Utah is home to big-building returns

Investors are turning to Utah for bigger returns on office buildings, apartment complexes and retail centers.

According to a report released Thursday by Salt Lake-based Commerce CRG, commercial real estate sales in Utah reached $714 million in the first half of 2005, more than doubling $347.3 million in sales during the same period in 2004.

Mike Howard, an investment property specialist with Commerce CRG, said Utah commercial investments are an attractive alternative to other Western states.

"You are going to get a higher return on your invested dollar here in this region than you will most anywhere else in the West, particularly California, Arizona and Nevada," Howard said. "There is a strong demand from out-of-state buyers."

Leading the charge were purchases of apartment complexes, which made up $257.7 million, or 36 percent, of total investment sales in the first half of 2005, compared to $91.8 million in the first half of 2004.

Investments in retail establishments ranked second at $230.7 million, or 32 percent. It was followed by office buildings at $171 million, or 24 percent, and industrial complexes at $53 million, or 7 percent.

Bill Martin, managing partner of Commerce CRG, said the investment trend should continue but cautioned that if interest rates creep up too quickly, investments would slow.

Capitalization rates — which measure the return on a specific investment by taking the net operating income of a property and dividing it by the purchase price — fell in the first half of 2005 compared with the same period in 2004.

But, Howard said Utah's CAP rates still remain a bargain compared to other Western states.

Purchases of storage units, mobile home parks and hotels and motels showed the highest returns at 9.8 percent for the six months ended June 30, up from 9.5 percent in 2004 from the same year-ago period. Apartment CAP rates were at 7.6 percent in the first half of this year, down from 8.4 percent a year ago.

Office investments reported an 8.4 percent CAP rate this year, down from 9.9 percent a year earlier. The CAP rate for retail investments was at 8.1 percent, down from 8.5 percent.

Curtis Cannon, an investment specialist with NAI Utah, said the state's investment market is the best it has ever been.