Utah County's office vacancies at all-time low
But that means rents will go up, report says
The good news, according to the real estate services company, is business is booming, with all-time low vacancy rates for office, retail and industrial space.
The bad news is, even with new commercial growth on the horizon, the dearth of available space means rent rates are going to go up — because they can.
"The law of supply and demand would say when you have occupancy rising like it is, you better start securing your leases because rates are going to go up," said Jon Anderson, partner and principal broker at Commerce CRG. "There's no question that rates will go up with that kind of supply dwindling."
According to the report, Utah County saw an increase of 250,000 square feet of retail space in 2006, yet the vacancy rate still fell 1.5 percent. Overall, the county has 6.3 percent of its retail space available for rent.
Office vacancies in the county are down to about 7 percent, though several office projects, such as the Mid Town Plaza in Orem, are planned to alleviate some of the need. At the same time, many of the projects have already sold leasing contracts for their buildings, and they haven't even broken ground.
For developers, that's good news.
"We always like the demand," said Rich Bennion, developer and owner of Bennion Investment Group. "We always want the demand to exceed the supply. Now we're getting into the situation where demand is starting to exceed supply."
One reason for a shift toward a lack of commercial space can be attributed to the limited amount of space already available, added to an especially robust Utah economy.
Developers may also be hesitant to build an excess of commercial space if they remember the high number of vacancies from two or three years ago.
At the same time, out-of-state companies may be fleeing to Utah as a refuge from more-expensive retail rates and taxes found in other nearby states.
"Sometimes you get a 'me too' kind of phenomenon," Anderson said. "If companies are going to Phoenix, other corporations will listen and go to Phoenix, too. When that isn't happening any more, they look around and see that Provo and Salt Lake are a lot cheaper."
Commercial real estate also follows residential trends, Anderson said.
In 2006, Utah County's residential permits exceeded those of Salt Lake County. The statistic could be attributed to a greater land mass availability for development, or it could be a sign of Utah County's growing economy.
"You look at what's going on in Alpine and Lehi and American Fork — and anything just over the Salt Lake County/Utah County border — many of those people are working in Salt Lake, but they can buy more home at a better cost in Utah County," said Jeff Thredgold, chief economist for Zion's Bank. "Utah County for a long time has been, perhaps, the second most critical metropolitan area in the state. Behind Salt Lake County, there's Utah County, and that's not going to change any time soon."
E-mail: achoate@desnews.com
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