Real estate market OK despite rise in vacancies

Salt Lake County's retail real estate market is healthy, vibrant and stable, despite rising vacancies, according to a new report by Salt Lake-based Commerce CRG.

Total retail vacancies — including mall space —stood at 8.14 percent in the second quarter of this year, up from 2004's year-end average of 7.97 percent.

Salt Lake County's southwest area has emerged as a new hub for retail development, the report said, with residential construction surpassing that of any other area and establishing a "catalyst for retail development in years to come."

A separate report also released Wednesday by CB Richard Ellis noted that Jordan Landing planned to add 200,000 square feet of new space to its existing 1.4 million square feet.

The CB Richard Ellis report said that four of the county's six regional malls would undergo redevelopment within the next year.

The Commerce report said the majority of empty big-box retail centers have successfully been absorbed by developers creating new multi-tenant sites.

The CB report said the retail vacancy rate in second quarter was 9.2 percent, with rents rising for new space and existing space less than 25,000 square feet. It said the average retail rent for the second quarter stood at $12.54 per square foot, while the Commerce report said retail rents in second quarter, including malls, was at $17.38.

Aside from retail, the CB Richard Ellis report noted that strong demand by expanding businesses has pushed Salt Lake City office lease rates higher.

The overall weighted average asking gross lease rate for Salt Lake County in the second quarter rose to $15.78, up 3.6 percent from $15.23 per square foot in first quarter of 2005, and up slightly from $15.65 in the second quarter of 2004, according to CB Richard Ellis.

Scott Wilmarth, broker at CB Richard Ellis, said the weighted averages are lower because of a glut of less-expensive "class C" space, which dragged rents down.

Still, Wilmarth said, "The fact that they have trended upward is just another indication that the market is turning around as evidenced by the low vacancy."

The report noted that the overall office vacancy rate — including sublease space — was 15.6 percent in the second quarter, down from 19.8 percent in the second quarter of 2004.

Wilmarth said most office absorption is coming from tenants growing internally.

"We have seen some tenants moving in from outside of the market," Wilmarth said. "But the majority of it is coming from existing tenants hiring and growing and merging."

A separate report recently released by Commerce CRG noted that for the six months ended June 30, the office vacancy rate — excluding sublease space — fell to 13.72 percent, down from 15.13 percent during the same six-month period in 2004.

---

E-mail: danderton@desnews.com