Trends point to flourishing commercial real estate
There’s no doubt the Park City real estate industry is in flux. According to Commerce CRG, there are some noticeable trends, especially in the commercial sphere.
Retail vacancy rates were down a little bit from 2005, but office vacancy went up from 10.3 percent to almost 13 percent.
"Of all these numbers, that’s what caught my attention," said Jim Barth, branch broker for Commerce CRG.
The main source for the trend, Barth says, is the Cottonwood building under construction in Newpark Town Center.
"It’s the only significant reason," Barth said. "Quicksilver is taking an entire floor. That building is being built right now. There are two buildings in the Cottonwood project that Rossignol and Quicksilver took."
Commerce CRG is able to pull up these numbers because of its close association with Cushman and Wakefield Global Real Estate Solutions.
"Cushman and Wakefield is a pretty well-known commercial full-service brokerage," Barth said. "It just so happens that the evaluation department for the Intermountain West is headquartered in our office."
Cushman and Wakefield evaluate and report on trends throughout the country. To tap into that resource is a tremendous advantage.
"We can go to these guys and get questions answered that you can’t get anywhere," Barth said.
Commercial real estate will remain strong in Park City as long as its population continues to grow, Barth said. He added that he doesn’t see the vacancy rates continuing to grow because of the desire for companies to move here and the public’s interest in bringing them to Summit County.
"The population of Park City is changing, we are getting a lot more full-time residents coming here for the quality of life," Barth said. "With that infusion, (Parkites) are looking for a different type of service and they don’t always want to drive to Salt Lake to have those needs met."
An example of that is Intermountain Health Care’s proposal to build a hospital in Park City.
"We have more office space here and people are finding less of a need to commute to Salt Lake for work," Barth said. "The government has discussed getting more companies here like Quicksilver and IHC hospital. If that does happen, then you have more and more people that can live here full-time."
Industrial commercial vacancy is seeing a similar decline as it has in past years. It has gone down from 2.5 percent in 2005 to 1 percent in 2006.
"It’s just a continuation of the trend," Barth said.
Industrial space is usually warehouses and inventory spaces that Park City doesn’t have the room for, Barth said. An example of the trend is the distributing center for Jans that is moving from Park City to Kamas this year.
"It goes to show how tight space is in Park City," Barth said. "It’s an interesting time as the town continues to change."
The industrial space at Silver Creek Commerce Center is a healthy industrial spot in Park City. It is aimed at housing local business and has flexible space, Barth said.
As a result of the trend, retail and office lease rates have stayed the same since 2005, but industrial rates have bumped up slightly as a result of demand.
Barth says, based on numbers he has seen, Park City’s economy is now stabilizing after several years of growth. Park City started its heavy growth in 2004 while other resorts have had a longer run. That, he says, makes Park City healthier than other resorts nationally.
"In the last six months, we’ve stabilized even though we saw homes sold," Barth said. "We had a nice run and we stabilized and we can support our numbers. We are not overvalued. We didn’t have that long huge run like others had."
Barth said investors are still heavily involved in looking for and purchasing real estate here. While the residential market slowed slightly in 2006, resort investment is extremely active, particularly in Empire Canyon and Flagstaff Mountain, according to Commerce CRG’s report.
"A lot of our clients may have a third or fourth home here," Barth said. "They are looking for undeveloped land, a retail center or condominiums."
The trend, he said, is from the baby-boomer generation or people repositioning their wealth from inheritance. People look to purchase resort property with the same philosophy of buying property in a retail center.
"People come up and say, ‘I want to buy on Main Street as well as Deer Valley.’ These guys look at their resort properties with the same keen eye as they would with any investment," Barth said.
Hotels are also looking to expand into Park City and the resorts at Empire Pass and Deer Valley. Currently, the planning commission is discussing a master development for the Montage, a 192-room luxury resort. If the Montage is approved, that will bring another five-star resort to Park City.
There was little change in the rates on Main Street, although they remain high, according to Commerce CRG. Buildings for sale are in the $500-$600 per square-foot range and leases are hitting $45 per foot for prime Main Street level retail space. With strong demand for Main Street property, there isn’t much space to be found.
"Main Street’s holding its own and rents are high," Barth said. "Good luck finding a place."
Nearby Main Street, however, is also starting to hold its own. According to Commerce CRG’s study, retail activity is brisk near the former Mt. Aire building after Squatters Brew Pub opened its new restaurant there.
"There is also redevelopment of the Gables at Park City Mountain Resort, it will provide much needed space," Barth said. "Entire parking lots and mountain resorts have underlying density allocated to them."
Barth said there are projects "looming out there" at the base of the resorts.
Kimball Junction has had a significant impact on the office space in Summit County. There has been a slight rise in vacancy in the Snyderville Basin, in part due to the growth in the Kimball Junction area.
"That’s obviously the growth area, there is a demand for office space there," Barth said.
As expansion continues beyond the city limits of Park City, there is increased activity in the Silver Creek/Silver Summit areas.
Among them will be additional office condominiums on the market when the new 45,000 square-foot Silver Mountain Spa and Fitness center opens and a 26,000 square-foot industrial building with some office space at Silver Creek Square. At Quinn’s Junction, there will be a new recreation center and Anderson Lumber.
Again, Barth said the change of population in Park City is what is causing more demand for office space as more people want to stay in Summit County full-time.
"How many more IHCs or Quicksilvers in our future? The city wants to see more," Barth said. "We want to have them in town and build an infrastructure that’s attractive to them."
At the same time, Barth understands the limits on land.
"Growth is limited and we are almost out of land," Barth said.
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Summit County has asked a 4th District judge to throw out Hideout’s attempt to annex Richardson Flat before the June 22 referendum when Hideout residents are set to vote on the proposal.