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We talked a little bit about speculative building, which has been slow. In a normal market we hit about 6 percent vacancy and you’ll start to see buildings being built. It’s been slower, and a lot of that has to do with our lending friends. Money is not as easy to get as it used to be, and so you have to be pretty well healed to be able to build speculative buildings. We’re one of the very few markets in the country that are seeing speculative development.
In my lifetime, I’ve never seen buildings being pre-leased, and we’re now seeing half-a-million-square-foot buildings being pre-leased before they’re even completed. All of this points to a positive future for our industrial sector.
WOOD: I’m going to speak a little more broadly to the commercial real estate market here in Davis and Weber counties. We get to talk with the presidents and owners of lots of companies, and we get to hear how their businesses are doing, what their plans are for growth, expansion, downsizing, their challenges, their issues. For the first time since 2007, the majority of these businesses are optimistic for this coming year. Most are saying they’re profitable. Most are saying they’re considering expansion. There’s a lot of positive things happening with businesses. From a real estate point of view, I don’t think I felt optimistic about what’s going on in the market since 2007 either.
Look at the year in review. We’ve seen the number of deals increase slightly. We’ve seen vacancy come down a little bit. I’m talking about a point or two, so nothing dramatic. Lease rates and sales prices have come down slightly, and have been driving a lot of that. But there really is a lot of feeling that the market bottomed in a lot of ways. Again, rates have started to come down, but vacancy is getting to a point where I think we’re going to see growth and continued optimism.
Look at new projects coming online. There’s office space being considered in Centerville.
East Gate is considering a speculative 200,000-square-foot building next to Janicki. Farmington Station, in addition to their retail, they’ve broken ground on their first 36,000-square-foot office building. Falcon Hill is breaking ground on their second office building. So there’s a lot of good things happening.
We need to see strong absorption up here. The number of square feet that’s vacant, especially in the office side, is still relatively high. Industrial is strong. Vacancy in industrial has held its own. We need to see some strong absorption in the office side, especially with some of the projects being contemplated and coming online this year.
Discuss the real estate side from the home building perspective.
WRIGHT: Utah’s demographics have always been great for home ownership, and they will always be with the creation of new households, young families. Currently there’s a slight bias away from home ownership, but I don’t think that will last long. The bad news is that 2011 was the lowest number of permits in the past 35 years for new home construction. We believe that 2011 was the bottom and that it will only get better. There will continue to be short sales and foreclosures in 2012 that we’ll have to compete with. But the future is bright.
KIEFFER: To give you an idea about the construction industry, 2010 was actually our company’s worst year. We had about 425 employees that year. This year we have 810 employees. A lot of that was the Utah Data Center that we’re part of. But if you take that out of the equation, we’ve added about 100 employees.
We’re seeing a lot of activity in food and dairy in Utah and the surrounding states. Manufacturing distribution is very strong. We’ve got a handful of projects we’re working on. Freeport West out by Ninigret has put a lot of square feet in the last couple years. They’ve leased that space up very quick, and they’re looking to do other projects out south. We had a good year last year. We’ve got a good backlog going into this year, and we see a lot of opportunity.
MCCALL: It’s my personal opinion we’ve bottomed out. Sales are up 5 percent this time of the year over what they were. People are just tired of waiting. Our phones are ringing, and we just think this is going to be a better year. It’s not going to a banner year. We still have issues with short sales and foreclosures. It’s difficult for our first-time buyers to get loans. There’s lots of inventory which continues to hold the prices low.