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— Office Properties Quarterly — October 2015
Market Update
W
ith undercurrents of
change occurring in the
downtown Aspen office
space market, results will
not be clear for a while.
There are few existing first-class
office properties, and new buildings
are now coming on line. Because of
the upcoming demolition of a build-
ing that sold earlier this year, some
local government departments are
losing their leased office space.
Concurrently, there is a move-
ment toward updating, expanding
or relocating all city and county
government offices. It is still being
determined whether these gov-
ernment office changes should be
accomplished by remodeling exist-
ing facilities, constructing new
municipal buildings, or some combi-
nation of both. The city and county
have started to lease office spaces to
house some functions temporarily
(for a couple of years) while expan-
sion, remodeling or construction is
in process. For example, the police
department leased auxiliary office
space because it was bursting at the
seams already.
While this is sorted out by the
forces of supply and demand over
the next couple of years, our usual
market forces are operating too.
Aspen is famous for shopping as
well as skiing, hiking, biking, culture,
music, art, history, glamor and natu-
ral beauty. As Aspen commercial real
estate brokers, much of the leasing
work is seasonally focused on long-
term leases for downtown retail
including luxury tenants, such as
Dolce & Gabbana and Louis Vuitton,
popular local shops, such as Kate-
baby and Miller
Sports, and many
art galleries. These
prime retail leases
grab headlines at
very high rents in
the range of $100
to $200 per square
foot.
All the vibrant
aspects of our
“little mountain
town” would not
exist without the
quiet year-round
support of business
and government
functions that keep
Aspen alive. Office space is required
for attorneys, architects, appraisers,
consultants, doctors and dentists,
media, banks and (of course) many
real estate brokers. Aspen thrives as
a sophisticated small city with real-
world professionals and businesses
in addition to the more visible resort
attractions.
While leasing of prime retail space
is fun and fast-paced (with dead-
lines for stores to open on time),
Aspen office leasing is unpredictable
and hardly seasonal. The rents are
more static and somewhat loca-
tion driven. Aspen lease rates are
quoted as triple net rents and ten-
ants also pay their prorata share of
taxes, insurance, utilities, common
area maintenance and management
for the building. Landlords rarely
provide much in the way of tenant
improvements or allowances.
Current office space rents for new
leases generally vary from triple
net $20 per sf up to $65 per sf with
spaces south of Main Street (going
toward the Gondola and ski slopes)
enjoying higher demand with higher
rents overall. Office spaces with
amenities such as outdoor decks,
views, elevators, A/C, high ceilings,
skylights and private bathrooms
achieve the highest rents.
Unlike many big city offices,
Aspen has many funky office spaces
within older or historic buildings in
great downtown locations with few
amenities. Aspen offices have no
building security guards, few park-
ing lots and fewer underground
parking garages. Parking spaces are
scarce overall because everyone is
encouraged to walk, bike, bus or
carpool to work. Tenants for Aspen’s
smaller office spaces are picky and
often choose to work at home rather
than lease a space that is not in the
desired block, the right configuration
or at “affordable” monthly rent.
In recent years, more office units
have become available for sale and
have sold well. These vary in size
from about 300 sf to 3,000 sf with
prices around $1,000 per sf depend-
ing on attributes. Sales of office
units to end users mostly occur at
recently remodeled or redeveloped
downtown properties. Older condo-
miniumized office units rarely have
resold and are more likely to be
owned by investors who lease them
out to office tenants.
Vacancies always are higher
for office spaces compared with
Aspen’s extremely low vacancy
rates for prime retail space. Aspen
office spaces face competition from
more affordable “down valley” lease
rates with the added attraction of a
shorter commute for some employ-
ees. Only 3 miles from downtown,
the Aspen Highlands ski-area base
village successfully converted most
of the commercial space from retail
to office uses. Some Aspen profes-
sionals have relocated to upscale
and affordable ski-in/ski-out offices
there, while the huge and ongoing
expansion of the Aspen Valley Hos-
pital within 2 miles from downtown
absorbed doctors and medical offic-
es into its beautiful new facilities.
These various market forces are
working together and against each
other to sustain a strong market for
office space in downtown Aspen
without big changes in lease rates
anytime soon, while the constant
presence of skis and bikes in offices
still confirms the commitment
to Aspen’s work-hard/play-hard
lifestyle.
s
Karen
Setterfield,
MBA,
CCIM, CNE
President and
broker, Setterfield &
Bright, Aspen
Only 3 miles from
downtown, the
Aspen Highlands ski-
area base village
successfully converted
most of the commercial
space from retail to
office uses.
