2019 Saw High Transaction Dollar Volumes and Construction Activity
Salt Lake City— Newmark Knight Frank (NKF) announces the release of its 2019 Utah Year End Market Report. The Wasatch Front commercial real estate market continued to perform strongly in 2019.
New industrial construction in Salt Lake County totaling 4.1 million square feet was delivered to the market in 2019, and 7.6 million square feet was under construction at year-end. The delivery of new construction in 2019 provided relief to an undersupplied market: the direct vacancy rate had hovered below 3.0 percent for the last two years. Davis and Weber counties experienced one of its largest jumps in lease and sale values year over year to date. Just over 2.0 million square feet was under construction in Utah County and direct vacancy rate ended at 3.4 percent for 2019.
Demand for office space in Salt Lake County remained strong in 2019 as vacancy dropped 128 basis points with construction reaching new records at 3.5 million square feet currently underway. The number of owner-user sales increased 100.0 percent and total transaction square feet increased 234.4 percent from 2018 to 2019. In the Tech Corridor, net absorption remained even with 2018 at a positive 1.8 million square feet for 2019 as well. Utah County saw a dramatic increase in net absorption and leasing, while Davis and Weber counties overall combined vacancy dropped from 6.7 percent at year-end 2018 to 6.1% at year-end 2019.
Utah’s retail market along the Wasatch Front is evolving. The shuttering of major players such as Sears, Shopko and Payless across the valley drove down net absorption and increased direct vacancy. By contrast, mixed-use redevelopment projects are flourishing. The market is proving its adaptability, resulting in stable lease rates of $17.60/SF and a 3.9 percent increase in the number of lease transactions.
The Utah investment market remained robust in 2019, posting an annual total dollar volume of $2.52 billion. The overall price-weighted cap rate ended 2019 at just under 6.0 percent, a decrease of 19 basis points from 2018. The office investment sector performed strongly in 2019, posting one of the highest annual total dollar volume totals of all time. Industrial properties are still highly sought after but little product available to purchase. The multifamily market experienced a precipitous drop in total dollar volume of 50.1percent from 2018 to 2019. On the retail side, interest in single-tenant triple net leased assets and grocery-anchored centers remained solid.
Demand for multifamily land, both apartment and townhomes, remains high throughout Salt Lake County. Well-suited industrial sites are becoming scarce pushing pricing up 7.8 percent from year-end 2018. Developers are watching how the office market reacts and absorbs the current construction before land banking any future office developments.
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Newmark Knight Frank (“NKF”), operated by Newmark Group, Inc. (“Newmark Group”) (NASDAQ: NMRK), is one of the world’s leading and most trusted commercial real estate advisory firms, offering a complete suite of services and products for both owners and occupiers. Together with London-based partner Knight Frank and independently-owned offices, NKF’s 18,000 professionals operate from approximately 480 offices on six continents. NKF’s investor/owner services and products include investment sales, agency leasing, property management, valuation and advisory, diligence, underwriting, government-sponsored enterprise lending, loan servicing, debt and structured finance and loan sales. Occupier services and products include tenant representation, real estate management technology systems, workplace and occupancy strategy, global corporate services consulting, project management, lease administration and facilities management. For further information, visit www.ngkf.com.
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