Commercial real estate continues to show no signs of letting up along the Wasatch Front, according to the third quarter MarketView report released recently by the Salt Lake City office of CBRE. The report from the commercial real estate firm said the surge is led by the industrial and retail sectors, with each setting records during the quarter. The full report is available at the company’s website, cbre.com/slc.
Industrial Development
Salt Lake County’s industrial segment continues to experience historic levels of growth and activity. With 1.1 million square feet of industrial product completed in the third quarter, Salt Lake has now delivered a record 3.9 million square feet year-to-date. The reports says that this record will quickly be surpassed in 2019, as a minimum of 4 million square feet is expected to deliver next year. This strong development continues to be fueled by user demand, where both new leasing and sales are more than keeping up with the heavy construction levels.
“Historically, Salt Lake’s industrial market has not experienced such elevated levels of development and leasing activity sustained over such a long period of time,” said Tom Dischmann, senior vice president at CBRE. “During Q3 2018, new leases surpassed 1.0 million square feet for the eighth consecutive quarter, and overall year-to-date net absorption, which measures the change in how much space is actually occupied, totaled 3.6 million square feet. This is phenomenal market activity and it is expected to continue for the near term.”
Retail Leasing
New and expanding retailers pushed Salt Lake area leasing to a post-recession record of 933,549 square feet year-to-date. This total is higher than overall activity for either 2016 or 2017. Retail leasing activity has been heavily influenced by recreation and entertainment tenants, who have driven the highest total of positive leasing and account for 28 percent of retail square footage leased year-to-date. Also influencing this momentum is mid-box activity — leases ranging between 15,000-50,000 square feet. Mid-box activity has been steadily increasing. Year-to-date, mid-box leases have accounted for 40 percent of all retail leases.
“Though more mid- to big-box closures continued to take place throughout the quarter, the strong leasing performance currently taking place has been enabled in part by these large vacancies left behind by struggling national retailers,” said Russ Harris, a first vice president and retail specialist with CBRE. “In an effort to counteract these closures, we continue to see retailers transform the way they do business to succeed — and even thrive — in today’s changing retail environment, as evidenced by this recent surge in leasing activity.”
Office
Office activity in Salt Lake County has been robust in recent years, but a slowing in new construction deliveries has allowed the market to rebalance. Building off of a strong first half of the year, steady infill leasing amid this lull in deliveries pushed vacancy down to 10.8 percent for the metro area. This put the market on track to reach 2017’s net absorption high of just over 1 million square feet. This is due, in part, to strong preleasing of new construction in addition to the infill of 2017’s deliveries.