A commercial for commercial investment property

I have been intrigued for some time by activity in the commercial real estate market in the valley as a whole.

While commercial space in downtown Aspen gets the attention and publicity, there is a very interesting commercial market in the entire valley. The truth is, the values of commercial space in Aspen have become such that they make no sense to an investor. The purchase prices are astronomical and there is no return, even over the long term. Who pays these prices? It is hard to tell where the money comes from but I suspect this is just a safe place to park money regardless of the return.

In my opinion, there is still investment opportunity in the valley outside of Aspen. Our county commissioners have publicly stated that there will not be any more commercial development allowed in the Hwy 82 corridor, so immediately, we know supply is fixed. As our economy continues to thrive, service businesses have increased the demand for commercial industrial space. Basically that means garage, warehouse, shop and office space. Recognizing that these businesses are driven by Aspen’s second homeowner market, the pressure for commercial space will continue. Lack of inventory is an issue but prices are still such that an investor can find a cap rate of 5 to 10%. Many of these opportunities are smaller buildings which may not have the sex appeal of a large investment property but I think there is a strong opportunity to buy several and build a nice portfolio.

Here is the catch, you have to be ready to move when the opportunity presents. A case in point is an industrial building in Carbondale that has been on the market for three and a half years listed for $1.5mm. 6200 sq ft with 5 tenants in place, clearly it was overpriced. Two weeks ago, the price was lowered to an appropriate $800k and it went under contract within a week.

Apparently, I am not the only one bullish on valley commercial.

Let me know if this idea has appeal as I am constantly on the search.