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Salt Lake City — The Salt Lake area’s economy and outlook remain positive, according to a new report by CBRE. Indicators suggest that businesses in Salt Lake remain confident. Both new leasing and construction activity in the industrial market have grown, and employment across all professional sectors expanded, affecting leasing activity in the office market.
A notable amount of new construction was completed during the third quarter. Nearly one million square feet was added to the industrial base—the largest addition to the market in the last three years. This is primarily in response to a continuation of high demand for big-box space.
Building on this construction trend, competition among industrial land developers increased significantly in Q3 2013. Jeff Richards, first vice president, said, “There have been a number of new developers entering the industrial market, an area that has historically been dominated by a small number of key players. Industrial land is being absorbed quickly; many of the few remaining development sites are either under contract or have been sold.” During the third quarter, Richards and his team sold 38 acres of industrial land known as the White Mountain Business Park, which is slated for the development of a 600,000 square foot high-image industrial project.
The industrial market as a whole continues to perform well. Leasing activity has remained stable, experiencing a 12.5 percent year-over-year increase since Q3 2012, with the greatest change occurring in spaces less than 50,000 square feet. This heightened demand for small space occurred as a result of users returning to the market, suggesting that small business owners have gained confidence in the overall economy. This increased level of small-box users is expected to taper.
The office market is performing well, and all indicators point to a continuance of strength in this segment. Employment across all sectors expanded by 3.2 percent in the 12-month period ending in August of 2013, according to the Bureau of Labor Statistics (BLS). During the third quarter, net absorption was positive, vacancy decreased to a current rate of 13.6 percent, and average asking lease rates increased to a current rate of $20.07.
Though Salt Lake’s economy continues to outperform that of the nation, there is an increasing level of uncertainty with regard to policy that may affect growth in the coming months. This uncertainty has caused a heightened awareness of cost-controlling measures in the minds of occupiers. CBRE professionals continue to report the interest of tenants in ensuring their space is being utilized efficiently.
This focus on tailoring space to meet objectives is not only centered on the cost of space, but also the type of space users desire. The relevance of real estate being a determining factor in attracting and retaining talent is becoming more widely accepted, as the generational shift towards “Gen Y” workers gains strength.
“Commercial real estate is playing a much more important role in the health of businesses than it has in the past,” said Scott Wilmarth, CBRE senior vice president. “Occupiers are more conscious of the effects that space can have not only on their bottom line, but also on their workforce. Landlords and owners who are proactively addressing these items, which include transit and work-life balance, are seeing more demand than those who have not yet adopted this attitude”
The Salt Lake market as a whole is performing well and is poised to continue growing at a pace consistent with long-term averages.
For the complete second quarter 2013 reports detailing both the industrial and office markets, visit CBRE.com/USA/Research.