Office vacancies drop

Continued job growth in Utah led to fewer empty offices in this year's third quarter.

Industrial vacancy rates also fell.

For the three months ended Sept. 30, Salt Lake County office vacancies — excluding sublease space — fell to 15.75 percent, down from 18.1 percent in the same quarter a year ago, according to a report released Monday by Commerce CRG in Salt Lake City.

Including sublease space, office vacancies fell to 18 percent in the third quarter, down from 21.8 percent a year ago.

However, office vacancies showed a slight rise from 15.13 percent in this year's second quarter to the third quarter's 15.75 percent.

Bill Martin, co-managing partner of Commerce CRG in Salt Lake City, said the slight uptick from second to third quarter was partly due to three new buildings, which added 253,000 square feet to the survey. Those buildings are Gateway III, Riverpark Corporate Center II and The Point at 53rd. In addition, Martin said, 22 other buildings were reclassified and added to the survey.

Despite the new space added, new jobs are the main driver behind the year-over declines.

Jeff Thredgold, president of Thredgold Economic Associates and an economic consultant to Zions Bank, said that while vacancy rates remain high, the falling trend is consistent with the state's improved economic performance.

"Office vacancy rates across the country tend to be somewhat high," Thredgold said. "Utah has been high with the economic weakness we saw for three years. You had some downsizing and some people leaving office space or looking to sublease office space."

However, he said, there has been some increase in absorption, and this year's decline in office vacancies represent Utah's best performance in roughly the last four years.

"We're up 26,500 jobs, which is reasonably good vs. where we were for three years when we went essentially sideways," Thredgold said. "Declining vacancies and higher absorption will lend itself to some modest improvements in rents vs. what we've seen the last few years."

Average lease rates for all buildings in the third quarter ranged from $16.70 to $17.26 per square foot, almost identical compared to the same period a year ago when rates were $16.60 to $17.28 per square foot.

Martin said while lease rates have remained static, concessions have been generous.

Aside from office vacancies, retail vacancies in the third quarter rose to 6.78 percent from 6.01 percent a year earlier. Yet industrial vacancies showed a drop to 9.41 percent in the third quarter from 10.07 percent in the same period a year ago.

"We have experienced reduced vacancy rates in almost every sector and every specialty," Martin said. "As the high-tech sector settles back into a healthier growth pattern, we will continue to see more of these firms interested in relocating to Utah."

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