Salt Lake County office vacancies drop

New job growth, increased in-migration and renewed optimism are driving down office vacancy rates in Salt Lake County.

For the three months ended June 30, office vacancy rates dropped to 15.26 percent, compared to 17.7 percent during the same period in 2003, said Bill Martin, co-managing partner of Commerce CRG in Salt Lake City.

James Wood, director of the Bureau of Economic and Business Research at the University of Utah, said the falling vacancy rates, which exclude sublease space, indicate businesses are optimistic.

"They've either hired or they expect to hire," Wood said. "They're willing to make an investment, and so that's a great sign."

Wood points to state projections for this year that indicate an addition of 22,000 new jobs, a 2 percent increase compared to 2003. And he expects net in-migration of 11,000 people by the end of the year.

Martin predicts that office vacancy rates could drop to roughly 14 percent by the end of the year.

Salt Lake Valley's central east side showed some of the lowest vacancy rates at 9.2 percent. That area includes office complexes in the Cottonwood Corporate Center, south of I-215.

And other areas that have shown historically high vacancy figures also are down.

"In the northwest quadrant, the vacancy numbers one year ago were at 36 percent," Martin said. "They are now at 23 percent."

Martin said renewed interest in call centers has the potential to turn around a "vacancy-plagued" segment of the market.

Call center vacancies account for 710,000 square feet in 17 buildings, according to Martin, but he predicts that sizable call center transactions could close before the end of this year.

The recent purchase of the Triad Center by The Church of Jesus Christ of Latter-day Saints will have a positive effect on downtown vacancy, Martin said, as LDS Business College and Brigham Young University's Salt Lake Center for Continuing Education move to Triad, inducing current tenants to relocate.

But the optimism over falling vacancy rates may be offset somewhat by new construction.

In a separate report by CB Richard Ellis, office construction activity by the end of 2004 will add nearly 300,000 square feet of office space to the overall market.

Those projects include: Old Mill Business Center III, The Pointe at 53rd, Riverpark II and Gateway III.

"While this construction activity points to continuing recovery in the Salt Lake City metropolitan area," the CB Richard Ellis report said, "it should be noted that each of the above properties has a premium location in areas with higher than average leasing activity."

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