The Salt Lake City office of commercial real estate firm CBRE has released it first quarter Marketview report for the office, industrial and retail sectors. Unlike previous reports, the most recent Marketview now includes office sector market activity and analysis in both Salt Lake and Utah counties, while the industrial and retail reports remain for Salt Lake County only.
“It is important that our data is an accurate reflection of current market activity and we believe this updated method of reporting will improve our ability to inform and assist our clients and community partners,” said Nadia Letey, CBRE’s first vice president.{mprestriction ids="1,3"} “A total of 86 percent of this quarter’s deliveries and 83 percent of the current construction is located in the tech corridor, which encompasses the Sandy, South Towne, Draper and Utah County North submarkets. Activity near the Point of the Mountain represents a large percentage of office demand and is a major factor in our office’s decision to aggregate data from the two counties in our regularly published market overviews.”
The following is an overview of each of the three sectors. The full reports can be accessed at www.cbre.com/research.
Office
The Salt Lake City-Provo office market had a slow start to the year, absorbing 177,363 square feet on net. While absorption is not expected to keep up with last year’s record pace, a strong pipeline of construction and other large tenant commitments should help bolster absorption throughout the rest of the year. For now, it appears that supply and demand are in check as there is currently 2.4 million square feet of office construction underway and despite a decrease in preleased deliveries, vacancy remained low at 10.9 percent market-wide.
Industrial
Aided by a steady stream of new product and heavy industrial users, new industrial leasing once again eclipsed 1 million square feet during the first quarter, totaling 1.2 million square feet for the entire market. During the same period, nearly 425,000 square feet of new product delivered and just over 850,000 square feet of new construction broke ground. When combined with space that is currently in development, the surging construction activity at quarter-end totaled 4.6 million square feet. Even with such high numbers of new space steadily coming to market, availability and vacancy decreased year-over-year, ending the quarter at 4.2 percent and 3.2 percent, respectively.
“Utah’s diverse economy has been instrumental in attracting a growing presence of national and global companies to the area, which has assisted with the robust growth taking place in recent years. It’s important to note, however, that there are a great deal of Utah companies that are extremely active in the market as well,” said Matt McAfee, CBRE senior associate. “This combination of high demand and low availability has also contributed to a 9 percent increase in lease rates over last year, though some of this increase can also be attributed to increasing construction costs.”
Retail
After hovering near its post-recession high for over a year, retail vacancy in Salt Lake City saw some reprieve during the first quarter, decreasing 40 basis points to 6.8 percent overall. This improvement was facilitated primarily by redevelopment of vacant spaces — many of them big-box — along with some limited lease activity. In addition, several other retail vacancies are up for complete redevelopment or conversions, including alternative retail uses.
“Retail continues to undergo a fundamental shift as the way we consume goods and services continues to evolve,” said Joseph Farrell, data intelligence manager at CBRE. “Though retail redevelopments and conversions are increasingly common, the development of traditional retail space is still important — particularly in the fast-growing southwest submarket where the majority of recent and planned retail construction is located.”{/mprestriction}
