Over the past few years, salt lake’s economy has experienced impressive growth and noticeable maturation. Employment growth has often outperformed long-term averages and the growing presence of national players is representative of a thriving, well-diversified business community. Looking back on his performance gives reasons to expect another strong year in 2017 for both real estate market and the local economy in general.

SUPPLY AND DEMANDS DYNAMICS

Building off of the continued growth and general performance of the local economy, office, retail and industrial properties alike experienced some of the highest levels of construction ever seen in the area. According to the senior vice president of CBRE, Rad Dye

“At the end of the first quarter of 2016, close to 1.6 million square feet was under construction, over 61 percent of which was either build-to-suit or owner/user,”

According to Phil Blair, owner of Century 21 Property Management, states “This shift demonstrates how low-interest rates and limited sale availability have incentivized many users to build their own facilities.”

Strong demand for new, Class-A space has sparked interest in value-add opportunities from both local and out-of-state investors.

ECONOMIC AND POLITICAL CONSIDERATIONS

When seeking to understand where things are headed in 2017, it is important to consider broader economic and political conditions. Employment is a major driver of commercial real estate demand in Salt Lake City. Though the low unemployment rate of 3.5% may be signaling an approaching peak for employment. The fact that unemployment is still 120 basis points above the record low of 2.3% set in march 2007 further supports the idea that there is room to run.

The plummeting of oil prices has a significant dampening effect in some markets, Salt Lake’s diverse economy has allowed growth to continue at a healthy rate. Low oil prices mean more disposable income for RSL consumers and low costs for the production and transport of goods and services, which are both positive trends for local real estate demands.

Looking ahead, there is much in the broader economic picture that remains uncertain, but RSL’s diverse economy is well positioned to continue growing throughout 2017. Mirroring this growth, commercial real estate in Salt Lake is expected to experience another strong year.

Salt Lake City

KEY INDICATORS

Salt Lake’s office market absorbed nearly 2 million sq.ft. over the past few years. At this pace, the Salt Lake City’s market would absorb an amount of space equivalent to that which is currently under construction by year-end 2017.

Strong demand elicited a supply response from developers. Year-end total completed construction was approximately 775000 sq.ft. with nearly 2 million sq.ft. of new office space coming down the construction pipeline in Salt Lake county alone.

OUTLOOK

Continued healthy, above-average growth is expected throughout 2017 with absorption levels similar to 2016. With notable gains anticipated in office-using employment, demand for office space is expected to remain strong. As previously noted, the area has yet to exhaust its labor supply despite a low unemployment rate. These projections suggest 2017 will be another good year for the Salt Lake City office market. Even as new supply is delivered throughout 2017, healthy demand will help maintain market balance.

LOCAL MARKET DRIVERS

The recent advancement of salt lake’s industrial market can be attributed to many drivers, but two are particularly relevant to performance in 2016. First, recent revolutions in commerce have led to an increased need for warehousing, distribution and logistics services. Salt Lake City has always had the advantage of regional intermodal access, but rising costs in primary markets and the need for more streamlined operations have made Salt Lake City even more attractive.

DEMAND

Healthy demand caused vacancy rates to drop to 90 basis points from year-end 2015 ending 2016 at 4.9%. vacancy in the Salt Lake market was mostly concentrated in older centers which had vacant big-box space. Increased demand for mid-box and smaller footprint properties resulted in many big-box centers being divided into mid-box space. Looking at the market as a whole, prolonged single digit vacancy rates have supported strong rent growth with average asking lease rates up to 7.5% year-over-year ending 2016 at 16.71 per sq.ft. demand was strongest for high-end space which consistently achieved rates well above overall average asking lease rates.

In conclusion, Salt Lake City has one of the fastest-moving housing markets, with equally aggressive price gains.