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A mid-year market report from NAI West describes Salt Lake’s industrial market as “a gem within the nation’s economy” due to factors like low vacancy rates, new speculative construction and robust investment activity.
Wick Udy, vice president in the industrial division of NAI West, said the state’s relatively healthy economy is helping the industrial market stay strong. In particular, he cites Utah’s proactive approach to attracting new companies to the state.
“We have more inventory coming online, which is enabling the national companies to come here,” he said.
Five new speculative buildings were added to the market in the first half of 2012. In total, these buildings represent 911,848 square feet of new industrial space. Three owner-occupant buildings added another 159,843 square feet to the overall inventory.
Additionally, 2 million square feet of industrial space is currently under construction in Salt Lake County.
Due in part to the new speculative construction, the industrial vacancy rate has increased slightly to 6.42 percent.
The market saw a 27.48 percent increase in the number of lease transactions, compared to mid-year 2011, totaling 167 year to date. At an average of $.38, overall lease rates are up—in fact, they are at their highest since the second half of 2008.
The number of sales transactions is down 12.5 percent over the previous year, and sales prices are down as well.
Due to attractive interest rates and sales prices, “it’s a great opportunity to go out and buy,” said Udy. “But there is a lack of quality product on the market right now.” But with lending options available, Udy said now is a good time for buyers to consider built-to-suit industrial buildings.
For owner occupants, the current sales price average is $51.13 per square foot, compared to $60.55 in the second half of 2011. However, the total volume of square footage sold increased significantly, from 591,493 square feet in the first half of 2011 to 811,143 in the first half of 2012.
Industrial investment sales remain strong. Investment sales rose from a total of 12 in 2010 to 30 in 2011—and this year seems to be keeping pace with the 2011 numbers. The investment dollar volume is up as well, from $63.4 million in the first half of 2011 to $68.9 million in the first half of 2012.
“You’re starting to see more confidence coming back into that investment game,” said Udy. A lot of investment money has been sitting on the sidelines, he said, but investors are starting to become active again. “There are a lot more pros in the market right now than cons.”
There were only six industrial land transactions in the first half of 2012. Udy predicted that the severely constrained market will lead to additional land sales. “We’re going to start seeing some closings on land, which is going to make land prices go up,” he said.