The Salt Lake City/Provo office market continues to show signs of recovery, according to a first-quarter CBRE Research report.
Leasing activity rose from a year earlier, the vacancy rate fell and net absorption was positive during the quarter.
The market “is well-positioned for further recovery throughout 2025, and net absorption is projected to remain positive in the near-term forecast,” CBRE said.
Leasing activity in the Salt Lake/Provo office market grew 36.4 percent, totaling 1.23 million square feet.
The total vacancy rate fell for the second consecutive quarter, dropping by 22 basis points to 23.7 percent, while the direct vacancy rate fell by 28 basis points to 19.6 percent.
Sublease availability remained flat at 2.5 million square feet following five quarters of consistent decline.
Net absorption remained positive for the second consecutive quarter, with 125,935 square feet of positive net absorption. That represents the strongest first-quarter occupancy gains since the first quarter of 2020, which was during the beginning stages of the impacts of the COVID pandemic. The positive net absorption “was driven by tenants occupying spaces secured earlier and sustained demand for high-quality office space in connected and amenity-rich locations,” CBRE said.
Significantly stronger was downtown Salt Lake City, with 161,810 square feet of positive net absorption, with gains in Class A buildings (81,665 square feet) and Class B buildings (128,498 square feet).
Meanwhile, Class A asking rents in the central business district rose by 2.1 percent from the prior quarter and 3.7 percent year-over-year, driven by strong demand for newer, amenity-rich spaces.
The average direct asking rent remained stable in the overall market at $26.21 per square foot following a modest decline over the previous nine quarters and a 0.5 percent year-over-year decrease. In contrast, the average sublease asking rent stood at $23.10 per square foot in the first quarter, a 11.9 percent discount compared to the average direct asking rent.
“Looking ahead, Class A properties are expected to see further rent growth due to strong demand for limited new top-quality space,” the report states. “Meanwhile, lower-tier properties with high availability will continue to offer more negotiation leverage in the near term.”
Suburban areas experienced less demand, resulting in a negative net absorption of 35,875 square feet.
The market saw no new office completions in the first quarter, and only 120,000 square feet is under construction. That equates to 0.2 percent of the total stock, down 95.9 percent since the 2020 first quarter, when nearly 2.9 million square feet was underway across 16 projects, and a 38.5 percent drop from the same period the previous year.
The report notes that the final institutional project under construction is The Beverly at Holladay Hills, scheduled for delivery in the second quarter. This Class A office property, which is already 50 percent pre-leased, is part of a master-planned, mixed-use development located on the former Cottonwood Mall site in the Central Valley East submarket.
“The office development pipeline is projected to remain historically low in the mid-term due to a challenging financing environment and high vacancy rates, which are expected to continue deterring developers from initiating new projects in 2025 without significant pre-leasing activity,” the report states. “Additionally, tariffs are anticipated to increase construction costs by approximately 5 percent in the near term, further discouraging new developments until economic conditions improve.
“This slowdown in development and completions is likely to mitigate supply-side risks in the coming years, as demand shifts toward absorbing second-generation spaces with elevated vacancy.”
Details of the report can be downloaded at https://www.cbre.com/insights/figures/salt-lake-city-provo-office-figures-q1-2025.