SALT LAKE CITY — Industrial leasing in Salt Lake County has topped 1 million square feet for the sixth consecutive quarter, a new report stated.
It is the longest run on record for the county, according to CBRE’s Q1 2018 MarketView. The report showed lease activity impacted by sustained increased development levels during the first three-month period of the year. Thus far, industrial developers have applied for 1.3 million square feet of speculative industrial permits and the initial phase of the Salt Lake City Port Global Logistics Center was also announced.
The new project is planned to be a 3,000-acre logistics park in the northwest quadrant of Salt Lake City with phase one slated to consist of 10 buildings totaling approximately 7.5 million square feet, said CBRE senior vice president Jeff Richards.
“Salt Lake’s industrial market has experienced remarkable growth in the recent past and it shows no signs of slowing down,” he said. “With the announcement of the Salt Lake City Port Global Logistics Center, the local industrial market has potential to increase in size by 39 percent in the future. This is just one example of the extraordinary momentum occurring in Utah’s industrial segment right now.”
The report showed that new construction totaled 500,000 square feet during the first quarter with 4.4 million square feet currently under construction. Half of the total is speculative construction scheduled to be delivered before year end, while the other half is made up of build-to-suit and owner-user developments, Richards said.
In the retail sector, more closures took place during the first three months of the year, with more than 175,000 square feet of large retail blocks vacated, the report indicated. Despite the loss of tenants, the decline was less abrupt than last year, a release stated.
As irrelevant retail concepts phase out, efforts to adapt centers for modern consumers are taking shape, explained first CBRE vice president Russ Harris. Landlords continue to modernize retail centers with a focus on convenience, value and experience, and some vacant blocks are up for complete redevelopment into multifamily-anchored centers, he added.
“More large closures are expected throughout the year, but the level of potential big-box closures is much more limited than it was just one year ago,” he said. “When considering the large amount of completed construction and number of pending redevelopments, we expect net absorption to turn positive again before the end of the year, signaling a balanced retail market.”
In the office market, demand-driven development surged in the suburbs, the report stated. There are several 100,000-plus square foot tenants in the market searching for space, and with only a handful of existing properties in the valley with large available spaces, new development is expected to continue throughout 2018 to meet this demand, said CBRE vice president Marty Plunkett. Overall activity in the market was slightly subdued during the first quarter though it is expected to increase, he said, while net absorption is expected to decline year over year.
Plunkett said two emerging trends were solidified in the office marketplace during the first quarter — coworking and conversions. The rising trend of coworking space — shared workplace facilities that can be used by a variety of users seeking flexible lease terms and space requirements — has landlords looking to upgrade their space in order to attract tenants and meet the needs of the changing market, he said. This is also related to the high level of conversions taking place, where investors are seeking existing, non-office buildings to build-out new, upgraded office space, he added.
“According to the Utah Department of Workforce Services, Utah’s growth rate of 3.1 percent was the highest in the nation during March of 2018. Utah’s historic, strong economy has led to a steady demand for office space, and economic indicators are demonstrative of continued growth in Salt Lake County. Demand and construction for office space are both expected to continue at healthy levels throughout the duration of 2018,” Plunkett said.