Commercial Real Estate Trends
Compared to the previous quarter, the Utah Commercial Real Estate market has seen a decrease in office space and a rise in multi-family rental rates. However, the industrial market is expected to continue growing significantly through the rest of 2022.
Multifamily rents grew by an average of 5.5% during the quarter
During the third quarter of this year, multifamily rents grew by an average of 5.5%. This was the highest year-over-year rate of growth since the post-recession cycle. The national rental rate remained stable at $1,584 per month.
Vacancies remained below historical norms. The overall vacancy rate was 7.2% in the third quarter. The markets with the lowest vacancy rates through the third quarter were San Diego, Los Angeles, San Francisco, Seattle, Orlando and Tampa.
The coronavirus pandemic increased demand for Sunbelt units. New residents will fuel future demand for apartment units. The economy continues to recover. The market forecast calls for moderate rent growth through the year.
As long as job prospects improve, employers will continue to hire workers. This will lead to increased hiring and further improvement in the rental apartment market.
Industrial market in Salt Lake City is expected to grow substantially through the rest of 2022
During the past quarter, several large warehouses were leased in Salt Lake City. This is one of the reasons why this market is expected to see substantial growth through 2022.
The Salt Lake area economy continues to be healthy. The unemployment rate is below the national average, and Utah’s non-farm payroll employment has increased 3.7% over the past 24 months.
The Salt Lake area also has an abundance of college graduates. This is one reason why it has been listed as one of the “next tech meccas” by Forbes.
Salt Lake City is home to major companies like Amazon. However, they are now reducing their footprint. The resulting drop in demand for industrial space may be the result of the company’s slowing hiring plans for their fulfillment centers.
Salt Lake City’s desert climate supports hot summers and cold winters
Located at 40 deg 45′ N latitude and 1,300 meters above sea level, Salt Lake City is the largest city in Utah. It’s the political, cultural, and religious capital of the state, and is also a hub for interstate transportation.
The Great Salt Lake and the Wasatch Mountains help to moderate the summer temperatures. However, the weather can still be very hot during the day and cool at night. The area is home to many game birds, quail, pheasants, and white pelicans.
The winters in Salt Lake City are cold and snowy. The average temperature in January is below 0 degF. The city receives 21 inches of precipitation each year.
While summer is warm and sunny, it’s also the driest season. The low humidity contributes to the dryness. There are also very few thunderstorms during the summer.
Salt Lake City’s office space sector has decreased quarter-over-quarter by about 3%
During the third quarter of 2019, Salt Lake City’s office space sector saw a 3% drop in asking rents. This decline is primarily due to a tempered demand. It was also impacted by the slow transitions of large tenants that vacated their space.
In addition to this, supply pressure is still at an elevated level. There are over 300,000 SF of new delivery underway. The majority of these projects are for logistics-oriented warehouses. The industrial market is expected to continue growing in the coming years.
This year, the market is expected to see moderate rent growth. The vacancy rate is expected to remain stable in the long term. However, due to the sticky high inflation and aggressive target interest rate hikes, the economic landscape may change in the short term.
Salt Lake City’s multi-family team has developed a tremendous depth of market knowledge
Investing in multifamily real estate is hot this year. The market is experiencing a vacancy shortage. Developers are working to create solutions to meet the demand. However, the new supply may not affect the rental market for several months. In the meantime, buy and hold investment strategies work well for mid-range rentals.
The Salt Lake City housing market has recovered well from the Great Recession nine years ago. Since then, the population has increased by 15 percent. The unemployment rate has fallen to less than two percent.
Salt Lake City’s economy has benefited from the low unemployment rate and historically low interest rates. Its job growth has also been strong. The employment sectors that are fastest growing include construction, trade and transportation, information and educational services. The Church of Jesus Christ of Latter-day Saints and Intermountain Healthcare are major employers in the area.