Landlords are Gaining the Upper Hand as Tech Companies Eye Utah
The demand for quality office space in Salt Lake City is higher than ever. According to Forbes, Utah’s economy continues to lead the nation, and more employers are looking to expand into the Salt Lake market. Large companies like eBay, Adobe and Boeing are setting up shop along the Wasatch Front, and more corporations will be coming soon.
Several new Salt Lake office projects are in the planning stages, while others have already broken ground. With lower vacancy rates in Class A and B spaces, new developments — which vary from build-to-suit to spec projects — are encouraging.
Overall Class B and C rates are hovering between 15 percent and 17 percent and inching downward as 2013 progresses, according to Newmark Grubb Acres’ research. Valley-wide, Class A properties are averaging about 11 percent, and will likely level off until more product is built.
A big change is currently taking place in the office market. The past few years have been predominantly tenant-driven, but trends now show a decrease in generous landlord incentives. Property owners who were previously given four to six weeks of annual free rent may now only receive two to four weeks. Landlords are also looking at tenant improvement allowances more closely — scrutinizing them on a case-by-case basis and, in some instances, delivering space as-is.
Along the Tech Corridor, which runs from south Sandy to Lehi, two new buildings will soon be under construction. They will join the already completed Adobe and eBay offices. The positive impact these developments will have on the market will create a significant pull for tenants in both of these regions.
The CBD and Southern Salt Lake County are seeing lots of activity as well. With the proximity to Salt Lake International Airport, downtown legal and financial hubs, and access to university and college campuses, office space in the CBD is in high demand. Companies in Southern Salt Lake County can easily recruit talent from nearby Utah and Salt Lake Counties as the new Frontrunner system, along with TRAX and I-15, helps employees commute with ease.
Some of the more active corporations looking for office space include Goldman Sachs, Overstock and Merritt Medical. Newmark Grubb Knight Frank (NGKF) has also established its presence in our Salt Lake market. Newmark Grubb Acres, formerly NAI West, is now affiliated with NGKF.
— Mark Lundgren, vice president of office leasing, and Eric Larson, office agent, both with Newmark Grubb Acres