Office-space lease rates rise 7.3% in Salt Lake City
City No. 6 among 15 markets worldwide with biggest increases
SALT LAKE CITY — While most of the rest of the world saw office-space lease rates still in free-fall during the past year, Salt Lake rates went up by 7.3 percent — the largest increase in the country — according to an annual survey of 176 markets worldwide.
The jump, which is rare for Salt Lake but nominal by pre-economic meltdown standards, puts Salt Lake No. 6 among the 15 markets worldwide showing the biggest increases, according to the CB Richard Ellis Group Inc.'s Global Office Rents survey of prime or Class A commercial space. Pittsburgh, the only other U.S. city on that list, is No. 9. Rio De Janeiro had the largest increase in the survey, up by 17.7 percent.
The survey, which is regarded as a detailed snapshot of a wildly fluctuating global economic recovery, comes the same week that Salt Lake was Ranked as the fifth-best city in the United States to do business in the next 10 years by Kiplinger's Personal Finance.
Area commercial real estate agents regard the survey results as part quirk of Salt Lake's sparse prime office-space market that grew by more than 460,000 square feet in December with the opening of 222 Main.
The 21-story tower located next to the Hotel Monaco downtown, is the only Gold LEED-certified high-rise and raises the profile of the city's skyline as well as the notion of downtown Salt Lake going for an uptown clientele.
Goldman Sachs has already leased seven floors of the tower, paying $32 per square foot or slightly higher than the average rent reported in the survey of $27 per square foot. The Holland & Hart law firm, now on South Temple, has leased the top three floors. Brinks Hoffer Gilson and Lione, now at 400 South and Main Street, has signed a lease, as well as CB Richard Ellis, which will take one floor of the high-rise.
So far, 57 percent of the building is leased, which is a big relief, considering the stagnating commercial occupancy trend that started shortly after construction was begun in 2007.
"The way things have turned out, if the building hadn't been here, the companies planning on growth wouldn't have had this option," said Eric Smith, first vice president of CBRE and co-leasing agent for the building. "When they began, there really weren't options for companies that had growth needs."
Although the building was regarded at times as a prime space for occupants that might not come, the two years has allowed the economy in general get its bearings and allowed big companies with big growth plans a place to expand, Smith said.
"The market looked a lot different then," he added, noting downtown's generally static or declining occupancy trend during the two-year construction period.
It turns out the timing couldn't have been better, Smith noted. "With City Creek well under way and the coming increase in amenities and activity overall downtown, we're looking for positive things in the Salt Lake office-space market."
The global market remains not so hot: 133 cities in the survey showed declines.
At a time when rent prices in office buildings worldwide still haven't touched bottom with a collective 4.6 percent decline over the 12-month period ending this past March 31, an uptick of any kind is noteworthy, said Raymond Torto, CBRE's chief economist, in a news release accompanying the report.
"While economic data reflects improvements year-over-year, the commercial real estate market lags the economy, and our occupancy cost survey still shows falling costs, Torto said. "On a quarter-over-quarter basis, rental data in these markets is generally starting to show a bottoming, and in some locations, such as London, even an uptick."
Speaking of London, it's West End district remains the most expensive place to do business in the world at $183 per square foot. Hong Kong follows at $153; Tokyo, which had the fifth-largest decrease in rent rates — 26 percent — still has the third-highest rent rate at $144 per square foot.
Salt Lake's rate, even with the increase, is just over half the rate of Amsterdam, which is 50th on the list of the 50 most expensive markets in the world.
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