtown retail core, the market area between Main Street and the base of Aspen Mountain, the vacancy drops to only 3.6 percent.
The real remaining weakness in the downtown commercial real estate market is the area along Main Street and north along Mill Street. These areas consist of mainly office and quasi retail-light industrial space where there currently exists about 27,000 square feet of vacant space or roughly 40 percent of all the vacant commercial space in downtown Aspen.
In addition to the declining vacancy rate, Aspen is starting to see the return of major national and international brand retailers. In the past four months, several major brands have signed long-term leases in prime locations including La Martina, Lululemon Athletica and Free People, a fully owned subsidiary of Urban Outfitters that signed a 10-year lease for 1,800 square feet in the Isis Building.
These leases are a positive signal that Aspen is again being viewed by major brands as a “must see” location. The rents in downtown Aspen are also starting to firm up after three years of decline. For most prime A+ locations, landlords are asking and getting $125 to $145 per square foot, with a couple of leases under negotiation reportedly at rental rates in excess of the $150 per square foot mark. As vacancy rates continuing to decline, it’s likely asking rental rates for retail tenants will be significantly higher in the spring and summer of 2012. Assuming the national economy continues its slow recovery, expect the Aspen commercial real estate market to continue is steady improvement.