Office vacancies now at 17% in S.L. area

Office vacancy rates in the Salt Lake Valley shot up to 17 percent during the first six months of the year, a 1.22 percent increase from 15.78 percent during the same period a year ago, according to a new report by Colliers International.

The near-record vacancy rates have sent lease rates falling and put tenants in the driver's seat when negotiating new contracts. Also, for the remainder of the year no new office space will be added to the Salt Lake market.

"This is the first six months I've seen in 20 years that we won't have a building built," said William Martin, managing partner of Colliers' Salt Lake office.

The little activity that has occurred this year is mainly the result of tenants relocating or upgrading, the report said.

That analysis is shared by John Dahlstrom, executive vice president and general counsel of Wasatch Property Management, a Logan-based leasing and management corporation, who said his company has benefited from tenants seeking premium "Class A" office space.

"We've seen an increase in activity at both the Woodlands (700 E. 4500 South) and for our downtown Salt Lake properties," Dahlstrom said. "It's not as much new tenants coming in. It's mostly relocation."

Lower-quality buildings, the report said, have suffered the most from tenant loss.

In addition to the Woodlands, Wasatch Property Management owns a number of Salt Lake properties, including the Wells Fargo Center, the First Security building and Hillside Business Center, located at 2469 E. 7000 South.

The Wells Fargo Center, Dahlstrom said, is 75 percent occupied.

Blame for the overall high office vacancy rate is placed on corporate downsizing and a lack of job creation.

New job growth in the state has remained in a vegetative state since 2002, when 7,500 jobs were lost, the first year since 1964 that Utah saw a contraction in new jobs.

Also pushing the vacancy rates higher were the completion of four new office buildings: Parkview Plaza II in Sugar House, Valley Center Tower in Murray, Resource Management in downtown Salt Lake City and Center Square in South Salt Lake City.

Yet with office construction reaching a standstill, according to Martin, the pause should result in future falling vacancy rates.

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