With nearly 3 million square feet of industrial space under construction, and climbing lease rates averaging $5.64 per square foot, it is safe to say the industrial market along Utah’s Wasatch Front is alive and well. The primary Salt Lake County market reports an overall industrial vacancy level of 5.08 percent. In the fast-growing Utah County submarket that’s just south of Salt Lake City, the vacancy rate is 3.44 percent. This is in line with the pre-recession levels experienced in the mid-2000s.
The most noticeable difference in today’s environment is the scale of buildings being built on spec, as well as who is carrying out these projects. We continue to see construction starts and announcements on buildings larger than 300,000 square feet — many of which are speculative — by out-of-state development or investment groups. This includes companies like Clarion Partners, Exeter Property Group and Seefried Industrial Properties. This represents a new resurgence of interest by many of the “brand name,” major-market players who want to be part of the dynamic growth occurring in Utah. This is a growing trend nationally as well, which is interesting to see in the relatively smaller, 170-million-square-foot Wasatch Front market.Activity from the local players continues to be strong as well. This group includes names like Steve Price, Roderick Enterprises, Romney Group and the Boyer Company. One of the more notable area projects is the 918,000-square-foot, built-to-suit distribution space for Post Cereals with local developer Freeport West. Business Depot Ogden, a unique joint venture arrangement between the City of Ogden and the Boyer Company, recently announced three large deals as well. Readerlink, the Home Depot and Honeyville, Inc. also make the notable projects list. These three will round out about 3.6 million square feet of new construction on the former Department of Defense property, a transformation that began nearly 20 years ago. There is currently an additional 1 million square feet of construction underway at the project.
Boart Longyear’s consolidation of multiple buildings into a single 300,000-square-foot deal has also become more common in today’s market environment. Business owners continue to recognize the benefits of consolidation into a single facility or upgrading into high-efficiency buildings to drive down the costs of operations. There is a saying with warehouses that, “nobody has ever made a penny in a warehouse,” which is somewhat true. Storing and moving products is a costly piece of the business cycle, and the smart companies are constantly examining how to reduce those costs any way possible. Utah is also participating in the national trend that includes taller ceilings, wider column spacing and bigger footprints.
This historic transformation, both in volume of deals and the deal size, in some cases, is being fed by many factors. Utah boasts strong job and population growth, a highly educated workforce and low taxes. It is also ranked by Forbes and CNBC as the “Best State for Business” for the third year in a row.
— By Jarrod Hunt, Executive Vice President, Industrial Services, CBC Advisors. This article first appeared in the March 2017 issue of Western Real Estate Business.