In the last issue of SVPN, my Commercial Market Update focused on Housing Projects in the south valley. In this update, I’ll summarize my view on commercial activity in Hailey, Bellevue, and the south valley.
Historically, growth and economic activity during the market upticks, flows from north to south, meaning it begins in Ketchum and then gradually moves to Hailey, and then Bellevue and south. The onset of the pandemic last March has had a definite impact on the typical dynamics of the valley economy. Pre-pandemic, we were well on our way to a full recovery from the recession from one end of the valley to the other. It was unusual, but the economic activity was simultaneously strong throughout the valley, not just from north to south. A real boom had begun. Then COVID arrived. After a month or so of uncertainty, things started to pick up. As I described in the January issue, the commercial and residential markets took off with a renewed enthusiasm and gusto.
The large majority of the commercial investment property deals happened in Ketchum. In Hailey, commercial investment has been more concentrated in light industrial, storage facility, and residential short-term rental properties. Unfortunately, it’s been a rough go for some of the retail and restaurant operators.
According to The Idaho Mountain Express, the city of Hailey collected $522,822 in local-option tax revenue from sales activity in 2020, or a 24 percent drop compared to fiscal 2019. Local-option taxes generated from short-term rentals, however, made a giant comeback this past summer, increasing from only $89 in May to $2,560 in June—a 2,776 percent increase. In July, the city brought in a healthy $4,004 from short-term rentals. Around 2 percent of Hailey’s housing stock is dedicated to short-term rentals, according to Community Development Director Lisa Horowitz. A quick search of AirBnB on December 20th turned up 54 short-term rentals listed within the city limits.
Also according to The Express, as of December 18, the city of Hailey planned to begin distributing up to $200,000 to small businesses, in the form of grants, using federal CARES Act relief funds allocated to the city. Qualifying businesses and organizations will be eligible to receive up to $10,000 each to cover COVID-19-related expenses incurred during the second half of 2020, and grants will be distributed on a first-come, first-served basis. By December 18, the city had received over 30 applications—more than a quarter of those from restaurants.
As always, I’m the optimist about our valley economy. I like to look at the things that factor into our future. I look at local trends, but also the macroeconomic conditions that I believe play a role in our area.
AIRPORT – New Landing System
The new approach system went online December 3rd, and airport manager Chris Pomeroy said the airport had 24 “saves” during the very early days of operation. Had the system not been in use, 24 flights would likely have been diverted to Twin Falls or Boise. It sounds like we can now avoid so many of those weather-related diversions, and make Sun Valley much more easily accessible to our guests.
X The Associated Press said in December that U.S. population grew by the smallest rate in at least 120 years from 2019 to 2020, according to figures released Tuesday by the U.S. Census Bureau. However, Idaho had the largest single-year population increase, growing 2.1% to 1.8 million residents. The collateral impact of this healthy growth in Idaho should in turn bode well for the valley.
On January 3rd, The Idaho Business Review writes that residential real estate is expected to continue its upward trend in Idaho. These are not housing bubble conditions. A housing bubble is driven by speculation. The current market is driven by demand growing faster than supply. The secondary home market is attractive for developers, especially in resort counties like Blaine and Teton. A disproportionate number of second homes get built in those locations. For example, according to the National Association of Home Builders, Blaine County has over 5,000 single-family homes and over 50% of those are second homes.
The Idaho Business Review also describes an interesting phenomenon regarding Idaho baby boomer farmers. “Most of the nation’s wealth is held by the baby boomer generation, which makes up a quarter of the population. They own approximately 57% of assets in the United States. That’s not exactly new news. The looming great wealth transfer has been covered in the press for some time now. Regardless, there’s a twist to this trend that affects Idaho deeply. The amount of property controlled by the boomers is disproportionate. As this generation retires, this wealth will be transferred. This includes most of the nation’s — and Idaho’s — farms, where 99% are privately-owned family businesses. It remains to be seen if we will see these boomers here in the valley investing that wealth.
And more and more frequently, wealth management professionals and financial advisors regularly counsel clients to diversify portfolios in order to reduce risk—and consider commercial real estate an attractive alternative investment.
X City adds to housing stock
As I mentioned, home sales in Hailey and Blaine County dropped off at the start of the pandemic, median home prices in the city rose significantly over the course of the summer. Compared with Ketchum and Sun Valley, Hailey saw the largest year-over-year increase in median home prices, from about $436,000 in the summer of 2019 to $545,000 in the summer of 2020.
In December, in response to Hailey City Council concerns that Hailey’s long-term rental market could become less and less affordable for the valley’s working class, the council considered one solution to that issue—allowing accessory dwelling units, or “mother-in-law apartments,” in two additional zoning districts. ADUs, or accessory dwelling units, can come in a wide variety of styles. Hailey’s P & Z commissioners support the ordinance because it could boost workforce housing inventory and increase property value. Top of Form
Since 2003, Bottom of Form
ADUs have been allowed in the Old Hailey district and General Residential zone, but not in the city’s Limited Residential and General Residential zoning districts. The additional zoning districts make up about 50 percent of Hailey’s subdivisions, and include Quigley and Northridge. One of the major considerations is to make sure that the ordinance protects the current property owners in those areas do not see diminished property values. Details of the proposed ordinance include things like a maximum of two bedrooms, square footage ranging from 300 up to 1,000 square feet, one parking space per ADU, at least 50 square feet of outdoor space, ADUs must have their own bathroom and kitchen, and most importantly that only one of the two units on a resident’s property would be allowed to be a short-term rental. The other unit must be owner-occupied or a long-term rental.
In the meantime, several developments aimed at “affordable” continue to move forward in Hailey in 2021:
An agreement between ARCH and the city of Hailey will bring nine affordable units to a one-acre property near the intersection of Woodside Boulevard and Countryside Drive.
ARCH Community Housing Trust’s Blaine Manor Senior and Family Community development will include 60 units: 30 units in a building for residents 55 and older, and another 30 units in a “family” building. The 72,500-square-foot development next to Campion Ice House will primarily serve those earning between 30 and 60 percent of Hailey’s median income. Sunbeam Subdivision’s preliminary plat was approved by the Hailey City Council as a planned-unit development. The high-density neighborhood will offer lots around 9,900 square feet, and include a 9-acre public park. The Sweetwater Community on Shenandoah Drive in Woodside is in phase two of expansion, and includes 20 condominium units and 12 townhouse units. River Street Apartments will be a two-story 12-unit residential development built from refurbished metal shipping containers. The apartments are scheduled for starting in 2021. The project received design-review approval in September from the Planning and Zoning Commission.
Next to the River Street Apartments site, the Silver River Residences three-story, 16 unit development is well underway. The project is located at 17 W. Silver Street, in Hailey’s new Downtown Residential Overlay District. Kiki Tidwell joined forces with property owner Gary Poole and architect Susan Scovell to address the city’s housing shortage. “This is a wonderful example of pooling together our resources to create lower-cost housing,” Scovell said during a presentation. “Along with [architect] Rebecca Bundy and [contractor] Paul Conrad, we’ve donated a lot of our time and money to make this more affordable.” The mix of apartment layouts consists of nine two-bedrooms, five one-bedrooms, and two small studios, range from 328 to 755 square feet. Some features include solar panels and shading, 16 parking spaces, and charging infrastructure for electric cars. The target audience is a cross-section of the community, including small families and single adults. Poole says, “One of our hopes is to encourage new development on empty lots nearby, to show developers that they, too, can have success investing in this district.” Developments like this in this new zoning district will hopefully revitalize downtown Hailey. This project is just what the city had in mind when it created this new zone.
As I write this piece, Hailey Airport Inn, LLC has submitted a Design Review Pre-Application for the addition of two (2) new three-story apartment buildings. Building One will consist of three (3) one-bedroom units and nine (9) two-bedroom units, ranging in size from 484 square feet to 745 square feet. Building Two will include four (4) one-bedroom units, two (2) two-bedroom units and three (3) three-bedroom units, ranging in size from 598 square feet to 1,020 square feet.
Other developments and transactions
Our Paul Kenny & Matt Bogue Commercial office, in cooperation with Engel & Volkers Sun Valley has completely sold out the 12 units at the Quigley View Apartments. Two of the 4-Plex buildings were sold to investors as rental properties and the third was sold as individual units to four different parties.
A local investor purchased the 6-Plex at River Street and Walnut Avenue. These units are some of the more affordable rental units that historically have been occupied by long-term employees at a few of our large valley employers.
X Airport Inn Apartments
Consideration of a Design Review Pre-Application by Hailey Airport Inn, LLC, represented by Owen Scanlon, for the addition of two (2) new three-story apartment buildings. Building One will consist of three (3) one-bedroom units and nine (9) two-bedroom units, ranging in size from 484 square feet to 745 square feet. Building Two will include four (4) one-bedroom units, two (2) two-bedroom units and three (3) three-bedroom units, ranging in size from 598 square feet to 1,020 square feet.
KING’S VARIETY STORE
After sitting idle for a number of years, the former King’s Variety Store at 615 N. Main St. in Hailey is soon to be a new Grocery Outlet Bargain Market. A definitive opening date has not been announced. The California-based “extreme discount” supermarket chain sells overstocked and discounted name-brand products, including fresh meat and produce.
The Granary at Lightworks
Next door to Rosmarie Bogner’s Lightworks studios, The Granary at Lightworks project is designed after regional rural grain silos and seed barns, or granaries, just like the granary buildings near Fairfield. The main building is a 34-foot-tall silo-shaped, spiral stair tower reaching to a third-floor, with a 625 square foot residential unit above the commercial space. This apartment can be rented by someone connected with the business downstairs or a family member of the property owner. The downstairs commercial space has a 19 foot ceiling and a mezzanine above. The four storage areas at the Granary can be rented by anyone. The construction includes structural insulated panel roofs, high insulation walls, high-efficiency heating and cooling systems, and solar electric renewable energy systems.
MARRIOTT FAIRFIELD INN & SUITESBottom of Form
An official ribbon-cutting ceremony was held for Hailey’s new Marriott Fairfield Inn and Suites on January 8. The 74-room, three-story hotel at 711 N. Main Street opened to guests later in the day. Construction began in October 2019 on the $7.5 million project. The hotel features an indoor pool, fitness room, breakfast and dining room and a bar, which is open to the public.
Hailey Gets an Art Deco Addition to Main Street
Hailey Auto Clinic owner Alex Dunn opened his new garage at 610 Main St. in late 2019. Alex, 35, can trace his family history in the Wood River Valley all the way back to the 1800s. He has been in the automobile service and repair industry since he was 15 when he worked at the Ford dealership in Hailey. The 2,693-square-foot black-and-white Art Deco-style commercial building contains three auto-service bays and an office, and was designed by architect Jay Cone. It features glass blocks, a 35-foot tower with an exposed neon tubed logo and other trim lighting elements. The neon lighting will not be used after midnight. The building sitsBottom of Form
on three city lots, and harkens back to the Art Deco gas stations of the 1930s and 1940s.
Croy Creek Campground
The Hailey City Council on Monday approved a $500,000 grant application to the Idaho Department of Parks and Recreation for what could become the city’s first public campground. The Croy Creek Campground would be located between Rotarun Ski Area and Lions Park, just north of the Wood River Land Trust’s new Simons Bauer preserve. The City of Hailey owns that property. Renderings of the campground depict twenty four RV sites and nine camping areas with designated tent platforms and parking spots, including some for ‘Class B’ recreational vehicles, such as Sprinter cargo vans. Councilwoman Heidi Husbands suggested a fee of $35 per night and it sounds like the goal is for shorter stays for more turnover to generate more visitors.
THE SURGICAL CENTER THAT ALMOST WAS
In the late summer of 2019, a group of surgeons and a surgical center developer were ready to open in the Village at Hailey Center Building at the corner of River Street and Pine. The 6,000 square foot facility would have occupied the portion of the building that had been sitting vacant since the construction in 2008. The application by the developer was delayed for more than nine months because the city wanted to save the historic Forest Service Warehouse Building. They made plans to move the historic building to the City Street Shop in Airport West. That won’t be happening after all. In late fall, staff members discovered lead paint on the building, making relocation and restoration infeasible. “The remediation effort plus updated restoration costs tipped the scales too far, and [the project] was no longer financially attractive,” Public Works Director Brian Yeager said in December. The delay was long enough that the surgical center developer moved on, and the plan died.
AREA OF CITY IMPACT (ACI) – ECCLES FLYING HAT RANCH
The area of city impact negotiations between Hailey and Bellevue may finally be coming to a close. The ongoing debate has been over which municipality should have control over development on the many acres of property on the Eccles’ Flying Hat Ranch, on the east side of Highway 75. Hailey officials wanted 100 acres of the property between the two cities for its ACI. In June, Blaine County determined that Bellevue was entitled to include the entire portion of the ranch lying on the east side of state Highway 75 in its ACI map, almost ensuring that the annexation will make it part of Bellevue. “We envision a lot of changes over the next 50 years—a zone of higher-density housing than we currently have, more general residential housing, a larger light-industrial district and, at some point, a new school,” Bellevue Mayor Ned Burns said following the county’s decision. Now it sounds like about 27 acres of open land between Hailey and Bellevue to be used jointly by both communities. This acreage is at the south edge of Woodside. Meanwhile, the city of Hailey has also finalized an ACI of its own. The County Board will review the two documents and should be able to adopt the ordinance at their February 23rd hearing.
The 158-acre Peregrine Ranch hay farm north of Hailey remains for sale with an asking price of $35 million.
THE MINT for sale or lease
The Mint is now available for sale or lease. It’s a great opportunity for a new operator. The current operator invested heavily in capital improvements, and brought the former Bruce Willis property back to life. The property includes the restaurant, the night club, the liquor license, and the adjacent promenade outdoor space.
2020 has been an exceptional year for real estate in the valley, both commercial and residential. In spite of the COVID pandemic, and probably because of it, the real estate sector of our local economy has benefited greatly. Many of those folks that have thought about moving here, and even those that hadn’t thought about it yet, became motivated to do it. The pandemic on top of overcrowding and over-pricing, in the other resorts like Aspen, Vail, Park City, and Jackson. I remain bullish on real estate, both commercial and residential, in the coming 12 months.
Car Dealership, Hardware Store, Condos
A two-story car dealership, two-story hardware store and between six and eight three-story condominium buildings are proposed for the entrance to Hailey. The project is proposed by Larry Green, owner of L.L. Green’s Hardware, and Matthew Cook, owner of Hailey-based Silver Creek Ford. According to the Idaho Mountain Express, Lisa Horowitz, Community Development Director, stated that “the proposed commercial developments would contribute to a “year-round economy unrelated to the tourism industry” and “bring civic activity to a vacant lot in Hailey’s downtown [and] promote economic growth, as well as downtown diversity.” The project will require rezoning along Main Street and McKercher Boulevard.
CLEARWATER POWER EQUIPMENT / Main St Bellevue
SAWTOOTH PLUMBING & HEATING / Main Street at North end of Bellevue
Paul Kenny has lived in Sun Valley for 46 years. He’s the former owner of Paul Kenny Sports (now PK’s) and The Mercantile of Sun Valley (Timberland). He’s practiced commercial real estate for over 20 years, and with his partner Matt Bogue, and associate Matt Gelso, they have an extensive history of transactions and an exhaustive data base on valley commercial property. Paul is also a Principal/Partner of Engel & Volkers Sun Valley, specializing in luxury residential real estate.