A newly released report from real estate firm Newmark Grubb ACRES shows that the Salt Lake City area had mixed results in the commercial real estate market for the first quarter of 2017. Slowing was noted in some areas following several years of substantial growth.
In the industrial market, an already low direct vacancy rate inched lower to 3.69 percent with 473,347 square feet (SF) absorbed in the first quarter. Of the 3.1 million SF currently under construction, 68 percent is already pre-committed.
Leasing and owner-user sales transaction SF volume were both slightly down year-over-year due partly to a dearth of available product. But prices per SF were up across most product types. Medium distribution had one of the largest year-over-year increases in lease rates at 17 percent.
The office market was fairly anemic with net absorption for the first quarter at 41,805 SF. Direct vacancy rates for classes B and C leveled out, and the Class A vacancy rate rose from a low in 2015 of 4.18 percent to 7.19 percent in the first quarter due, in part, to new construction coming to market. Lease transaction SF volume is down year-over-year but lease rates are up with Class C increasing the most. Owner-user sales transaction SF volume rose over 300 percent year-over-year.
Investment transaction dollar volume during the period was the lowest of the past five first quarters but the number of transactions was the second-highest of the past five. Multifamily investment transactions made up almost 50 percent of the total investment transaction dollar volume. Year-over-year cap rates were down for industrial, multifamily and office but up for retail.
In the zero-9,999 SF segment of the retail market, the number of leases, lease rates and leased SF were up year-over-year but were all down in the 10,000-plus SF segment. The number of owner-user sales is up year-over-year by 15 percent but the transaction SF and dollar volumes are both down with more transactions in the smaller segments. Single tenant investment sales dominated the number of investment transactions with close to 60 percent of the total first quarter transactions, an increase of 73 percent year-over-year.