2020 Colorado Mountain Outlook for Mountain Towns
– Part 1
Colorado Real Estate Journal Conference
October 24, 2019
Hyatt Regency Aurora-Denver Conference Center
Glen Weinberg – Managing Partner, Fairview Commercial Lending
Ron Wendler – Owner/Broker, Colorado Group Realty (Steamboat Springs)
Scott Dillard – Founder/Broker, Integrated Mountain Group (Aspen/Glenwood Springs)
Mike Budd, Broker, GRI, RSPS – Broker, Berkshire Hathaway Home Services Colorado Properties (Vail/Eagle/Beaver Creek)
Dennis Clauer, CRS, GRI, ABR – Broker / Owner, Real Estate of the Summit, Inc. (Summit County)
Jack Gerstein – Owner/Broker, Mountain LifeStyle Realty (Winter Park)
Good morning everyone, glad you could make it. I appreciate everyone coming. I’m a private real estate lender. As a private lender, we don’t require appraisals, so I personally look at every property. With that, I’ve become quite the expert on mountain real estate. So, mountain towns are drastically different than the Front Range communities, so in today’s panel, we are going to discuss resort market mountain town real estate, as I mentioned they’re very different not only because we get more snow. We have a lot less traffic, but they react differently to economic forces. For example, Aspen. Only 5% of the buyers in Aspen are from the Front Range with 46% coming from out of state. This differs from the Front Range where buyers are driven by local factors and economic factors. I’ve assembled a panel of what I think are leading experts in mountain communities to tell us a little bit about their individual market. So, the five speakers are Ron Wendler, Scott Dillard, Mike Budd, Dennis Clauer, Jack Gerstein. So with that, Ron, would you like to start?
Ron Wendler – Owner/Broker, Colorado Group Realty (Steamboat Springs):
The market in Steamboat Springs has been very good the last few years. Even though the Total Sales Volume was slightly down from 2018, transactions are down about 10% but price per transaction was up. Buyers and sellers alike have been happy. This has a lot to do with inventory, types of units and costs of construction. Materials and labor have been climbing over the last several years. Buyers seem to be finding a way to buy.
The average price of a home has dropped to $680,000 which is down from this time last year. Average days on market is 93 days compared to 44 for the state of Colorado. Average price of a home is $367 per foot. Although pricing is high, we are beginning to see more custom homes built. Upper end homes and spec homes have been selling well in the $1M – $1.7M range. Finding a home under $500,000 or $600,000 is virtually impossible in the Steamboat Springs market.
On the commercial side, sales of commercial properties except for a few very large transactions has been down because of inventory difficulties. I have a lot of investors that are looking for something that they can make a decent return on and local companies can occupy for their business use. Building new versus finding a property that will fit your use is a tough find in our market. If you’re a little flexible, one will always become available. You just have to be patient and loyal to your commercial broker for something will materialize. Cost to build an industrial type property (warehouse, live/work, commercial with offices/warehouse) you will find that the price per square foot are $175 per square foot for a shell and $80-$100 per square foot to finish it out. It’s all relevant to what your needs are. If you can find one for sale, I encourage you to take a strong look at it. Steamboat Springs needs new warehouse/live/work and industrial buildings. The market will catch up to the construction prices soon. There’s nothing we can do about it for now. Retail and office space is up also about 15%. $270,000 in 2018 to $375,000 YTD in 2019. Inventory is continuing to be absorbed.
Lease rates remain strong and finding the specific commercial space needed is difficult. Our CAP rates are floating around 7% but that depends on the property and the tenant. All in all Steamboat Springs market seems doing well.
Scott Dillard – Founder/Broker, Integrated Mountain Group (Aspen/Glenwood Springs):
I’m representing Integrated Mountain Properties and Glenwood Springs to Aspen market. I’ll paint a broader brush here because in Glenwood Springs you’re talking $480,000 average price for a home versus Aspen with the average price for home in the $4,500,000 range with 300 days on market. So each market is very much different. A lot is going on in Glenwood Springs. It’s growing more and more every year. It’s officially a year-round tourist destination. Restaurants, hotels and retail are all very strong. About 300 new apartments are going online this year including 180 units within Red Canyon Lofts development. Rental prices are 130% above what they initially were asking. It’s also not hurting the lower end market. People from Rifle and Silt who want to live in Glenwood Springs are moving and spending more on housing. Studios rentals average $1,800 per month and 2 bedroom apartments rents are averaging $2,200 per month. Monthly rents are much higher than what we’re used to.
Carbondale has always been anti-development and it is hard to do anything right now in that market. Average home price there is $615,000 and it’s hard to find anything in that market. The Town of Basalt is struggling mainly because of the Willis Town Center as its causing downtown Basalt real estate to struggle. As for Aspen, hotel and restaurants seem to be doing well. They’re doing more summer activities in Aspen as well. Residential real estate is struggling. Homes in the $10 million dollar plus range are not moving. A lot of baby boomers who wanted that huge family home for their kids and family to visit – their kids are not as excited about that. A lot of these homes are overbuilt and not selling. All in all, the Roaring Fork Valley is super strong in terms the economy and real estate sales. More than half of the homes we sold this year were to people from Summit County and the Front Range who are trying to get away from all the traffic. The number one priority they request is fast internet. If they can find it, they’re moving to the Roaring Fork Valley.
Mike Budd, Broker, GRI, RSPS – Broker, Berkshire Hathaway Home Services Colorado Properties (Vail/Eagle/Beaver Creek):
I’m representing Eagle County/Vail Valley market. About 84-88% of Eagle County is owned by government. That doesn’t give you a lot of land available for residential or commercial development. We have the largest population in Western Colorado at 55,000 residents. Our average wage is $47,000 per year, compared $63,000 for the State of Colorado overall. This has to do with the number of hospitality and recreation jobs in Eagle County which represent 49% of all jobs here. Aspen is the only market that has a higher income. The mountain towns have a different dynamic.
The peak year for us in Vail/Eagle County was 2007. We hit the $2,930,760,000 mark in real estate sales with about 90% residential and 10% commercial. That dropped in 2009 to $895,000. Since then, we’ve been growing at a gradual rate and moving back towards the $2,000,000,000 range. Based on the numbers in September 2019, we’ll be right around $2.1 billion in real estate sales by the end of the year. So, we’re healthy but we have some interesting dynamics in our market. One of the main ones is 75% of the transactions of residential homes in Eagle Valley were under $1,000,000. Our housing inventory is extraordinarily low for homes in that price range. We have a bigger basis in terms of jobs (31,000 jobs in the Eagle Valley) with 55% of homes being purchased by local buyers, and another 16% or real estate transactions coming from people moving from the Front Range. People moving from out of state account for 32% of our transactions. 5 states have a huge chunk of that including Texas, Florida, California, Illinois and Missouri. International is worth about 1% of all real estate transactions in our market.
Vail and Eagle County is a very different market. We’ve got commercial share of the market which is about 5-10%. We’ve also had a couple big commercial real estate sales in the last few years with several hotels selling for $125-$145M. Lease rates in the Vail are way up. Prime retail space goes for up to $120 per square foot. Secondary retail space is around $65 per square foot. In the Edwards area, retail space goes for $15-25 per square foot range. And in Eagle/Gypsum, retail space goes for $6-$15 per square foot. It’s a pretty diverse mix. For the first time in a decade, we have lot of development projects in the pipeline either in the initial submital or already under construction. The mass majority of these are referred to as local housing, however the prices can throw you off. In the Vail to Edwards area, we have 11 projects that are in some form of the development process. And in that, there are 2 new concepts which are dorm concepts. In total, there are 2270 units under development in Vail to Edwards market. If you then go down to Eagle and Dotsero markets, we have another 9 development projects in process. A couple of these projects are contentious and may or may not get through the process. They total 3060 units and if you total it all up, we’ve got 5330 units potentially in the pipeline. We’re not sure if it’s all these projects are going to happen.
Dennis Clauer, CRS, GRI, ABR – Broker / Owner, Real Estate of the Summit, Inc. (Summit County):
Good afternoon, my office is in Breckenridge and I’ve lived in Summit County for 38 years and have been a realtor/broker for the past 31 years in Summit County. iBuyer companies are approaching 15% share of real estate sales in our markets right now. In general, our commercial real estate sales are under 2% in terms of vacancy rates. Throughout all Summit County there are different pockets in the market.
What’s driving all the investment money? Some of it is specific to Summit County. The amount of money (net worth) has gone up to over 1 trillion dollars and is driving the appetite for resort real estate in the area. 82% of the land in Summit County is owned by BLM or National Forest Service. People who want to buy real estate in Summit County will find space here to be very limited, so this is driving up the value. It’s amazing how many people will buy a home for 7 figures or more. Last year, 935,000 Epic passes were sold worldwide and 335,000 Icon passes were sold and I expect those numbers to grow. People want to buy real estate in Summit County because it is small-knit community and people can afford to live here and be a part of this great community. Our average residential price has gone up 17.5% since last year. We’re at $1,350,000 for an average single-family home in Summit County. That is a huge jump. The condominium market did not fare quite as well, but we saw a 6% annual increase year to date.
Silverthorne is the hottest spot in Summit County real estate market and we’re going to see about 450 properties close this year. There’s a tremendous amount of inventory as well. We also have a significant amount of employee housing. To date, we have 2,035 unoccupied residences. That’s a pretty big number. We feel fortunate that we have more land for development and it was preserved. The towns in Summit County have been proactive in providing as much housing as we can. Commercially, we have very few changes, to be frank. We don’t have any brokers that make a living full-time selling commercial real estate in Summit County.
Jack Gerstein – Owner/Broker, Mountain LifeStyle Realty (Winter Park):
Winter Park Ski Resort was acquired by Otero. A few years ago they casually dropped $20,000,000 in the ski area which is the most money I’ve seen spent in the last 20 years at Winter Park. The Icon Pass has been a real benefit since it is sold worldwide and attracts new skiers. The affordability of Winter Park is a secret that’s starting to get out to resort real estate buyers. The average price for condos is just under $400,000.
As for development, there are many big developers trying to get their foot into the market. Along Hwy 40 corridor, there isn’t any commercial space available. Winter Park is going to be the Aspen of the area and Granby will be similar to the Carbondale market in relation to Aspen. Granby has a lot of development going on at the moment. They’re now in the midst of developing 300 acres of what is a glorified RV campground. It’s the only RV park on the west side of Rocky Mountain National Park. Frasier now has 4 breweries and a distillery with another in development. Granby is experiencing a 36% increase in sales in residential sales and 30% increase in condo sales. Commercially in Granby, there are new O’Reilly Auto Parts and Carquest stores. On the south side of town, they are going to have a combination of about 75,000 square feet of commercial real estate developed today in Winter Park. Frazier has 60,000 square feet of commercial development coming up. The demand on that is going to be strong. It’s a developing town. We’re very family oriented and we’re a very strong community. Commercial space for retail office lands between $15 and $20 per square foot. For warehouse space, it’s running $15-$20 a square foot. There’s virtually no land available for commercial development. There are 200 units of Employee housing. We’re experiencing a shortage of affordable housing and therefore employees are having a hard time finding a place to live.
So, I’ll wrap this up. 5 of the top 10 resort markets in the US are in Colorado and we’re all represented here on state. Real estate is going to be desirable in each of these markets and even if we hit a recession, whenever that may be, all of these markets are going to outperform the general economy. One of the biggest reasons is that people pay in cash.