The first six months of 2009 may be a precursor to the challenges to come in Utah's real estate market, according to the Mid-Year 2009 Market Review, released Tuesday by real estate brokerage firm Commerce CRG.
An analyst for the Salt Lake City-based company told the Deseret News that vacancies in the Salt Lake County office market would likely continue to climb for the next six months of the year and into 2010 from its current rate of 13.6 percent.
"We think that it's probably going to 15 to 15½ percent by the end of the year," Rich Nordlund, office specialist with Commerce CRG, said.
He said a number of new buildings are scheduled to come online in the near future, which will result in even more unoccupied office space around the valley.
Nordlund said that the faltering economy and increasing unemployment have had significant impacts on the office sector as companies downsized and therefore have required less space to operate.
"When the financial bubble burst nationwide … the people that were looking around basically (put everything) on hold," he said. "The whole market is in (flux) right now because of loss of jobs."
Nordlund said similar issues have been experienced in the retail, industrial and investment real estate sectors as well.
The report stated that total retail market vacancy edged upward, due primarily to store closures by national retail chains. The vacancy rate increased from 8.31 to 8.50 percent over the past six months, but widespread closures by national retail chains have begun to slow, according to the report.
Industrial vacancy — now at 6.89 percent — will increase through the remainder of 2009, the report said, with corporate restructuring and scalebacks by national and regional tenants affecting Utah as several large users have indicated their intent to shutter or greatly reduce the size of their operations in the state.
In the multifamily sector, the apartment vacancy rate in Salt Lake County at midyear 2009 was 7.2 percent, up dramatically from the 4.6 percent rate one year ago, Kip Paul, investment specialist, told the Deseret News.
"Even more dramatic than that is that rents have actually decreased 6 percent," he said.
Paul added that the tough economic times have forced many individuals and families to share apartments in an effort to pool resources and reduce expenses.
"Or people move back in grandma's basement and another thing that is occurring is a number of failed condo projects are being turned into apartment communities," he said. "The rental pool … is growing and the number of renters is shrinking."
Property managers reported that job losses have been the principal cause of higher vacancy rates, the report said.
Paul said that despite the struggles, the market is approaching a reasonable balance and should continue to see low rents and more vacancies over the next 12 months.
"We're not to a point of overbuilding or oversupply," he said. "It's a relatively gentle market cycle and it's all for the better."