Cushman & Wakefield | Commerce Reports 2013 was a Strong of Year for Expansion of Commercial Real Estate in Utah
SALT LAKE CITY—Jan. 30, 2013—The Cushman & Wakefield | Commerce (www.comre.com) 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 coming 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 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. With numerous construction projects lining up, 2014 is anticipated to be another strong year for commercial real estate.”
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/uploads/reports/p18ip1030p1p3spjrcag1uv3su13.pdf
- Every submarket in the Salt Lake County office market saw some type of improvement in 2013 as 1,090,980 square feet (sf) 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 sf of positive absorption as the overall vacancy rate dropped by 0.7 percentage points (pps) to end at 13.8 percent. Both Utah County South and Orem were largely flat, while Provo experienced 68,322 sf of negative absorption. Utah County North was the strongest market as 115,419 sf 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 pps in 2013 to end at 11.5 percent.
- The Summit County office market experienced strong absorption in 2013 with approximately 65,000 sf of net absorption. This strong absorption, coupled with no new construction, pushed vacancy rates down by 5.7 pps 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 MOBs saw vacancy rates improved over the second half of the year as the rate dropped by 1.3 pps 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 sf, representing the highest level of annual absorption since 2007 and exceeded the absorption of the last 4 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 pps to end at a strong 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%. 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 pps 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.
- Summit County’s industrial market is comprised almost entirely of smaller buildings with incubator or mid-bay type space that primarily caters to local construction and service companies. The little remaining inventory from 2012 was mostly absorbed in 2013 as the vacancy rate dropped by 4.4 pps to the current rate of just 1.1 percent. Given this severe lack of supply, it appears likely that some speculative construction will begin to occur in 2014.
- Very little new construction was completed in 2013 with only pad space and additions to existing centers taking place. Despite little new construction, the market experienced 752,321 sf of positive absorption. New construction will increase in 2014 and be more in line with long term averages as several grocers are expanding in the market. Average asking rates will see upward pressure, which will also be buoyed up by the new product on the market.
- In Utah County, Lehi continued to see a dramatic amount of retail expansion through 2013 which is expected to continue for the foreseeable future. With the increase in new construction expected for 2014 and forward, vacancy rates will likely level off to compensate for the new space on the market.
- Weber County retail vacancy rates have steadily declined over the past two years. Landlords have been aggressive in offering incentives such as free rent and tenant improvements to attract new tenants. Lease rates have been relatively flat but are inching back up as the market strengthens.
- The Davis County retail market heated up as many new retailers moved into the area. More than two dozen retailers and restaurants opened their doors this past year. Overall lease rates are on the rise as renewed confidence and steady growth improve the retail sector.
- In Washington County, the retail market was hit with several significant tenants giving back space. Anchored class A retail continues to outperform all other property classes and types with high demand yielding high rents and very little vacancy.
- No other market in Utah, during 2013, experienced as strong of declines in vacancy rates as Summit County. Many signs of positive momentum continue for Summit County heading into 2014.
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About Cushman & Wakefield | Commerce
Cushman & Wakefield | Commerce, an independently owned and operated member of the Cushman & Wakefield Alliance, has been the leading provider of real estate brokerage services for more than 30 years. Headquartered in Salt Lake City, the firm has offices throughout Utah, Nevada, Idaho and Washington. It offers consulting, brokerage, tenant and landlord representation, property and facilities management, and valuation services to corporations, institutions and investors throughout the Intermountain West and Pacific Northwest. For more information, and for property listings, broker information, market category reports and more visit www.comre.com.
About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 253 offices in 60 countries, employing more than 15,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $3.7 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.