— By Phil Brierley of JLL —
The Salt Lake City office market continues to strengthen despite strong systemic headwinds. Last year was a banner year for leasing, with 4.8 million square feet of total leasing velocity. Silicon Slopes once again led all submarkets, representing 43 percent of all leasing. This was followed by the Greater CBD with 25 percent.
Absorption was positive through the fourth quarter (for the second consecutive time) at 72,861 square feet, offsetting move-outs earlier in the year. Overall vacancy peaked in 2023 at 18.9 percent and is finally trending in the right direction. It finished the year at 18.6 percent. Subleasing is still a soft spot, especially in Silicon Slopes, with 300,000 square feet of new sublease space hitting the market in the fourth quarter of 2024 alone.
Sales volumes rebounded after a dismal 2023, clocking in at $518 million in 2024. RCA notes this is close to the trailing 10-year average of $587 million. Much of that velocity was driven by user sales, including Salt Lake County’s acquisition of the Peace Coliseum, Canyons School District’s purchase of the eBay regional headquarters, the University of Utah’s acquisition of City Center downtown and Onset Financials’ acquisition of Vista Station 1.
The investment market remains slow. The only significant transactions were Dakota Pacific’s sale of Newpark I and II to Fort Street and the Boyer Company’s acquisition of 3401 Ashton Blvd. from Nuveen. Based on market trends and broker opinion of value (BOV) activity in our practice, we expect this to increase substantially over the next 24 months as debt capital returns to office acquisitions and owners begin to accept higher interest rates.
The upside of the substantial user sales activity is that 2.2 million square feet were removed from the investable inventory over 2024 when considering user sales, conversions and demolitions. This represents about 3 percent of total inventory. Combine this with an effectively non-existent development pipeline, and we are starting to see a substantial lack of large-block space in Tier I assets. This is likely to increase over the next few years unless things materially change in the development space.
Taken holistically, Salt Lake City is a market with enviable office leasing fundamentals — alongside long-standing high demographic and economic growth — where acquisition opportunities are limited. There is a window of opportunity for savvy private investors to acquire office space at a low basis while capital markets remain dislocated around office. That window is rapidly closing. We can already hear the institutional acquisition machine starting to re-enter the office market in search of yield. Get ready for the rebound!
— By Phil Brierley, Senior Director of Capital Markets, JLL. This article was originally published in the March 2025 issue of Western Real Estate Business.