Commercial real estate firm CBRE has released it third-quarter 2022 Salt Lake City Industrial and Office Figures report.
Over 7.9 million square feet of new industrial space has hit the market so far this year, an all-time high for a single year, according to the industrial figures report. Despite this, vacancy remains extremely scarce.
The report said lease rates continue to rise across all space sizes in the Salt Lake area. Low vacancy numbers and increasing construction costs are contributing factors. Due to an airport submarket vacancy of 0.1 percent, leasing activity in the Northwest Quadrant is increasingly concentrated in the California Avenue submarket.
High construction costs and an uncertain economic environment have slowed the pipeline of planned construction, CBRE said. The report also found that changing local demographics are putting pressure on local distribution and small- to medium-sized facilities.
The report also said that sale prices in 2022 have soared, a key contributor to the decrease in sale volume seen.
According to the office figures report, leasing activity declined 33 percent in the third when compared to the same period in 2021, with market fundamentals showing signs of a slowing market.
Overall market office vacancy increased to 19.6 percent, while the market had negative quarter-to-date net absorption of 393,403 square feet.
Driven by high vacancy downtown and strong demand for urban multifamily development, the second quarter saw Salt Lake City’s first office-to-residential conversion project sale. Office tenants relocating from that building should boost downtown absorption in 2023, CBRE said.
The office report found new groundbreakings slowed in recent quarters as materials become increasingly difficult to source. Despite these conditions, the market’s first mass timber property broke ground in the South Valley and other planned projects are shovel-ready, pending tenant lease agreements.
CBRE said economic volatility remains top of mind amid high inflation, a tight labor market and housing shortages. However, the Salt Lake-Provo market is well-positioned regionally and tends to outperform national averages, the report said.