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The commercial real estate industry in Utah is seeing a recovery, but some are worried that slow lending may stall future projects, according to a group of real estate experts at a Utah Business magazine roundtable Tuesday morning.
Most medium to large office spaces—10,000 square feet or more—are full, and even smaller spaces are beginning to fill up with the help of SBA loans, said Bob Chatfield, chief credit officer of the Bank of American Fork.
Smaller deals are coming back, but it’s only been recently, said Brandon Fugal, Coldwell Banker Commercial executive vice president. Fugal said the last three months have seen an uptick in smaller offices getting leased.
Although things are going well, Fugal said he’s concerned that there isn’t enough building going on to meet future needs. “What I’m afraid of is Utah, by default, chasing companies away that would have otherwise located here because we have a lack of product and we have very few developers that really have the ability to go vertical quickly.”
Jake Boyer, president and CEO of the Boyer Company, said his company hears a lot about the supply shortage in commercial building, but they are willing, able and ready to build for a legitimate tenant.
Fugal said the problem with that is few tenants are looking the year to two years in advance needed to complete a large-scale commercial project. Many of the companies that are now driving the economy didn’t exist in their present form five years ago, so planning out that far in advance isn’t realistic.
However speculative building is almost nonexistent and getting financing to build without a significant part of the building pre-leased is nearly impossible, said Eric Smith, first vice president at CBRE.
Pentad Properties President Greg Shields said cities also need to have enough staff to address permits in a timely way. “If you want these national tenants, these jobs, these residents, you have to be able to move it along quickly—and I’m not saying give anything up—move it along quickly once these projects come. Or the people are going to go away if the process takes too long.”
The arrival of City Creek will cause some problems for Gateway and other properties for a while, but the attendees agreed that ultimately the new development will be a gain for downtown and draw more businesses away from the suburbs despite higher costs and longer timeframes for downtown projects.
The Commercial Real Estate roundtable will appear in the May issue of Utah Business magazine.