|Salt Lake City Real Estate|
After a remarkable decade of performance, the Salt Lake City area real estate market appears to be making some realistic adjustments. Despite the national and local economic slowdowns, Salt Lake City continues to achieve a positive level of office space absorption over the national average during a 10-year period.
Some of the major factors that have contributed to the real estate growth through the past decade are capital investments in infrastructure improvements, the 2002 Winter Olympic Games, the low cost of doing business, a well-educated workforce, and high quality of life.
Utah's centralized location in the West led to a well-deserved reputation as a hub for distribution and warehousing in the 1990's. An improved transportation and telecommunications infrastructure make the state much more attractive to out-of-state business and supportive of those already here. Real estate developers no longer have a tax incentive to over-build, and are now much more sensible in their approach to changes in the market. Financial conditions are dramatically different. Rather than sky-high interest rates and the savings and loan debacle, we have a good supply of real estate investment money available at some of the lowest interest rates in decades.
The constant scrutiny Utah had as host of the 2002 Winter Olympic Games exposed the state to the court of international opinion, and the less that remains unknown the better. Media coverage made the public more aware of Utah, and success of the Games made that exposure positive. That increased awareness will extend the positive changes Utah has made in over the past ten years.
In a three-month period near the end of 2001, single-family home sales in Salt Lake City County amounted to 22,253 units sold at a value of $407.3 million. A typical three-bedroom home went for $156,080, while a four-bedroom home sold for $210,794. More than 300 condominiums were sold at an average price of $125,932. While the average home was 60 days on the market, most sold in 30 days or less. The vast majority of real estate buyers financed their home with conventional loans, while 132 paid cash. By comparison with figures from 2000 for the same period, real estate sales are steady, but down in 2001 by less than a thousand units, while construction cost per square foot went up by only one dollar.
Salt Lake City Board of REALTORS® 2001 President Vicki Fulkerson says, "I think we're lucky here because we're so versatile in our marketplace. We kind of march to a little different drummer and we're a little slower in falling into any pattern."
Commercial Real Estate:
The change in the nature of the commercial real estate market in the Salt Lake City area along with shifts in the local and national economies; make it likely that the real estate market will begin to recover from the recent downturn much more quickly than it did in the late 1980's. Salt Lake City continues to achieve a positive level of office space absorption, only down 303,000 square feet off record high of 1,496,300 square feet in the year 2000. Salt Lake City's downtown area is experiencing a flurry of construction from hotel developments, to new apartments and upscale residential condominiums, to restaurants and shops.
Colliers Commerce CRG expects recovery to begin in the second quarter of 2002, or a worst-case scenario of fourth quarter 2002.
Office Real Estate:
Growth in office inventory was even more significant, almost doubling in 11 years from 13.5 to 23.5 million square feet. Overall office vacancy in the beginning of the 90's stood at a startling 21 percent, but had fallen to 8 percent by 1994 and has since remained below 9 for 7 years. Although recent downturns pushed office vacancy up to 12.09 percent in last part of 2001, the increase is as reflective of declines in the office real estate market on a national basis as any local decline.
The south end of the Salt Lake City Valley was the epicenter of the boom in office construction over the past decade, but high demand also drove development of quality parks in non-traditional areas such as the west side and the airport corridor. Pioneering real estate developments in the airport corridor suffered the most from 2000's lull in the office market. High vacancies in the area artificially inflated overall figures for the entire market with seven buildings contributing up to 30% of the overall vacancies. Landlords in this segment have become extremely competitive and tenants now have the opportunity to make very attractive long-term deals on quality buildings.
The increase in vacancy has caused real estate developers to become more judicious in undertaking new projects. Office construction in 2002 is expected to drop to approximately 700,000 square feet from the 1.6 million completed in 2001.
The northwest/airport corridor, a frontier for office development in the past decade, has 1.3 million square feet vacant which is 2.2 percent of vacancy in the entire office real estate market. However, it has seen a significant increase in new corporate relocation; including Verison, IHC, Discover Card, Pacificorp, 3-Com, Comm Comm, Ingenix, Myriad Genetics, Digital Signature Trust, and Auto Soft.
The average asking price for Class A office space in Salt Lake City's central business district is ranges from 21.48 to 22.51 per square foot, Class B from 15.72 to 16.94 per square foot, and Class C from 13.11 to 14.74 per square foot. The office vacancy rate in 2001 for the central business district was 10.87 percent.
Retail Real Estate:
Overall, the retail real estate market in Salt Lake City has remained steady through 2001. Utah's economy is generating sales volumes that justify the expansion of new stores such as Wal-Mart, Home Depot, ShopKo, Target, and Costco.
The ZCMI Center Mall, the Crossroads Plaza, and the Gateway Shopping Center anchor Salt Lake City's downtown retail base. Together these malls house more than 310 shops. Plus, a resurgence of activity has occurred in the downtown area with the completion of the TRAX light rail system.
Utah's growing population and affluence will continue to attract high-caliber tenants, according to Colliers CRG. Salt Lake City is considered one of the most promising retail markets in the nation. Valuation International Ltd., an Atlanta-based real estate consulting and appraisal group, has ranked Salt Lake City as the most lucrative retail market in the country.
According to Colliers CRG, grocery chains are aggressively competing for core retail real estate sites near high-growth residential areas. The reason is that Utah is one of the most profitable states in the country for grocery retailers. Also, the Salt Lake City market has become a magnet for out-of-state restaurant chains. Plus, complexes that include total entertainment packages have been a major component of new retail real estate construction along the Wasatch Front.
Industrial Real Estate:
The total real estate inventory of industrial buildings grew from a little more than 67 million square feet in 1990 to 96.5 million in 2001, a period in which vacancy has never exceeded ten percent.
The Salt Lake City market grew from three major industrial parks to current 11, and today's parks are better designed, more efficient and user-friendly than ever before. The real estate market began drawing the interest of large, out-of-state developers in the early 90's, and now offers an ample inventory of "big box" facilities that are available for immediate occupancy. Although some large real estate developers have retracted to pursue projects elsewhere, many maintain quality landholdings in the Salt Lake City area, and are available for immediate construction.
Located on 320 acres adjacent to the University of Utah campus, the University of Utah Research Park provides a site for private research and development activities. The park has 34 buildings housing 44 companies and portions of 37 University departments. The park employs an estimated 6,100 people and contributes approximately $600 million annually to Utah's economy. Various companies conduct joint research with University departments, use faculty as consultants and employ students. Research Park companies have added more than 4,700 jobs to the state's economy.
Summary: Utah's Governor Mike Leavitt and the Economic Development Corporation of Utah have launched a Utah/Silicon Valley Alliance. The purpose of the high-tech initiative is to reach out to Silicon Valley businesses. Because of the high real estate and labor costs in the Bay area, Utah is in a prime position to benefit from the expansion of high-tech industries. Utah's preparation for the 2002 Olympic Winter Games impacted the local real estate market. Between 1997 and 2001, the construction of nonresidential Games and Games-related projects generated more than $700 million in construction activity. Other noteworthy building projects in the valley include construction of a new Salt Lake City Public Library and Phase II of the Huntsman Cancer Institute.
- contains information from the Salt Lake Chamber, 2002