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Salt Lake City — The Cushman & Wakefield | Commerce 2013 Year-End Market Review reports that in Utah, 2013 saw commercial real estate returning to pre-recessionary levels in several categories, the most prolific being total investment sales, which came in at their second-highest level of all time.
“Once again, Utah has seen a stellar year of growth and development, and has received numerous national accolades for its stability, pro-business environment and high quality of life,” said Michael Lawson, president of Cushman & Wakefield | Commerce. “The commercial real estate market in Utah saw a shift in 2013 as it drove past the effects of the recession with all property types moving beyond stabilization into a period of expansion.”
By the end of year, Utah had recorded the second-highest level of investment sales activity in the state’s history, with nearly $1.4 billion in sales.
The following are report highlights from the Cushman & Wakefield | Commerce 2013 Year-End Market Review. The full report may be accessed at: http://www.comre.com/reports/2013Reports/Utah/YearEnd2013Report_Utah.pdf">http://www.comre.com/reports/2013Reports/Utah/YearEnd2013Report_Utah.pdf
Every submarket in the Salt Lake County office market saw some type of improvement in 2013 as 1,090,980 square feet of space was absorbed, representing the third-highest level on record. Demand is expected to continue into 2014.
The Utah County office market experienced moderate growth with 35,349 square feet of positive absorption as the overall vacancy rate dropped by 0.7 percentage points to end at 13.8 percent. Both Utah County South and Orem were largely flat, while Provo experienced 68,322 square feet of negative absorption. Utah County North was the strongest market as 115,419 square feet of space absorbed on the year. This was largely the result of Thanksgiving Point IV coming online.
Weber County saw the overall office vacancy rate decline significantly, with the largest absorption occurring in class-A buildings. Vacancy rates in class B and C properties decreased but continued to remain on the high end.
The Davis County office market made moderate strides in 2013 as class B and C office vacancy rates declined from the prior year. Class A space increased in vacancy, but that is largely due to the new construction at Station Park.
The Washington County office market continued to show moderate improvement. The overall vacancy rate continued to improve over the past several years with a decrease of 1.7 percentage points in 2013 to end at 11.5 percent.
The Summit County office market experienced strong absorption in 2013 with approximately 65,000 square feet of net absorption. This strong absorption, coupled with no new construction, pushed vacancy rates down by 5.7 percentage points, to their lowest levels since 2008. Average asking lease rates have been climbing, especially around the Kimball Junction area, where much of the new development is occurring.
On-campus medical office buildings saw vacancy rates improved over the second half of the year as the rate dropped by 1.3 percentage points to 10.3 percent. Little changed in the second half of 2013 for off-campus properties as class A vacancies remained high as both the Hoopes Vision Building and One Sandy Center continue to have high vacancy.
In 2013, the Salt Lake County industrial market capitalized on the momentum from 2011 and 2012 and showed that it is no longer in recovery mode but entered an expansion period. Strong activity in the market led to positive absorption of 2,574,173 square feet, representing the highest level of annual absorption since 2007 and exceeded the absorption of the last four years combined.
Utah County leasing activity remained strong throughout the year, and many tenants became more interested in acquiring their own buildings. With this increase in leasing activity, the overall vacancy rate decreased by 2.4 percentage points to end at 5.7 percent.
In Weber County, the industrial market continued to be the strongest sector. Industrial vacancy rates decreased from 8.3 percent to 6.4 percent over the past year.
In Davis County, the industrial segment remained strong with an overall vacancy rate of just 3.9 percent. Both lease rates and sales prices are on the rise as quality space becomes harder to find.
The Washington County industrial market continued its strong recovery with the vacancy rate dropping by 3.8 percentage points to end at 4.0 percent. While the majority of the absorption occurred in the first half of the year, activity was solid throughout the entire year. There has been an increase in demand for industrial land which is expected to continue through 2014.