This is a critical factor and one that impacts all real estate in Summit. It is often overlooked since the vast majority of my colleagues focus on residential real estate only. My ace in the hole is my older brother Nathan. He is an extremely well established commercial broker and partner at Fredick Ross in Denver. He is there to guide whenever required.
As a very general rule, most investors in today's market are looking for cap rates of 8% or better to make a long-term real estate investment worthwhile. In Summit very few building are sold at an 8% cap rate. For example, the Bank of the West building in Breckenridge sold for $4.06 million at a cap rate of 6.18%.
The answer to why astute investors are willing to accept lower rates of return in Summit County versus other parts of the country speaks volumes about their confidence in this market over the next 20 years (many commercial leases are 10 years with an option to renew for another 10 years). There are two main reasons: 1. they are expecting real estate to appreciate here to outstrip the markets that offer higher cap rates; 2. they are looking ahead for redevelopment opportunities knowing that land prices will skyrocket once Summit County reaches build-out.
Love Life,
Yve Johnson
Your Mountain Broker
Comments