Like Texas, Utah is also recognized as one of the best states in the nation to conduct business (ranked #1 in 2011, Business Facilities & #2 in 2012 by CNBC). Its long‐term growth prospects are solid as well.
Salt Lake’s office market continues to reflect a strong local economy. The financial, professional and business services expanded by 5.5% in the 12 month period ending May 2013, partially propelled by SLC becoming the country’s largest industrial banking center with the presence of Goldman Sachs, UBS, American Express, and Morgan Stanley, among others. Although smaller than most market areas, SLC is one of the healthiest office markets, with only 1‐2 years necessary to stabilize supply with demand, compared to the national average of 4.5 years. One cause of the growth is the concentration of high tech firms in SLC. The University of Utah consistently produces the greatest amount of start‐ up companies in the U.S., ranking #1 and ahead of MIT the past two years. SLC employers are more attuned to younger workers’ office environment preferences, properties with a cool or creative factor are favored, and access along Utah’s public rail system is a bonus.
Retail vacancy in SLC is almost back to pre‐recession levels (6.6%), but asking lease rates have remained low (roughly 15% below the 2007 average). The average asking lease rate is misleading; retailers have become increasingly selective and are focused on finding locations that will weather economic turmoil. A preference for sites with high traffic counts, great access and healthy co‐tenancy is paramount and is causing a greater disparity between high and low lease rates between the haves and have‐not centers. Although the number of multi‐tenant properties traded each year is limited, SLC provides an opportunity to buy grocery anchored retail centers in the low‐8% cap range. Particular attention will be given to northern and southern Utah County where new tech companies and startups are locating.
Salt Lake City is a strategic industrial market for the western U.S. I‐80 is the preferred truck route over the Rocky Mountains and SLC is about an equal distance from Los Angeles, Denver, San Francisco, Portland, Phoenix and Seattle. As a result, I‐15 & I‐80 are major freight corridors. The SLC industrial market is thriving, with a 4.9% vacancy rate, increasing rents, and 70% pre‐leased speculative construction. Pressure is building on supply of remaining available space, dwindling parcels of land, construction costs and lease rates. Even during the recession, the industrial market only hit 6.92% vacancy at its lowest point in 2009. This is a stable product class in a stable market. Although investment properties are limited, we foresee an opportunity to purchase second generation space near the airport.