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Commerce Real Estate Solutions, an independently owned and operated member of the Cushman & Wakefield Alliance (www.comre.com), released its Marketbeat Snapshot reports detailing the second quarter status of the commercial real estate market in Utah.
The reports show that retail space is hot, and even though office vacancies are up slightly in Salt Lake City they are down in the suburbs and outlying high growth communities. The industrial market may be flat, but the investment market saw an increase in sales activity and volume for all real estate segments in Q2 2012.
"Utah's economic growth has seen rates at more than double the national average, and Utah is expected to add about 30,000 more jobs this year than last year," said Michael M. Lawson, president and CEO of Commerce. "This, coupled with a population and corporate influx into the state is cause for optimism in the commercial real estate market. We see continued improvement in the Intermountain region through the end of the year. Property owners and investors alike should be able to leverage this positive environment throughout 2012 and well into 2013."
The central business district in Salt Lake City has several large vacancies that will be an attractive option for tenants looking to take advantage of the revitalization of downtown. The overall direct combined vacancy rate for all property types in the metro office market is up over one percentage point from year-end 2011. The rise in vacancy is largely a result of companies opting to move to newer, more efficient build-to-suits in the same area. In contrast, suburban vacancy saw more than a full percentage point drop in vacancy from 14.19 percent to 13.15 percent during the same period. This is compounded by the significant growth in business and commercial real estate uses in Utah County.
Vacancy rates in the industrial market remained relatively flat, now sitting at 9.05 percent, while overall leasing and sales activity is up 500,000 square feet, or 21 percent year over year, suggesting the market is reaching levels comparable to those of 2006 and 2007. There are business trends within the Intermountain region that have significant influence on changes away from industrial space to more multi-use business space, based on the type of business growth occurring.
The overall number of transactions continues to increase, signaling a positive return toward pre-recessionary market norms. Total investment sales volume for all sectors increased nearly 65 percent year-over-year. Both lenders and buyers are entering the market with increased confidence, which is bolstered by low interest rates and favorable terms. Year-over-year, the investment market experienced an increase in sales activity/volume for all segments: Apartments: 140 percent, Office: 80 percent, Industrial: 33 percent, Retail: 9 percent.
Discount retailers are hot; the expansion plans of retailers like Ross, Marshalls, TJ Maxx, Jo-Ann Fabric, Shoe Carnival and Rue 21 have been very aggressive over the past six months. Ross alone is expected to open 2-4 new stores in the next year. The report also outlines that City Creek is pulling several tenants away from Gateway and many national restaurants are evaluating the feasibility of opening new locations in the market due to the expansion of the liquor licenses.
The full Salt Lake County report and Q2 Commercial reports for Davis, Weber, Utah, Washington and Summit counties can be downloaded at http://www.comre.com/research.cfm.