Industrial Development Reaches Record Levels
Salt Lake’s industrial segment continues to experience historic levels of growth and activity. With 1.1 million square feet of industrial product completed in Q3 2018, Salt Lake has now delivered a record 3.9 million square feet year-to-date. Remarkably, this record will quickly be surpassed in 2019, as a minimum of 4.0 million square feet is expected to deliver next year. This strong development continues to be fueled by user-demand, where both new leasing and sales are more than keeping up with the heavy construction levels.
“Historically, Salt Lake’s industrial market has not experienced such elevated levels of development and leasing activity sustained over such a long period of time. During Q3 2018, new leases surpassed 1.0 million square feet for the eighth consecutive quarter, and overall year-to-date net absorption, which measures the change in how much space is actually occupied, totaled 3.6 million square feet,” stated Tom Dischmann, senior vice president. “This is phenomenal market activity and it is expected to continue for the near-term.”
Retail Leasing Surges to New High
New and expanding retailers pushed Salt Lake City leasing to a post-recession record of 933,549 square feet year-to-date. This total is higher than overall activity for either 2016 or 2017. Retail leasing activity has been heavily influenced by recreation and entertainment tenants, who have driven the highest total of positive leasing and account for 28 percent of retail square footage leased year-to-date. Also influencing this momentum is mid-box activity—leases ranging between 15,000-50,000 square feet. Mid-box activity has been steadily increasing; year-to-date, mid-box leases have accounted for 40 percent of all retail leases.
“Though more mid- to big-box closures continued to take place throughout the quarter, the strong leasing performance currently taking place has been enabled in part by these large vacancies left behind by struggling national retailers,” noted Russ Harris, a first vice president and retail specialist with CBRE. “In an effort to counteract these closures, we continue to see retailers transform the way they do business to succeed—and even thrive—in today’s changing retail environment, as evidenced by this recent surge in leasing activity.”
Construction Lull in Office Segment Makes Way for A Tightening in Vacancy
Office activity in Salt Lake County has been robust in recent years, but a slowing in new construction deliveries has allowed the market to rebalance. Building off a strong first half of the year, steady infill leasing amid this lull in deliveries pushed vacancy down to 10.8 percent for the metro area. This put the market on track to reach 2017’s net absorption high of just over 1 million square feet. This is due, in part, to strong preleasing of new construction in addition to the infill of 2017’s deliveries.
“During 2018, much of the lease activity has consisted of fewer, yet larger transactions by office users looking to lease big-blocks of new or recently converted office space,” stated Kreg Peterson, first vice president. “This is a trend that has taken place throughout the local market; large users have sought high-end space, and often there has not been enough existing inventory to satisfy the demand. However, recent and planned construction have helped in meeting this demand, as is evidenced in the size of transactions that have been taking place.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.us.