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‘Buy dirt’ ringing true for commercial real estate investors

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Real estate broker Chris Paoli has developed a complex of nine light industrial warehouses named Marble Hill Condominiums along Elk River Road at the northern end of Steamboat Springs. According to the real estate agent, this type of light industrial warehouse space with less than 2,000 square feet per unit is in high demand.
Chris Paoli/Photo Courtesy

Any commercial real estate investor looking at Steamboat Springs must have heeded the old advice to ‘buy the soil’. Or maybe a recent hit with these lyrics he must have been paying attention to country songs.

Many investors have purchased vacant lots for development and vacant lots for commercial redevelopment in the past few years, leaving little commercial zone space available within the city limits, according to Steamboat commercial realtors. Is not …

“There is no dirt,” said Chris Sias, a broker at Steamboat Paoli Group.

Brokers point out that top areas for recent commercial purchases include Ski Time Square Drive along the northern edge of Steamboat Resort’s base area and the Copper Ridge Light Industry area along Elk River Road north of Steamboat. increase.

millions of dollars Steamboat Resort Capital Improvement by Alterra Mountain Co. Spur purchases at Ski Time Square Drive.

“People thought things would come back in the mountains,” Sias noted, which may have had a positive domino effect on local commercial sales.

Chris Paoli, a Steamboat real estate agent since 2005, says since January 2020, hard-to-find and high-demand properties in the light industrial area have led to 15 spurred the purchase of industrial land.

Realtors say Steamboat Springs is currently in high demand for small light industrial warehouse or storage spaces like this new unit in Marble Court on the northern edge of the city.
Chris Paoli/Photo Courtesy

Local realtors say the redevelopment of Yampa Street in downtown Steamboat has helped further.

Sias has seen a healthy volume of commercial purchases of 1031 tax deferral exchanges locally. Federal Tax Code 1031 is a real estate investment tool that allows the seller to defer capital gains tax upon sale if he purchases a similar property within his 180 days.

“I think people are bullish on Steamboat just because the town is doing well,” Sias said.

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Commercial property developers are battling shortages of construction workers and subcontractors and high interest rates. At the same time, he has over 90% occupancy rates for all commercial property types – retail, office and light industry.

With more homebuyers moving to Steamboat during the pandemic, commercial property highs are typically about 12 to 18 months following a housing boom, agents say.

Greg Breslau, broker at The Group Real Estate at Steamboat, said: “When the housing market heated up, lease rates started to rise in the commercial market after a few months, increasing commercial sales activity and opportunities. .

As rising interest rates cooled the local residential real estate market, the commercial market quickly followed suit. Commercial real estate sales are currently quiet due to limited inventory.

One of the most sought-after commercial real estate categories in Root County is light industrial space, including warehouses and small warehouses under 2,000 square feet. According to Sias and Paoli, the price of light industrial space has nearly doubled in the last two to three years, from about $200 per square foot to nearly $400 per square foot.

Paoli recently developed a project in Marble Court at the north end of Steamboat with nine small warehouse units of approximately 850 square feet each, each with a bathroom, heating and 300 square feet of loft space. He has another small developer building five more units nearby.

At a asking price of $475,000, Paoli said eight of the completed units in August were sold or leased, with only one still available. He noted that rising steel, concrete and subcontractor labor costs contributed to the increase in unit prices.

This map shows three areas where many commercial properties have been purchased in recent years.

Steamboat Sotheby’s International Realty broker James Howser said the commercial market is now very friendly to sellers and landlords, with landlords increasing commercial lease rates due to high occupancy rates in commercial properties. increase.

Breslau said we will see more owners and users in the retail commercial market because it makes more economic sense for established businesses.

Sias said office space was oversupplied about two years ago but is now under pressure, especially after the Steamboat firm has contracted. Hauser said as more families and remote workers move from metropolitan areas to more rural Luot counties during the pandemic, some remote workers are working from spare bedrooms or using office space. They say they are tired of looking for

As commercial land is confined within Steamboat city limits, several agents have pointed out that Industrial Park Opportunity East of Hayden As a future bright spot in the Root County commercial market.

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