The Salt Lake County office market nearly had a record year in 2015, while industrial demand continued to top the five-year average, according to reports from Salt Lake City-based Cushman & Wakefield/Commerce.
The Salt Lake County office market nearly had a record year in 2015, while industrial demand continued to top the five-year average, according to reports from Salt Lake City-based Cushman & Wakefield/Commerce.
The office market’s net leasing absorption in 2015 totaled 976,127, just short of the peak reached in 2007. Significant transactions included CHG’s lease of 281,663 at View 72; Ancestry.com’s lease of 200,317 square feet at Traverse Mountain; and SolutionReach’s lease of 147,000 square feet at Thanksgiving Point.
New construction also was strong last year, with 830,813 square feet completed in Salt Lake County alone. The most notable project was Vista Station’s three buildings, totaling 400,000 square feet, which was 100 percent leased upon completion.
“Looking back at office market trends over the past year, this segment has seen strong activity in Salt Lake County,” said Trigger Reital, managing director and market leader of the firm’s Salt Lake City office. “The leasing activity was particularly strong — so much that record levels were hit and it is very likely that the market will continue to grow in 2016.”
Meanwhile, absorption in the industrial sector reached nearly 2 million square feet, above the five-year average. Leading the way were spaces of more than 100,000 square feet, with both leasing and sale activities reaching the second-highest level in the past five years.
Among the factors aiding the activity in the large-space category is the proximity Salt Lake City offers by way of distribution and logistics chains. Salt Lake City reaches all markets from Denver, Phoenix, Los Angeles, San Francisco, Oregon and others within a 24-hour drive, making it an excellent and dynamic location for distribution. Cushman & Wakefield/Commerce expects to see strong activity in that sector throughout 2016.
Last year also featured more than 3 million square feet of speculative development, most of which was in the 100,000-plus-square-foot segment of the market, with spaces divisible to 30,000 square feet.
As for 2016, the firm is predicting the highest level of construction completions in eight years in the office segment, with more than 1.6 million square feet currently under construction. The level of confidence by both developers and tenants continues to be reinforced with notable developments such as 111 Main, a 24-story, 440,452-square-foot building in the central business district, which is 42 percent pre-leased and expected to be fully leased by completion in fourth quarter, the firm said.
“The office market will remain strong throughout 2016,” the firm said in announcing the statistics. “Expect to see high levels of absorption, although vacancy is expected to increase by up to 1.7 percent due to the large amount of new construction. This increase is not an indication of a weakening market, but rather the result of demand by tenants for new buildings to accommodate all their needs. Any vacancy increase will remain well within healthy levels.”
In the industrial segment, 2016 is expected to see continued speculative development in a variety of market segments. Due to low vacancy, demand and rising market rents, speculative development of smaller product will be reintroduced to the vibrant Salt Lake City market, the firm said.
“This past year, we saw investment sales reach $194 million, with an average cap rate of 7.48 percent. This, coupled with low vacancy, is evidence of a strong industrial market,” Reital said. “This strong segment of the market will continue throughout 2016.”
More than 2 million square feet of industrial construction is expected to be completed in 2016, with the majority of buildings in excess of 100,000 square feet, causing availabilities to outpace absorption, triggering vacancy to rise slightly. Another bright spot to look forward to in the near future is the prison relocation, which will open large tracts of land creating many new opportunities in the northwest quadrant over the next 10 years, it said.