Chamber and CBRE provide economic outlook
SALT LAKE CITY- (October 30, 2014) The Salt Lake Chamber and CBRE released the 2014 Salt Lake County Economic Outlook, moving forward in a dynamic global environment. This bi-annual report summarizes key factors, including international and national geo-political instability, labor market changes, and demographics shifts and their effect on the economic future of Utah’s most populous county and the state in general. The report also details business activity, commercial real estate and notable projects such as the Salt Lake International Airport terminal redevelopment project and its impact on Salt Lake County and the economy in the coming years.
“Today’s global environment changes quickly and various forecasters, investors, policymakers, businesses and consumers are on edge while trying to understand developments here and abroad,” said Natalie Gochnour, Chief Economist, Salt Lake Chamber and Associate Dean, David Eccles School of Business, University of Utah. “Utah’s economy is becoming more and more global and world events can—and do—impact us locally.”
Due to the complicated nature of today’s economy, this report details both sectors and issues relevant to the state and metro outlook. Topics explored include the labor market, demographics, Utah’s tech sector, general trade and commerce, notable development projects and commercial real estate markets. Examination of these topics will provide a greater understanding of today’s complex economic environment.
Dynamic Global Environment
The report features how global events far from the mountain west are affecting the economic well being of Salt Lake County and Utah in general. Utah is more connected to the world than ever before as international trade supports 356,000 jobs within the state, and the share of jobs tied to trade more than doubled over the last two decades. Slowing emerging markets, conflicts in Russia, Syria and throughout the Middle East, an increasingly assertive China, and changing demographics all influence markets, sentiment and economic activity – impacting a more global Utah.
“Globally, the economic picture remains complicated,” said Darin Mellott, Senior Research Analyst, CBRE. “Though Utah’s economic growth is outperforming the national economy and looks bright, further examination demonstrates a very complicated global economic environment.”
The labor market is a focal point of economic discussion in Utah. With an unemployment rate of 3.5%, Utah now lauds the second-lowest unemployment rate in the nation. This is especially impressive considering that statewide unemployment peaked at 8.4% in January 2010. While this certainly indicates a recovery, experts close to the issue remain cautious. Unemployment rates alone do not provide a complete picture of conditions and must be considered in the context of other employment figures—some of which raise concerns about Utah’s labor market.
Traditionally, low unemployment rates are indicative of markets at full employment. But even as Utah boasts a low rate, wage levels have been slow to rise. In Salt Lake County, nominal wage growth averaged 2.1% per year over the last five years—which is essentially flat in real terms—and similar trends can been seen at a state and national level. This suggests Utah remains below full employment despite its low unemployment rate. Such a seemingly contradictory condition raises questions about the condition of the labor force itself, its makeup and skill.“Adding to the complexity of the economy is Utah’s student debt, having increased by 58 percent since 2005,” said Joseph Farrell, Research Analyst, CBRE. “Utah had the fifth largest increase in student debt from 2005 to 2012. More than half of this increase can be traced back to tuition hikes. Though Utah’s average student loan debt is among the lowest in the nation, decreased parental and state contributions leave Utah more reliant on debt to finance their education.”
Despite the mixed labor outlook, Utah has outstripped nominal values of venture funding by high profile tech hubs such as California and Massachusetts. A recent CNBC poll put Utah in first place for access to capital. Utah County alone outperformed 39 other states in terms of venture capital per capita. Overall, Utah placed third behind California and Massachusetts.
Several notable projects across the valley will provide significant impact to the local economy. Most notable among them is the redevelopment of the Salt Lake International Airport. The $1.8 billion dollar project will not be funded by taxes or public funds. Passenger fees, retail rents, bonds and airport usage fees charged to airlines will cover the tab.
“Indicative of Utah’s growing global connections, we as a community are choosing to invest in a world-class airport,” said, Gochnour. “Prudent financial management and thoughtful economic leadership are allowing a project of this magnitude to move forward without a single tax increase.”
Commercial Real Estate
The industrial market has experienced strong demand; over 2.5 million square feet of industrial space broke ground during the first three quarters of 2014, and large amounts of new supply are planned to enter the market in coming months. Availability continues to remain favorably low, ending the third quarter of 2014 at 8.4 percent.
Utah’s strong economy is supporting demand for commercial investment properties. Asset prices in Salt Lake are favorable relative to many larger metro areas, thus providing investors with higher returns compared to primary markets. Going forward investor activity is expected to remain strong with higher levels of market activity through the end of 2014.
To learn more about the 2014 Economic Outlook, visit http://slchamber.com.
About the Chamber
The Salt Lake Chamber is Utah’s largest business association and Utah’s business leader. A statewide chamber of commerce with members in all 29 Utah counties, the Chamber represents 7,700 businesses and approximately 500,000 Utah jobs—nearly half the workforce of our state. With roots that date back to 1887, the Chamber stands as the voice of business, supports its members’ success and champions community prosperity.