As the Aspen commercial market heads into the final third of the year, the vacancy rate in retail and office space continues its slow decline. Until the recession of 2007 through 2009, Aspen landlords and tenants were used to a market with a very low vacancy rate of under 1%. As the recession took hold in 2007 through mid-2010, the vacancy in Aspen commercial space rose to 10% precipitating a sharp decline in commercial rents of roughly 30%. Between, 2009 and the end of 2012, the vacancy rate in Aspen commercial space declined to about 6.2%. Since early 2013, the overall vacancy rate for commercial space has declined to about 3.9% currently.
At this time, there are approximately 40 office and retail spaces for lease in one form or another in throughout downtown Aspen. The available commercial spaces are split roughly fifty-fifty between office and retail listings. The total space currently available for lease is about 41,466 square feet. Of this space, about 74%, or 30,603 square feet, is office space and about 26%, or 10,863 square feet, is retail or flex space. If you eliminate for lease space that is currently occupied and space that is outside the downtown retail core, there is 24,663 square feet of available office space and 8,042 square feet of available retail space resulting in a 3.1% commercial vacancy rate in the downtown retail core.
Since the beginning of the 2013, about 20 new office and retail commercial leases have been signed ranging in size from a few hundred square feet to about 2,500 square feet. These leases include a new bank location, several galleries, two ski shops, a shoe shore and few jewelry stores. There are also several leases pending on new spaces that are under construction in new buildings. In short, the Aspen commercial space market has been quite active since the beginning of 2013.
Of the spaces currently vacant, many have been on the market for extended periods of time, in some cases almost four years. This usually means there is either a functional problem with the space, the space is overpriced for its location or condition and/or the space is not being properly marketed. If you eliminate those vacant spaces that have been on the market for over a year, the overall commercial vacancy rate in downtown Aspen drops to under 1%. This may indicate that the Aspen commercial real estate market may be effectively close to full occupancy.
Over the next twelve to twenty four months, about 45,000 square feet of new commercial space currently under construction will be added to the marketplace. This represents about 4.2% increase in the overall commercial space available in downtown Aspen. Much of this new space is already committed to retail and office tenants. Even with this new space, the Aspen commercial market is clearly approaching its historic character as a zero vacancy market. Short of another major recession, this would point to a market where commercial rental rates should continue their healthy upward trend.
William Small, JD, CCIM is the Managing Director of Frias Commercial Real Estate. If you’re interested in receiving his monthly market reports, you can reach him at (970) 429-2419 or email him at firstname.lastname@example.org. You can also follow his Aspen real estate analysis by visiting his blog site at WilliamSmall.com.