MARKET OVERVIEW

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OFFICE

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SALT LAKE COUNTY - OFFICE

2017 - Q3

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Construction activity remained strong during the third quarter of 2017 in the Salt Lake County office market. Over 1.2 million square feet of additional Class A space is scheduled to reach completion by mid-2018, including Sandy Center Plaza at just over 327,000 square feet and 136 Center 1 located in Draper city at 162,823 square feet, and the redevelopment at Sugarhouse adding 150,000 square feet of office space.

Vacancy rates increased slightly with the continued development of office space throughout Salt Lake. Vacancy rates in the Union Park/ Cottonwood submarket experienced the largest increase as several tenants relocated to office space along the I-15 interchange. The CBD/Periphery submarket also saw vacancy rates increase, mainly due to new completed construction and tenants who moved from Class B to new Class A space.

UTAH COUNTY - OFFICE

2017 - Q3

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Vacancy rates in the Utah County office market inched upward from 6.40% in the third quarter of 2016 to 9.85% currently. With this additional available space, the overall weighted average asking lease rate decreased slightly from $21.33 to $20.32 currently. Landlords with available space are watching the market closely to stay competitive and quickly fill their vacant space.

While there is continued solid demand for Class A office space throughout Utah County, vacancy rates in Class B office space in the Central and South quadrants increased when tenants moved into newer office space in more ideal locations. By the third quarter, net absorption registered at a less robust-43,355 square feet, reflecting the softening demand for older generation office product.

Developers continue to see Utah County as a promising location for economic strength and continued business growth. Over 1,260,000 square feet of new office space is currently under construction — mostly in the North quadrant — and slated for completion by midyear 2018.

Utah County Activity

Class B vacancy rates increased significantly as tenants relocated from the Canyon Park Technology Center and the Neways office building. Of the 265,863 square feet of sublease space available, more than half is in the Provo Riverwoods and East Bay within the Central submarket. Overall demand in Utah County was healthy but focused throughout the third quarter, reflected by decent growth in the North quadrant and significant continued construction. Looking ahead, 2018 is expected to bring another year of focused continued improvement.

RETAIL

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SALT LAKE COUNTY - RETAIL

2017 - Q3

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 Total: 744,813 SF 

The Salt Lake retail real estate market is robust with supply, while many areas of the market are seeing above-average rental rates. Net absorption has reached more than 300,000 square feet year to date. The majority of leasing activity occurred in the Central West and South East quadrants. Omnichannel retailing is enhancing brick-and-mortar stores as 48 percent of consumers who order online want to pick up, return or research a product in person.

Vacancy rates finished the quarter near a five-year low of 4.57 percent, decreased from last year’s 6.57 percent. The overall average asking lease rate decreased from $19.86 at this time last year to a current rate of $18.75, mainly due to a lack of available space. Class A retail space was absorbed quickly during the first part of 2017, and the remainder of available space is in less desirable locations that have not been upgraded over the last few years, affecting the overall average asking lease rate.

UTAH COUNTY - RETAIL

2017 - Q3

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Activity in the Utah County retail market has been strong throughout the first three quarters of 2017.  The average asking lease rate increased to $18.67 from $16.65 at this same time last year. Vacancy rates increased from 3.99 percent to 4.26 percent currently as smaller tenants continue to occupy ideal vacant space in growing locations. Freestanding retail space has also seen increased activity over the last two years.

Just over 744,813 square feet of space is currently under construction in Utah County, a slight increase from this same time last year. The majority of retail construction in Utah County occurred in the North quadrant in an attempt to meet the demands of continuous office and population growth.

Future Growth

Utah’s per capita personal income grew 3.5% to reach $40,744 in 2016. Per capita personal income for the nation in 2016 was $49,571, a year over year increase of 2.9%. With increases in both population growth and spending power, Utah County is primed for continued growth as retailers look to capitalize on available properties and the continued strength that economic foundation has provided for the state.

ECONOMIC  STATE RANK  VALUE  PERIOD 
Employment Change  2nd  4.6%  April 2017 
Unemployment Rate  10th  3.1%  April 2017 
Total Personal Income % Change  2nd  5.8%  4Q2016 
Population Growth  1st  1.9%  4Q2016 

INDUSTRIAL

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SALT LAKE COUNTY - INDUSTRIAL

2017 - Q3

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T he vacancy rate for industrial buildings fell to 4.74 percent in the third quarter, down from an already low 5.08 percent. Vacancy rates will stay low as the limited and shrinking inventory of quality buildings is quickly absorbed by a motivated pool of tenants.

The average asking lease rate, which incorporates all size ranges and markets throughout Salt Lake County, is $0.50 NNN per square foot per month, a $0.05 per square foot increase from last quarter and a $0.03 per square foot increase from a year ago. The Salt Lake County industrial market’s average asking sales price at the end of the third quarter came in at just under $93 per square foot.

While sale prices vary greatly depending on the size of the building and an average sale price doesn’t tell the entire story, this represents a $5 increase from the third quarter of 2016.

UTAH COUNTY - INDUSTRIAL

2017 - Q3

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Utah County’s industrial market has seen a slower completed deal pace for the 3rd quarter based on limited  building supply. New construction has been active in 2017, which has been needed since 2014 in order to create a more balanced supply ratio.

With vacancy rates continuing to drop and reaching historically low rates of 2.3%, quality available space is difficult to locate.  Current net positive absorption settled at 336,536 square feet compared to last year’s third quarter rate of 413,670 square feet. The cause of this decrease in leasing activity is again, due to continued lack of available space.

With the supply not keeping pace with demand within the Utah County industrial market, leasing activity will remain challenging well into 2018. Without much retraction in market demand, local developers are continued to respond with more speculative space than in recent years. At this time last year, 702,526 square feet was under construction compared to this year’s 1,108,414 square feet.

Increased demand for distribution warehouse space as a result of strong e-commerce trends is adding to the demand pressure. The need for efficient distribution warehouse product in Utah county is becoming more prominent than ever before.