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Utah used to be a state that large commercial real estate companies and investors would just pass over, but in recent years, Utah has truly become the place to be, according to several of the state’s commercial real estate experts. Most also agreed that 2013 showed phenomenal growth in their industry during Utah Business’ annual commercial real estate roundtable Wednesday.
“Utah used to be a flyover state,” said Gary Mangum, regional manager and principal broker at Marcus & Millichap. “None of the large institutional players were looking at placing capital here. But today they say we’ve got everything going for us. They hope other institutional players don’t catch on for a while so they can increase their portfolio holdings here.”
Mangum said this trend portends well for Utah’s economy because the state has gained a lot of recognition and credibility in the market.
“Corporations are even setting up their national headquarters here,” he said. “I think Salt Lake and Utah in particular are poised for additional growth.”
Greg Shields, president of Pentad Properties, said he continues to hear negative comments about other states when it comes to commercial real estate.
“There’s kind of a dichotomy of the states that have it going on and those that don’t,” he said. “There seems to be much more of a division now than I’ve ever seen in my career.”
In 2013, the commercial real estate market in Utah did just under $1.4 billion in investment transactions, Mangum said.
“You’ve got to go back to 2005 before we’re close to that,” he said. “We’d have been even higher than that had the inventory been available, because almost everything priced right on the market was sold. We saw record numbers on square foot prices and transaction volume, and we’re seeing the start of this year on that same pace. When deals hit the market, there are more buyers than we have deals.”
Kip Paul, executive director of investment sales at Cushman & Wakefield | Commerce, said that $1.4 billion produced the second-highest year on record. Paul said last year alone, there were 41 separate transactions of $10 million or greater. Of those transactions, two-thirds were purchased by out-of-state investment groups, and of those groups, roughly half were repeat buyers and half were new entrants into the market.
“That speaks to the point that the word has gotten out about Salt Lake City,” he said.
One area in the state that continues to have tremendous growth is downtown Salt Lake City. Scott Wilmarth, senior vice president at CBRE, said in order for downtown’s central business district to continue to do well, the city needs to capture more high-tech firms.
“We think there will be record-breaking absorption this year, and two-thirds of that is attributed to high-tech firms,” he said. “Downtown is going to have to reach out to these high-tech firms, and they can, because they’ve got the residential, transportation and ability to accommodate. It’s key to the resurgence of downtown.”
Jake Boyer, president and CEO of The Boyer Company, said there’s about a 23 percent growth in inventory in downtown Salt Lake City with current construction projects.
“What we’re feeling is that downtown is no longer just law firms and service providers,” he said. “It’s something that’s opened up to [all types of] companies. A lot [of the workforce] wants to be downtown because we have younger individuals working who want to live downtown and have the environment.”
Jeff Edwards, president and CEO of the Economic Development Corporation of Utah, said statewide, EDCUtah has 243 active projects. Edwards also said Utah is getting bigger projects than ever before—including seven recent projects with more than $1 billion of capital expenditure attached to them.
“Utah is an island of stability in a chaotic national market,” Edwards said.
The discussion was moderated by Edwards. The Commercial Real Estate roundtable will appear in the May issue of Utah Business magazine.