Utah commercial real estate soars

The Utah commercial real estate market posted one of its best years ever in 2007, falling just short of record totals posted 12 years ago.

At the end of last year, non-residential new construction, which includes office and industrial buildings, retail stores, hospitals and hotels, was valued at $2.1 billion, just shy of the record $2.2 billion set in 1996, according to data in a year-end Salt Lake City market study compiled by the University of Utah's Bureau of Economic and Business Research. The study was conducted for commercial real-estate company CB Richard Ellis.

The report said the Salt Lake area in 2007 saw the highest level of new construction in roughly 10 years, with almost all of the new commercial construction in the suburban market.

Among the major projects breaking ground in 2007 were the $1.5 billion City Creek Center and the 22-story 222 South Main building, which will be the first high-rise built in downtown Salt Lake City in over a decade. The building is scheduled for completion next year.

Construction also began the $110 million Major League Soccer stadium in Sandy for Real Salt Lake and an $80 million Intermountain Healthcare hospital in Riverton.

"Utah is more and more being recognized as a market that is becoming appealing for expansion purposes," said CB Richard Ellis senior managing director Mark Bouchard.

The state is now seen as a top "inbound market," he said, and his company has received numerous inquiries from companies across the nation about potential expansion opportunities in Salt Lake City and northern Utah.

Salt Lake County's office vacancy rate rose slightly in 2007, according to the report, but the rate remains at historically low levels. By the end of the fourth quarter last year, the metro-area vacancy rate increased to 12 percent, compared with 11.3 percent in the fourth quarter of 2006.

The downtown Salt Lake City office vacancy rate finished 2007 at 11.5 percent, up from 10.8 percent the previous year. The fourth quarter 2007 vacancy rate in the suburban Salt Lake County was up slightly at 12.2 percent, compared with 11.6 percent the same period a year ago. The all-time high was set in 2003, at 20.5 percent.

"Vacancy rates can be a little bit misleading, because as a new building comes online, it throws off vacancy rates," Bouchard said. "Sometimes an increase in vacancy in a market is really subject to the fact construction outpaced immediate demand."

The study also noted that in 2007, Salt Lake County had a 49 percent increase in the amount of office space under construction, compared with a year earlier.