Q2 2022 Commercial Real Estate Report: Salt Lake City, UT
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Hosting the headquarters of major companies like Overstock and Ancestry, Salt Lake City has become one of the fastest growing cities in Utah and the United States as a whole.
Salt Lake City’s unemployment continues to drop: It currently sits at about 1.9%, below the national average of 3.6%.
Overall new leasing activity across the region for Class A and Class B properties has fallen quarter-over-quarter, however, as more businesses seek more affordable Class C counterparts as employees continue to work from home or in a hybrid setting.
Salt Lake City’s commercial real estate (CRE) market has grown rapidly in recent years, though its CRE fundamentals are starting to soften as 2022 progresses.
Nonetheless, it remains relatively affordable compared to other markets throughout the country and is expected to continue strong growth.
General Area Overview & Demographics
Salt Lake City is the capital and most populous municipality of the U.S. state of Utah, with a metro-area population of 1.19 million as of July 1, 2022.
The average age is 32.3, and the average household income is about $88,000. The combination of younger average age and higher average household income makes Salt Lake City a hotspot for premium employment among young professionals, most especially in the tech sector (almost 10% of the city’s total employment).
It is one of only two major urban areas in the Great Basin (the other being Reno, Nevada), and lies in the Salt Lake Valley, a shallow basin flanked by mountain ranges that rise abruptly to elevations of 4,000 to 5,000 feet (1,200 to 1,500 meters) above sea level.
On average, Salt Lake City receives about 21 inches (53 centimeters) of precipitation per year and experiences about 107 days per year with measurable precipitation. The resulting desert climate supports hot summers and cold winters. Although its weather pattern still features dry spells, it is noticeably wetter than either Los Angeles or Phoenix.
General Commercial Real Estate Performance in Salt Lake City, UT in Q2 2022
In Salt Lake City’s office space sector, overall asking rents have decreased quarter-over-quarter by about 3% but have increased year-over-year by about 5%. The quarterly decrease may be due to low leasing activity in the city’s submarkets. Overall office vacancy has increased quarterly.
In the city’s industrial sector, demand for distribution and manufacturing space is outpacing supply: vacancy rates for both property types fell to 2.8% and 0.6%, respectively. Overall average asking rents for industrial space have increased by about 3% quarterly. The city’s industrial development pipeline remains active, as well.
In the multifamily sector, an upward climb in employment is growing demand for multifamily housing as new rental units are delivered to Salt Lake City’s market. Local rental stock has expanded by nearly 6% and average asking rent sits at about $1,600 per month.
Salt Lake City, UT Office Market Activity in Q2 2022
Overall office space asking rents in Salt Lake City rose to about $25 per square foot year-over-year but fell over the previous quarter.
The number of new office space leased by tenants dropped in Q2 2022 compared to Q1: about 620,000 square feet compared to Q1’s 1.4 million square feet. This focus on existing space should boost absorption throughout the rest of the year as tenants start to occupy their spaces.
A notable uptick in leasing occurred in Salt Lake City’s Central Business District (CBD): about 23%, with Class A properties accounting for the highest share of new leases in the district. The speculation is that employers are leasing higher-quality office space to encourage employees to return to full-time office employment.
Notable Office Market Deals in Q2 2022
Several notable office deals and leases occurred in Salt Lake City in Q2 2022. These include:
- Pelion Ventures’ leasing of about 26,000 square feet for in the South East submarket.
- Sterling Realty Organization’s purchase of about 100,000 square feet in the South East submarket.
- Cerco Development’s purchase of about 32,000 square feet for $275 per square foot in the Periphery submarket.
USAA also completed a 320,000 square foot development project in the Periphery submarket.
Salt Lake City, UT Industrial Market Activity in Q2 2022
The industrial market in Salt Lake City is particularly active, with new construction projects underway and several large warehouses leased in the past quarter, shrinking overall industrial vacancy to nearly 2.0%.
Vacancy rates are declining as asking rents increase in 2022: The average asking rent per square foot across all industrial property types in Salt Lake City is about $0.70 per square foot, a notable year-over-year (24%) and quarterly (3%) increase.
Leasing activity grew to about 1.6 million square feet in Q2 2022 compared to Q1’s 1.5 million square feet.
The overall industrial market in Salt Lake City is expected to grow substantially through the rest of 2022 as tenants occupy their spaces, demand rises, new construction completes, and asking rents increase.
Notable Industrial Market Activity in Q2 2022
Several notable industrial leases popped up in the city’s North West submarket in Q2 2022:
- Ready Alliance Group’s leasing of 200,000 square feet.
- Berlin Packaging’s leasing of about 166,000 square feet.
- Pretium Packaging’s leasing of about 97,000 square feet.
These are among other notable sales transactions and leases.
Salt Lake City, UT Multifamily Market Activity in Q2 2022
Salt Lake City, UT’s multifamily market activity in Q2 2022 was led by a mix of average to above-average rent growth and new development deliveries.
Multifamily rents in the city grew by an average of 5.5% during the quarter.
The number of new multifamily units delivered to the market totaled nearly 5,000 in the year ended March 2022.
The market forecast for the rest of 2022 is for continued moderate rent growth and new development deliveries.
Takeaways for Salt Lake City, UT Investors
The strong performance seen by Salt Lake City’s commercial real estate market is expected to continue through the rest of 2022.
It’s speculated that employers in the city will begin recruitment drives in talent pools outside the metro area, drawing new residents to Salt Lake City and growing the demand for housing as a result.
Industrial real estate is expected to continue its boom, as well.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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