Commercial real estate market stabilizing

SALT LAKE CITY — The Salt Lake County commercial real estate market is starting to make some gains after months of less-than-stellar performance.

Overall, the office market continued to see improvement during the third quarter of 2010, according to commercial real estate brokerage firm Commerce Real Estate Solutions.

A new report showed both lease and vacancy rates stabilized, with vacancies falling to 15.53 percent versus 15.97 percent at midyear. The market absorbed 177,322 square feet this past quarter, a significant turnaround from the third quarter last year, which was negative 257,382 square feet.

Among the notable transactions completed during the period were a United Healthcare Group property located at 2525 Lake Park Blvd. and the Merrick Bank Corporation property located in the Jordan Gateway Plaza II development.

The report forecast indicated that although demand had increased, the office market would likely continue to be tenant-driven through the end of the year.

"The economy is starting to be a bit more positive," said Rich Nordlund, office real estate specialist for Commerce Real Estate Solutions. "We just see a lot more companies starting to hire more people."

He said the key to recovery for the commercial real estate sector will be the continued addition of jobs, which will give companies the confidence to invest in more projects.

In the retail market, tenant activity remained flat during the third quarter with vacancy rates still a bit high at 9.14 percent — "although trends point toward stabilization," the report states. Lease rates continued to soften and landlords continued to offer incentives. The most active retail segment continued to be restaurant.

In the industrial sector, vacancy rates fell to 7.06 percent in the third quarter, down from 7.59 percent from the previous three-month period. Lease rates fell to 37 cents per square foot, while activity rose 21 percent as landlords competed aggressively for fewer deals, the report said.

Sales prices fell 5 percent versus last year, and sales activity reached just 62 percent of third quarter 2009 rates. Overall activity in the industrial market also continued to decrease over the last year, ending at just 72 percent of historic 2007 highs.

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