NGA Market Snapshot: Commercial real estate still thriving in Utah

Commercial real estate is still thriving as companies inside and outside of Utah look to grow and expand across all sectors within the state, according to the 2018 Newmark Grubb ACRES Market Snapshot for the third quarter released last week.  

Industrial product saw an increase in activity compared to third quarter 2017, with significant jumps in both leased square feet and transaction dollar volume, the report said. Owner-user sales are reaching nearly $100 per square foot across all types, which represents a new high. Lease rates continue to increase across most industrial building types, with five of the seven building types showing increases year-over-year. Direct vacancy hovers at a near-record-low at 2.9 percent and will to continue to stay low despite the 4.2 million square feet delivered year-to-date and the current 4.7 million square feet currently under construction.

Salt Lake County direct vacancy rates for office continue to drop across all class types at 8.3 percent overall. Net absorption remains positive at 657,910 square feet and is trending to surpass 2017 by year-end. Class B product saw a slight dip for the first quarter through the third quarter while Class A saw a high water mark of over $30 per square foot in the third quarter of 2018.

Along the office tech corridor, net absorption for the first quarter through third quarter  is already more than double 2017’s year total and is expected to be at, or close to, 2016’s all-time high of 1.8 million square feet.  The vast majority of office construction throughout the state of Utah is taking place in the tech corridor with almost 1 million square feet already delivered for first quarter through third quarter and just over 1 million square feet breaking ground in that same time frame. Office inventory has grown by 6.3 million square feet (77 percent) in just six years in the tech corridor.

Retail leased square footage is up year-over-year in Salt Lake County while overall retail lease rates have been on a slight downward trend. Statewide, single tenant retail investment sales made up 66 percent of the overall retail investment transactions for the first three quarters.

Utah’s investment dollar volume is up 123 percent year-over-year across all product types with the third quarter standing at $560 million, the second-highest dollar volume seen in any third quarter for the past six years. Utah’s economic fundamentals continue to draw out-of-state investors to Utah investment real estate, especially in industrial and multifamily product types, which continue to be in high demand and in short supply.

Land sales in Salt Lake County continue to be dominated by industrial use in terms of total dollar volume (37 percent) for first quarter through third quarter 2018, while multifamily use is still the driving force behind high land price-per-square-foot.