The Salt Lake City office of commercial real estate firm CBRE has released its Market View report for the fourth quarter of 2018. The report highlights local market activity in the areas of industrial properties, retail leasing and office leasing.
The study’s findings include:
• Finishing the year with 4.7 million square feet (SF) of new industrial deliveries, 2018 was a top year for industrial development and was the second straight year the market achieved record-breaking numbers. This elevated development was concentrated in the Northwest Quadrant and whether speculative, build-tosuit or owner/user, included some of the largest facilities ever completed in Salt Lake. Even with such sustained, elevated development activity, overall user demand is keeping up with the market and will continue to balance overall fundamentals as development continues at a breakneck pace, the report said.
“Demand from large industrial occupiers continued to surge in 2018, propelling annual lease activity to an impressive 5.3 million square feet,” said Jeff Richards, senior vice president at CBRE Salt Lake City. “With so many users in the market — notably large, market-moving users — and the robust development taking place, particularly in the Northwest Quadrant, the outlook for 2019 is for elevated activity levels to continue in the industrial segment.”
• Retail occupiers signed 1.25 million SF of new leases in Salt Lake during 2018, smashing 2017’s record by more than 30 percent and setting a post-recession high. The majority of this elevated user activity is due to re-tenanting of vacant big-box retail sites, where most space is being repurposed to mirror modern consumer priorities for destinations that provide experience, value and lifestyle options, according to the Market View report.
“Not that long ago there were a plethora of headlines predicting the demise of the retail segment as a good deal of big-box users reduced their overall footprints, but 2018’s activity has painted a clear picture of the evolution currently taking place,” said J.R. Moore, CBRE first vice president. “In just a few short years, the retail industry has completely reinvented itself. As most large closures have already occurred, the downside risk as we enter 2019 is relatively low for Salt Lake and things are expected to continue stabilizing, with vacancy most likely decreasing and conversions and redevelopments continuing to rise.”
• The Salt Lake metro’s office space net absorption (measuring the change in occupied square feet) reached a post-recession high of 1.2 million square feet in 2018, with 91.3 percent coming from the suburbs. This leasing activity, combined with a temporary lull in delivered construction, has kept overall vacancy low, which is creating a challenge for users who are searching for large blocks of space. In the fourth quarter, there were only three existing Class A properties downtown that could accommodate at least 40,000 SF of contiguous space. However, this tightening in the office market is being alleviated by recent market innovations that have helped provide more options for users, said the report’s authors.
“The office market is experiencing its own evolution as co-working, creative space and agility have become more prevalent themes. At the end of 2018, approximately 241,000 square feet of flexible space was either operating downtown or was set to open in 2019,” said Eric Smith, CBRE senior vice president. “Roughly 67 percent of the co-working space downtown was signed within the past year alone and has assisted users of all sizes to become more agile as they look to expand, contract or relocate their workforce in a timely and effective manner to meet their business needs.”