Commercial real estate company CBRE has released its fourth-quarter 2022 report on industrial and office space activity. Key data from the report included:
Industrial
Industrial sector activity was highlighted by a Salt Lake County record for square feet of space delivered, increasing the vacancy over 2021. Lease rates also saw an unprecedented 30 cents per square foot jump, driven by lack of vacant space and an increased number of tenants in the market.
The report found that the Airport submarket accounted for over 55 percent of lease activity in the quarter, mainly due to a few large leases signed in buildings under construction. Vacancy in that submarket remained at 0.01 percent.
According to CBRE, new groundbreakings slowed due to high construction costs and economic uncertainty. As a result, the current under-construction volume is at its lowest point in two years. Absorption closely followed deliveries in 2022 due to low vacancy rates in existing space throughout the year, the study said. Because the demand for industrial space was high, sale prices in 2022 soared. However, economic uncertainty slowed sales volume.
Office
Meanwhile, activity in the office sector suggested a slowdown in the market. Lease activity in for the quarter in the Salt Lake-Provo market decreased 10.4 percent year-over-year in 2022 with a net positive absorption of 196,272 square feet and a rising vacancy rate of 19.7 percent.
The amount of sublease space available in the Salt Lake-Provo metro reached a record high of 2.7 million square feet during the fourth quarter, increasing 20 basis points quarter-over-quarter and 200 basis points year-over-year.
Salt Lake City’s first office-to-residential conversion project was sold and closed in earlier in the year and the relocation and expansion of some tenants from this building to downtown Class A space contributed to a positive absorption in the fourth quarter. Additional absorption from the conversion is expected as the remainder of tenants move into their new space, CBRE said.
Despite the economic headwinds felt in the Salt Lake City-Provo office market, 619,278 square feet of construction is currently underway, principally in the Draper and Lehi submarkets. In addition, the market’s first mass timber property broke ground in the South Valley in the second quarter of 2022, with other planned projects being shovel-ready, pending tenant lease agreements.