It is no secret that the success of the office real estate market is an indicator of the state of the economy. Without the success of businesses, the economy will not begin to thrive. With this in mind,Salt Lake County has been aching for a sign of hope that the office real estate market has positive results to report. Recent publications by the Deseret News and the Salt Lake Tribune have begun to highlight the positive changes that downtown Salt Lake City is seeing. The boost of patronage to the downtown central business district, in addition to the highly anticipated completion of City Creek are significant reasons that these publications have used in their explanations. While these concepts seem to be reasonable factors that would forecast a strong economic push on the state, our 2010 first quarter numbers don’t seem to match this optimistic view.
2010’s first quarter saw vacancy rates rise to 16.2%, up from 13.7%, and direct absorption rates of -76,737 sf, due largely in part by the negative absorption in the Periphery and Suburban markets, which negated the positive absorption seen in the Central Business District. However, as the second quarter wraps up, this optimism does not seem so far-fetched.
As the numbers are finalized for the second quarter’s absorption rates, there are many positive economic indicators that suggest that Salt Lake City’s real estate market has begun to take a turn for the better. Salt Lake County has seen an array of notable lease transactions, and the positive effects of these transactions are being seen across all sectors and quadrants, not just in the Central Business District.
Significant lease transactions have occurred all along the Salt Lake Valley. Vehix has moved its offices downtown into the Walker Center, leasing prime downtown space. Additionally, Goldman Sachs has taken 150,000 sf in 222 South Main, and already plans to expand its business by over 400 new positions. In the suburban office market, the RiverPark complex in the Southwest quadrant has adopted new corporate headquarter locations with Advanced MD Software, taking over 52,000 sf, and Provo Craft, who will be occupying over 65,000 sf.
These considerable transactions, coupled with new leasing activity in Class A and B buildings, may reflect a slight decrease on vacancy. Salt Lake is becoming a viable option for outside companies to reduce their business cost. The lack of new construction has allowed for absorption in existing office space, ultimately causing an increase in absorption in Class A and B buildings in both the suburban and downtown markets. With these factors in place, the Salt Lake City office real estate market seems to be experiencing a positive push.
Vacancies in desirable properties with significant square footage still allow for businesses to take advantage of this economically advantageous time. Additionally, downtown Salt Lake has many available spaces with great potential for tenant improvements for a variety of businesses.
While the second quarter’s final numbers will be released in the coming weeks, these positive factors are evidence of a shift into positive absorption rates. With current absorption estimates at 250,000 sf, the Salt Lake County office market does seem to be taking advantage of the economic distress by finding new ways to appeal to potential tenants. The stronger market indicators of this year’s second quarter might be a reason to begin instilling hope into the future of the office real estate market.
Chris Kirk and Todd McLachlan are Office Specialists with Commerce Real Estate Solutions. They can be reached at 801.303.5495 or firstname.lastname@example.org and email@example.com.
Reproduced with permission of The Enterprise, Utah’s business journal,www.slenterprise.com.