Utah economy building momentum, strength

Economic indicators show Utah's economy has very likely turned a corner and is slowly, steadily building momentum.

My own experience over the past 18 to 24 months tells me that Utah's commercial construction industry has been growing in scope and strength, and that this trend is extending into a pattern of progress. Please consider the following factors. They are provided as background and perspective.

Construction industry leaders watch the industrial and office real estate markets closely. As vacancies fall and absorption of existing facilities increases, these are good measures for the construction industry, because we know that there will likely be increasing demand for new construction, either speculative or build-to-suit.

In a recent report published by NAIOP/CCIM for the Commercial Real Estate Symposium, real estate company NAI Utah reported industrial building vacancy rates declined from 11.6 percent in 2003 to 10 percent in 2004. There was marginal growth in industrial space in the first four years of the decade, with 96.2 million square feet of industrial space in 2000, growing to 97.7 million square feet in 2004.

The Salt Lake industrial market was quite stagnant during that period of time. The good news is that industrial lease activity has picked up significantly. In 2004, 4.89 million square feet was leased, compared to 2.79 million square feet leased in 2001. To reiterate, stronger activity in the real estate markets means the potential for new construction, as space is absorbed.

The office market is exhibiting similar signs of significant improvement. CB Richard Ellis reports overall office vacancy rates decreased from 20.5 percent to 18.9 percent in 2004; the first vacancy decrease in eight years in the Salt Lake market. Downtown vacancy declines are less substantial due to much stronger leasing activity in the suburban markets. New suburban office buildings completed in 2004 are almost completely leased. Our companies' experience shows there is an appetite for new office space.

The Governor's Office of Planning and Budget predicts 2005 overall employment growth for Utah at 2.4 percent. The GOPB's projection for the construction industry's job growth is 4.8 percent, double the overall rate. This estimate may be somewhat conservative, as actual numbers published by the Utah Department of Workforce Services show the creation of 5,700 new construction jobs in the 12-month period between March 2004 and March 2005.