With continued demand for people wanting to move to, buy houses in and develop businesses in Steamboat Springs, commercial lease rates continue to gradually increase post-COVID-19 pandemic, although not as exponentially as residential prices, local real estate experts say.

The underlying reason is that supply in both residential and commercial real estate properties is “very tight” compared to the current demand, according to Broker Chris Sias with The Agency in Steamboat. Sias spoke as part of the Real Estate Panel at the 30th annual Routt County Economic Summit on Thursday hosted at Colorado Mountain College.

In the commercial property categories of restaurant, retail and industrial, property zoned light industrial has shown the highest increase in square footage rates in Steamboat post-pandemic rising approximately 66% since pre-pandemic, from $12 to $20 per square foot on average.

“Steamboat has almost no industrial-zoned land to develop,” Sias said.

Based on his information as a commercial broker for eight years, Sias said rental lease rates from pre-pandemic to post-pandemic have increased from $28 to $33-$37 per square foot on average for retail locations. Restaurant lease rates are a little higher moving from an average $35 per square foot pre-pandemic to $40 post-pandemic.

Sias said a rule of thumb for a retail business would be for rent to equal 10% of sales, but in Steamboat that rental cost often reaches 20% of sales. Store owners may be able to afford a higher rent with retail sales up post-pandemic, or other smaller store owners purchased their location years ago when real estate prices and mortgage rates were lower.

The broker said developers are more apt to build residential properties instead of commercial properties for a better return on investment. Bucking that trend is a current increase in construction of live-work units. A sought-after residential unit above a ground-level commercial space can help a developer’s investment pencil out, Sias said. On the other hand, some of those new live-work units are not occupied by businesses because owners are buying the residential units and keeping the downstairs commercial space as “toy garages,” he said.

Other real estate panelists included Routt County Building Official Todd Carr, Hayden Town Manager Mathew Mendisco and Yampa Valley Housing Authority Executive Director Jason Peasley.

Mendisco highlighted the 58-acre, $8 million Northwest Colorado Business Park with 13 lots under development located north of parking at Yampa Valley Regional Airport. The town took the lead developing the business park to fill a need for light industrial lots to help retain valley businesses, to help replace coal industry jobs and to create jobs at or above the average median income, according to Mendisco.

“The whole point is, create jobs where people can make a middle-class living,” Mendisco said.

Audience members asked the panelists if the high number of construction projects underway in Routt County can be built by local contractors and workforce members.

“There’s no way locally we could support, what I was showing, in terms of the commercial construction activity,” Carr answered. “Our local contractors, even on the residential level, are struggling right now…trying to find places for contractor shops… and above them they are trying to create some apartment units to house their employees.”

Mendisco said all of the large construction projects in Hayden are bringing in the majority of workers from outside construction companies. The town-developed business park will allow residential units but only for employees of the businesses inside the development. Mendisco said another industrial park near the regional airport is proposed by a private developer.

An audience member asked how Steamboat is fairing with commercial prices compared to other regional resort towns.

“I don’t believe we’re the most expensive area out there, but certainly with the investments with the mountain and all the nice residential real estate that’s online, we are certainly pushing up there,” Sias said.

The real estate agent presented the audience an analogy that “back in the day” Steamboat Resort viewed itself as a family-friendly “Columbia” and now is more of a “North Face.”

The tight but popular real estate market is impacting the profile of Steamboat residents, Sias said during a follow-up interview on Friday.

“It’s changing the composition of the people who can move to Steamboat,” Sias said. “Steamboat continues to be a place where people really want to live. Because we don’t have much supply, it’s getting more and more expensive for people to live here.”

On the residential side of the market where availability of homes is limited and prices are “shocking,” Sias and other panelists referred to the current “lock-in effect” where potential sellers with existing low-rate mortgages are reluctant to sell or move. He noted only 37 single-family homes and 49 condos are listed for sale in Steamboat currently, or “a fraction of what a normal market would support,” and sales are closing at approximately 98% of asking price.

Sias said 50-60% of residential sales are by cash buyers, and home insurance rates for entry-level homeowners have increased greatly.

“The very high cost of insuring older condos due to the appreciated value of underlying assets and recent disasters such as wildfire and floods is leading to significant increases in dues and affecting this market,” Sias noted.