Cushman & Wakefield | Commerce Reports Utah Commercial Real Estate Broke All-Time Investment Record of $1.8 Billion in 2014
SALT LAKE CITY—Jan. 28, 2015—The Cushman & Wakefield | Commerce (www.comre.com) 2014 Year-End Market Review reports that total commercial real estate investment sales topped $1.8 billion, which is the highest level in the state’s history.
“Utah has proven yet again why it is consistently being recognized on a national level for its stellar business environment,” said Michael Lawson, President of Cushman & Wakefield | Commerce. “2014 saw a robust real estate market with several records being set. The state saw the highest level of investment sales activity ever and the lowest vacancy rate for retail properties in more than a decade. Looking ahead to 2015, this market is shaping up to deliver another exciting year for commercial real estate.”
The following are report highlights from the Cushman & Wakefield | Commerce 2014 Year-End Market Review. CLICK HERE to read the full report.
Utah Investment Market
• Following a strong recovery in 2013, 2014 surpassed expectations registering a record breaking year of just over $1.8 billion in total sales volume. The large transactions from 2014 will be a tough act to follow, but 2015 should indeed provide adequate opportunities for both buyers and sellers.
• In Salt Lake County, medical office continued to see gains through 2014 as the overall vacancy rate declined by 2.7 percentage points (pps) to end the year at 12.7%. Strong leasing activity resulted in 61,209 of positive absorption.
• Salt Lake County showed continued strength in the office market for Salt Lake as strong absorption continued to outpace construction. The direct vacancy rate of 10.8% was down by 1.0 pp on a year-over-year basis representing the lowest vacancy rate since 2007. Although the suburban market continued to have the highest level of absorption, the CBD posted 315,781 square feet (sf), more than tripling its 10-year average. A total of 677,000 sf of new construction is expected to be delivered in 2015.
• Utah County tenants expanded or relocated throughout Utah County resulting in 769,825 sf of positive absorption. Strong absorption decreased the overall vacancy rate dramatically by 1.9 pps on a year-over-year basis to end the year at 11.9%.
• Weber County’s office market continued to struggle and has not fully recovered from the recession. Over the past 12 months, class C properties saw the biggest improvement in vacancy rates, dropping from 21.9% to 17.9%. Vacancy rates in class A and class B type properties rose slightly. Lease rates however continued to decline across the board as landlords worked to fill spaces.
• In Davis County, numerous office projects were added to the market in both Centerville and Farmington. Much of the new product has already been absorbed. Class A vacancy rates dropped from 27% to 21% on a year-over-year basis. Lease rates remained steady for class A and class B properties and ticked up slightly for class C product.
• While the office market in Washington County showed signs of marked improvement during the first half of 2014, the second half of the year was a pause, if not an abrupt halt, to the steady improvement we have seen in the recent past. In the first six months of the year the market absorbed 57,492 sf of vacant space, which exceeded the absorption number for the entire year of 2013. In the second half of 2014, the market posted 1,904 sf of negative absorption, bringing the year total down to 55,588 sf.
• Summit County office properties continued to strengthen through 2014 as 58,500 sf of space was absorbed. This strong absorption caused the vacancy rate to decline by an impressive 4.4 pps to just 5.2%.
• 2014 saw another strong year for the Salt Lake County industrial market. Total activity in the market set a new record coming in at 6,114,208 sf. Both components, leasing and sales, provided strong numbers with leasing being an all-time high and sales being bested only by 2013. This increase in activity translated into just over 3.5 million sf of positive absorption which easily outpaced new construction of 904,053 sf for 2014.
• In Utah County, most submarkets performed well in 2014 with Orem, Provo and Utah County North absorbing 229,957 sf of space. Despite the strength of these submarkets, Utah County South struggled giving back 237,651 sf.
• The industrial market is the strongest commercial segment in Weber County. The vacancy rate dropped from 6.4% to 5.4% on a year-over-year basis. This marks the second straight year vacancy rates have declined and those rates now sit at an all-time low.
• The Davis County industrial segment remained the strongest with a vacancy rate of just 3.3%. The overall vacancy rate has declined over the past two years. Sales prices are on the rise, mostly because there is very little product available to purchase. Lease rates were steady with very little change from last year at this time.
• The industrial market continued to be the strongest sector in Washington County. The vacancy rate is at 4.4% and the market continues to tighten, pushing lease rates upward.
• Summit County’s industrial market is comprised almost entirely of smaller buildings with incubator or mid-bay type space that caters to local companies. These companies are typically related to construction, service and local distribution. With a current vacancy rate of just 1.0%, there is very little product that is available for lease.
• In the Salt Lake County retail market, vacancy continued to improve through 2014 as the overall vacancy rate declined by 0.7 pps on a year-over-year basis to end at 6.2%. This represents the lowest vacancy rate of the past decade.
• As with the rest of the state, Utah County grocers continued to be a big part of new activity. A new Walmart Supercenter is under construction in Spanish Fork and will open in 2015. Harmon’s also announced that they will locate at the new Terrace at Traverse Mountain located in Lehi.
• In Weber County, the overall vacancy rate is 15.2% which is up slightly on a year-over year basis. Lease rates are stable and have remained mostly unchanged over the past year.
• The retail market in Davis County continued to improve throughout the year. Vacancy rates declined for regional centers and anchorless strip centers. Lease rates were stable and saw very little change over the past year. It is anticipated that the retail market will continue to expand and grow in the coming years with the announcement of two major developments in Farmington.
• The Washington County retail market showed improvement in 2014 with vacancy rates dropping by 2.2 pps on a year-over-year basis to end at 5.3% while average asking rents increased. The improving trend is expected to resume in 2015 at a rate comparable to 2014, with vacancy decreasing and lease rates improving further. Investment sales will increase substantially in 2015 as investors from outside the area find opportunities for quality asset purchases in Washington County.
• In Summit County, retail continued to be the deepest sector. The best known retail corridor, Park City’s Historic Main Street, continued to command some of the highest lease rates in the state, with rates as high as $60 psf NNN. Limited inventory is expected to exert upward pressure on lease rates across all market segments in 2015.
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About Cushman & Wakefield | Commerce
Cushman & Wakefield | Commerce, headquartered in Salt Lake City, Utah is an independently owned and operated member of the Cushman & Wakefield Alliance with offices throughout Utah, Nevada, Washington and Idaho. The firm partners with its sister company Cushman & Wakefield | NorthMarq to provide innovative commercial real estate solutions to occupier and investor clients, offering transaction services, capital markets services, occupier and investor services, and real estate advisory. Together the firms manage more than 52 million sq. ft. of retail, industrial, and office assets, have annual revenues of more than $100 million, and employ more than 750 professionals. Learn more at www.comre.com; www.cushwakenm.com. C&W | Commerce and C&W | NorthMarq are part of the Cushman & Wakefield platform, which is the world’s largest privately-held commercial real estate services firm with 250 offices in 60 countries globally. www.cushmanwakefield.com.
About Cushman & Wakefield
Cushman & Wakefield advises and represents clients on all aspects of property occupancy and investment. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services to its occupier and investor clients for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, appraisal, consulting, corporate services, and property, facilities, project and risk management.