Commercial real estate is still thriving as companies inside and outside of Utah look to grow and expand across all sectors.
Industrial product saw an increase in activity compared to third quarter 2017, with significant jumps in both leased square feet and transaction dollar volume. Owner-user sales are reaching near $100 per square foot across all types –a new high. Lease rates continue to increase across most industrial building types with five of the seven building types showing increases year-over-year. Direct vacancy hovers at a near record low at 2.9% and will to continue to stay low despite the 4.2 million square feet delivered year to date and the current 4.7 million square feet currently under construction.
Salt Lake County direct vacancy rates for office continue to drop across all class types at 8.3% overall. Net absorption remains positive at 657,910 square feet and is trending to surpass 2017 by yearend. Class B product saw a slight dip for first quarter through third quarter 2018 while Class A saw a high watermark of over $30 PSF FS/Year in the third quarter of 2018.
Along the office Tech Corridor, net absorption for first quarter through third quarter 2018 is already more than double 2017's year total--and is expected to be at or close to 2016's all-time high of 1.8 million square feet. The vast majority of office construction throughout the state of Utah is taking place in the Tech Corridor with almost 1.0 million square feet already delivered for first quarter through third quarter 2018 and just over 1.0 million breaking ground in that same time frame. Office inventory has grown by 6.3 million square feet (77%) in just six years in the Tech Corridor.
Retail leased square footage is up year-over-year in Salt Lake County while overall retail lease rates have been on a slight downward trend. Statewide single tenant retail investment sales made up 66% of the overall retail investment transactions for Q1-Q3 2018.
Utah’s investment dollar volume is up 123% year-over-year across all product types with third quarter 2018 standing at $560 million, the second highest dollar volume seen in any third quarter for the past six years. All price-weighted average cap rates have compressed Q1-Q3 2018 in comparison to 2017 except for multifamily cap rates which is up two basis points. Utah’s economic fundamentals continue to draw out of state investors to Utah investment real estate, especially industrial and multifamily product types, which continue to be in high demand and in short supply.
Land sales in Salt Lake County continues to be dominated by industrial use in terms of total dollar volume (37%) for first quarter through third quarter 2018, while multifamily use is still the driving force behind high land price per square foot.