Retailers cash in as lease rates drop in Aspen
ASPEN — Customers enjoying the moving-sale prices at Kali’s Denim in downtown Aspen can thank the sharp rent reductions landlords are offering retailers this spring.
One of those reductions will let the Cooper Avenue store trade up from a basement-level space to a more prominent, across-the-street location costing little more, store manager Kimberly Jarrell said. Kali’s will be paying $110 a square foot for its new spot.
“Last year it was 200-something a square foot over there,” Jarrell said.
The changing commercial leasing market in Aspen’s downtown shows that even this high-end resort isn’t immune to the global recession’s economic realities. Closures of some restaurants and other businesses have helped drive up vacancy rates and increase the bargaining power for tenants, with some tenants using the opportunity to shift to cheaper or more favorable downtown locations.
“They’re taking advantage of the lower rents, for sure,” said Aspen native Justin Alderfer, as he strolled the city’s downtown pedestrian mall and surveyed the moving signs in front of some stores.
Bill Small, an Aspen commercial broker, said the downtown vacancy rate was “basically 0” percent in 2007.
“Then things kind of deteriorated in 2008-2009,” he said.
The deterioration was reflected in the city’s sales tax revenue, which fell 14 percent last year. Lodging tax collections showed an even sharper decline of 25 percent, and the construction industry has been hard-hit.
Contractor Randy Neal Davis, pausing while remodeling a space to make way for a downtown tenant he declined to identify, saw the downturn firsthand. He said he moved to the Aspen area three years ago to escape the slowdown in Florida.
“I came out here because business was booming. … Then it hit here,” he said of the recession.
Small said the downtown commercial vacancy rate had risen to 7 percent or more by last fall, and lease rates are now down around 30 to 50 percent, depending on the location.
Stephen Marcus, a downtown commercial property owner, believes rent reductions have been smaller, generally around 20 percent. Those who bought properties during the boom time may have less ability to drop prices, he said.
“If you owned a building for a long time, you can be a little more flexible,” Marcus said.
Small said that despite the slowdown, a lot of leasing activity is occurring. He said he has leased about 13 locations since November. Marcus said he has filled one of three vacancies he has, and he is about to fill a second open spot.
“We’re starting to look a little better,” he said.
Marcus said the lease-rate drops are providing an opportunity for “new people looking to do new things” in downtown locations.
Small said the situation provides a chance for locals to improve the economics of their business, or to start up businesses. There has been little recent interest in commercial spaces from national and international brands, although that may change if the economy starts to improve, he said.
Some of the startups in the works include a Papa John’s Pizza and a new restaurant being planned for the historic Red Onion building. On the flip side, the city has seen the closures of establishments such as Ruth’s Chris Steak House and the Steak Pit and the co-owned Double Dog pub.
For Steak Pit/Double Dog owners Bob and Cindy Glowacki, the drop in lease rates came too late to do them any good. Bob Glowacki said by the time their landlords showed a willingness to be flexible on rent, he and his wife already had borrowed too much money and were no longer comfortable staying in business.
He said they were spending $24,000 a month for a 6,000-square-foot, basement space.
Glowacki said he is glad to see property owners starting to reduce rents after having charged “top dollar for every space in Aspen.”
“Aspen can no longer afford to pay top dollar. It’s local people who are trying to make a living,” he said.