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NAI West, a leader in Utah’s commercial real estate industry, recently released its 2012 Quarterly Report detailing trends in the office, industrial and retail markets in Salt Lake, Weber and Davis Counties. The report is a snapshot of the current state of commercial properties and is intended to reveal trends as they occur.
In the retail market, the newly-opened City Creek Center brings 700,000 square-feet of retail space to downtown Salt Lake and includes 90 new stores and restaurants, creating a huge boon to the city’s retail market. Chris Hatch, co-founder, partner and principal of Mountain West Retail-Investment, said the retailers at City Creek are performing well, especially with the well-timed opening that coincided with the Easter holiday and the LDS General Conference.
“The retailers typically have a strong opening and then see a tapered-off sales stream from there,” Hatch said. “With this schedule they were able to have three solid weekend performances in a row which has helped put this trophy asset on the map across the country with real estate professionals.”
For the office market, Casey Mills, CCIM, NAI Office Division vice-president, said compared to the first quarter in 2011, the first quarter of 2012 shows a significant drop in the vacancy rate in Salt Lake County from 15.37 percent to 13.78 percent. “We’re finally starting to hear companies in our market talk about expansion and actually pull the trigger on taking additional space,” Mills said. “There has been an increase in expansion deals during the last 12 months and I think that will continue.”
Although the average asking rates for office space have dropped, despite the fall in the vacancy rate, Mills indicates lease rates will likely increase during the next 12 months. He also added new building construction could slightly increase the vacancy rate but hopefully, construction of new product will have a minimal impact on the vacancy rates given the current velocity of the market.
For the industrial market in Salt Lake County, average lease rates are on the rise with a significant increase of $0.03 psf/month through the first quarter of 2012 compared to 2011, according to Jeff Heaton, NAI West vice president of Industrial Properties. Heaton believes the increase in rates is due to an uptick of activity in the smaller size range, less than 10,000 square feet, which typically have higher prices.
Another interesting phenomena is a slow-down in the larger size range, 100,000 square feet plus. Heaton stated, “We’re seeing a lot of deals stall due to expectations of tenants, believing they should get massive reductions here in Salt Lake simply because they got them in other parts of the country. Landlords are less willing to negotiate because activity has been slowly, but steadily, increasing for over a year.”
In Weber and Davis Counties, an increase in office-leasing inquiries depicts an interest for businesses to relocate or open new office space. NAI Vice-President of Office/Land Chris Falk said that company owners seem to be ready to get off the sidelines and become more readily involved in expanding their businesses. “Financing is not more readily available and we’re not seeing much job creation,” he said. “I just see it as more people are finally willing to get back in the game.”
For these northern counties, the industrial market shows more investors are flowing into the Weber and Davis County markets, an increase not seen since 2009. Construction projects in the Syracuse and East Gate areas are receiving more attention and industrial rates show a slightly increased purchase price, up about 10 percent..
The Utah commercial real estate market tends to be seasonal, with more activity between April and November. Close to 100,000 square feet was taken off the market by owner/users in Weber and Davis Counties, and that could push rates up a little higher if vacancy drops in the northern part of the state.
Overall, while the commercial real estate market is still depressed, small upward trends could bring a favorable year for construction, leases and sales in the state. For the complete 2012 quarterly report, visit www.naiwest.com or contact Greg Willis at firstname.lastname@example.org