Mountain Village Still Recovering
TELLURIDE – One of the biggest development proposals ever submitted for consideration by the Town of Telluride could be a signal that commercial real estate in the region is poised for a recovery.
The proposal presented by John Lifton and Pamela Zoline last week to the Telluride Town Council aims to redevelop the intersection of Pacific and Fir streets, commonly known as the Four Corners, into a commercial and cultural downtown district, complete with shops, restaurants and an arts and science “campus.”
Many local real estate professionals hope that the development proposal is a beacon of an improved real estate market in the Telluride region.
“We’ve got a lot of good stuff being considered right now in the commercial segment,” said Mark O’Dell of Sotheby’s Telluride Realty, who attended the meeting of the Telluride Town Council where the Four Corners proposal was presented.
“We’ve got the Four Corners proposal that includes a well run, professional development and investment group, which means more people are confident about putting their money in Telluride’s market. Plus the Medical Center is thinking about making improvements and the Telluride Science Research Center may end up just a gondola ride away in Mountain Village.”
Stewart Seeligson, another broker at Telluride Sotheby’s, said he agrees that the Four Corners project could be viewed as a symbol of brighter days to come, but is more cautiously optimistic.
“…There are many steps to go before this project comes to fruition and until the ground is broken it remains only a symbol and an omen rather than a concrete data point,” Seeligson said.
Strong Numbers Taking Hold
While the Four Corners proposal is just entering the town approvals process, 2013 was a strong year for commercial sales in San Miguel County.
The purchase of two of the Four Corners by the Four Corners development group totaled $5.7 million, more than a third of total commercial sales in San Miguel County in 2013. Altogether, there were 13 commercial properties sold last year for a combined $19.6 million, an increase over 2012, when six sales totaled $8.9 million, according to data from Judi Kiernan, owner of Telluride Consulting.
2013’s numbers, while they aren’t at pre-recession levels, are a far cry from the worst of the recession in 2009, when only three commercial units sold for $2.3 million.
Dirk de Pagter of Telluride Real Estate Brokers agrees that the market is much healthier.
“The market has definitely hit bottom, and is recovering from the Great Recession,” he said. “There’s good momentum in the Telluride market.”
De Pagter cautions that a broker “always seems to be an eternal optimist about the market.” But de Pagter has reasons behind his optimism.
Already this year, he’s contracted the building that houses the Shanghai Palace on Main Street, which features commercial and residential units, and is in negotiations to sell an empty parcel on Spruce Street. That activity, coupled with the year-on-year increase of property showings he’s conducted in January, allows him to predict that 2014 will be a healthy year for the Telluride commercial segment.
O’Dell also has reasons to be optimistic: he’s the listing broker on an empty three-quarter acre lot north of the Telluride Post Office, one of the last undeveloped lots in Telluride, and believes the parcel will be sold this year. The listing price for the parcel is $7.9 million.
“There’s a lot of activity and interest in it, and I feel it could go under contract in the near future,” O’Dell said.
Like the Lifton-Zoline proposal, O’Dell believes the parcel would be developed as a Planned Unit Development made up of shops, restaurants and public spaces.
The increase in Telluride’s commercial segment parallels with Mountain Village and Telluride’s slowly improving residential real estate markets.
Single-family homes and condo sales in Mountain Village and Telluride were down eight percent in 2013 compared with the year before. But residential real estate, like commercial real estate, has generally improved over the past five years, and is steadily working its way back to pre-recession levels.
“I have never looked at a ‘link’, but momentum (or lack thereof) is a huge factor in every market,” Kiernan said. “Activity in one segment, whether it be commercial, residential or condominiums, could very well affect the activity in other segments in a psychological sense, which could explain why different areas have a surge of activity at different times.
De Pagter explains that the residential and commercial segments are literally linked in Telluride and Mountain Village because so many commercial buildings incorporate residential condominiums on upper stories.
“If the residential market is hot, like it is in Telluride, and a commercial real estate property already has or can have a residence on top of it, then that property is desirable as well. You’ll see that in some of the sales,” he said.
The $2 million sale of the residential and commercial Wick building on So. Spruce Street, which was brokered by Michael Ward, a realtor at Telluride Sotheby’s, supports de Pagter’s theory.
“There’s a lot of value in commercial units that have residential components,” said Ward.
O’Dell thinks that the Telluride market is healthy enough that most good values, he said, are selling, regardless of market segment.
“The Town of Telluride has been pretty consistent,” he said. “Nice, new single-family homes and condominiums were pretty much the first to sell at the beginning of the recovery. Fixer-uppers single-families were the next to sell.”
The next segment of the market that will heat up, he continued, is what he calls ‘value play’ condominiums.
“These units typically have good ‘bones’ – good floor plans, good volume of spaces, good views and solar qualities – but maybe need some cosmetic work done,” said O’Dell, “I think that’s what’s going to be the next to go as there’s a lot of opportunity there.