SALT LAKE CITY — The commercial real estate market in the Salt Lake Valley is reflective of the strong local economy.
The growth is keeping overall demand for commercial space steady, and new construction continues to occur in both the industrial and office markets, a new report stated.
Data from commercial real estate firm CBRE indicate that average lease rates during the second quarter of 2013 have increased slightly across both segments.
Utah’s commercial real estate market continues to perform well and is healthier than the U.S. economy, the report stated. According to the Bureau of Labor Statistics, statewide unemployment decreased to 4.6 percent compared with the U.S. unemployment of 7.6 percent, with total employment in the Salt Lake area rising 3 percent.
The industrial market is expected to improve throughout the year, CBRE said. Compared with the same time a year ago, sales and development activity in the sector increased, while availability fell to 8.1 percent and the market lease rate increased.
“Demand for industrial product is solid,” said Tom Dischmann, CBRE senior vice president. “Even with the record number of construction completions that have occurred over the past two years, availability has remained steady and new development continues."
There is more than 1.4 million square feet currently under construction, 70 percent of which is preleased, Dischmann added. Much of the new construction that has taken place is in response to demand for higher-quality, big-box space, he said.
Meanwhile, the office market has also reflected well on Utah’s strong economy.
For the 12-month period ending in May 2013, financial services in Salt Lake expanded by 5.9 percent, and professional and business services expanded by 5.2 percent, driving the demand for office space, according to BLS data.
As a result, the marketwide vacancy rate decreased to 13.7 percent, CBRE said. Currently, there is more than 500,000 square feet of office space under construction, with the greatest concentration in the Sandy and Draper areas. In addition, construction is increasing in northern Utah County as well.
As organizations look to draw from the talent pools of both Salt Lake and Utah counties, the areas have become magnets for new office construction, the report stated.
“Tenants in the office segment are becoming more sensitive to the type of space they occupy,” said Kreg Peterson, CBRE vice president. “Generation Y is gaining prominence in the current market, and their needs and desires differ from those of the mature work force. More frequently, we get requests for buildings with access to public transportation and creative buildouts that will attract this younger demographic.”
CBRE said that Salt Lake’s economy is increasing at a pace that will allow strong growth in the office market to continue. Consequently, steady growth is likely to occur throughout the second half of the year, the report stated.