Jim Sheldon, Newmark Grub ACRES
Utah’s industrial real estate market shines while validating real estate fundamentals. Tight supply and consistent demand are contributing to rising sales prices and lease rates. The lack of options – with vacancy at 3.79 percent – presents a bottleneck to Utah’s economic growth.
An underlying trend is the tenant’s flight to quality. Users are demanding high function in prime locations. One of the differences this time around is the increasing magnitude of discounts landlords are conceding to move properties with any functional obsolescence or locational challenges.
Meanwhile, the delineation of legitimate submarkets along the Wasatch Front continues. All the data points are variable within the individual submarkets: land prices, lease rates, vacancy, etc.
The submarkets were historically defined by square foot increments, then by use, and now, increasingly, by geography and use. Labor pool, access and infrastructure are prime determinants resurrecting the old adage of location, location, location.
Utah’s most active industrial submarket continues to be the northwest region, followed by the Point of the Mountain. Demand for bulk distribution product was constant across most geographic markets, topping out at 2.1 million square feet, which is up 23 percent from 2014. Midbox, service and flex product were in highest demand at the Point of the Mountain.
Developers recognize the opportunity of a supply constrained market and, as we move into 2015, there is almost 2.5 million square feet of bulk product being built – 95 percent of that is on a speculative basis.
For example:
Northwest Region
• I-80 Logistics – 590,909 square feet
• Freeport West – 633,000 square feet
• Price Gladiola A – 307,559 square feet
Point of the Mountain – Planned Projects
• Price Development’s Lone Peak project at 12300 South – 35 acres for sale
• Ivory Company’s Mountain Point Industrial at 924 West 14600 South – Seven planned buildings at 100,000 square feet each
Optimism remains strong. Salt Lake‘s key role as a pivotal regional distribution center is being validated over and over. Salt Lake’s strength in high-tech manufacturing for medical, composites, outdoor sports and food-related industries also form a solid, diversified foundation for future growth.
By Jim Sheldon, Senior Vice President, Industrial Group Leader, Newmark Grub ACRES. This article originally appeared in the March 2015 issue of Western Real Estate Business magazine.