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Salt Lake County made significant increases in office and industrial construction during the third quarter, according to a report from CBRE’s Salt Lake office.
Completed office properties were up 158 percent from the second quarter, while industrial completions rose 45 percent in the same period.
“The recession and how it affected real estate had more to do with a decrease in demand and less to do with an oversupply of inventory,” said Scott Wilmarth, CBRE senior vice president. So the increase in demand for office space is tied to the rising employment numbers, and Wilmarth anticipates continued growth.
Demand is almost entirely in large, high-quality blocks, Wilmarth said, which are becoming harder for companies to find. About 268,000 square feet of office space was completed in the third quarter, including two multi-tenant office buildings—Old Mill Corporate Center IV in Cottonwood Heights and Building One at The Interchange in Draper.
Because of stringent financing requirements, those types of office spaces are still difficult to build. He said as banks and lenders see the space is being used, they may relax requirements slightly. “We may not go back to the place where we were, but you’ll see that lenders will perhaps be a little bit more accommodating,” he said.
Overall office vacancy is at 15.9 percent right now, Wilmarth said, but it isn’t even close to the more than 20 percent vacancies when the tech sector was struggling. He said, “I think anything less than 10 percent is what people would consider favorable to the ownership or landlord.”
Industrial construction is also on the rise, according to the CBRE report.
“In response to big-box demand for larger, more modern space, Salt Lake County has experienced a significant amount of new multi-tenant industrial construction boom,” said Rad Dye, CBRE senior vice president, in a press release. “In fact, industrial facilities under construction have not dropped below 500,000 square feet since the first quarter of 2011.”
The third quarter saw industrial space construction at 1.4 million square feed, up from 964,000 square feet in the previous quarter. Two notable industrial buildings completed construction in the third quarter: Rockefeller E building in Salt Lake City and Cookietree Bakeries building in Murray. Both buildings are single-tenant projects.