— By Wick Udy, Senior Managing Director, JLL —
Salt Lake City’s industrial market continued its exceptional performance in 2022. Last year was the third consecutive year of above-average leasing and the second-highest volume of annual absorption on record. The largest volume of completions was recorded in 2022 with 13 million square feet delivered. However, leasing and absorption volumes were both below 2021 levels, which is something industry leaders are watching in 2023.
Developers were forced to push pause on new building projects toward the end of 2022 due to rising interest rates and tighter capital markets. Because of this, JLL predicts 2023 could be the year of the sublease. What was a landlord-favorable market for many years is slowly leaning toward a tenant-favorable market.
Based on current activity within the marketplace, absorption should be positive in first-quarter 2023. Companies are signing leases on existing buildings instead of waiting for new builds, which will keep vacancy low for the foreseeable future.
The market has remained as robust as it has because companies from California are relocating to Salt Lake City. They want to take advantage of its affordable real estate, quality of the workforce and the market’s proximity to large population centers.
Significant leases were signed in 2022, including a 207,000-square-foot local expansion and an 805,000-square-foot, new-to-market deal. Pepsi inked a 200,000-square-foot, build-to-suit in West Jordan. There is now a fourth co-warehousing operator in the market, Cubework, that has leased 89,296 square feet at RWK Doolittle in the Salt Lake City Airport submarket. Another notable new project from JLL includes the Quadrant II where Ritchie Group has pre-leased 300,000 square feet of the 1,067,000-square-foot building. JLL also recently sold 100 acres to an undisclosed data center user in West Jordan.
Perhaps the most significant addition for 2023 is Project WaveRunner, which kicked off the building of Scannell Logistics Campus — a 434-acre industrial development in the Airport submarket that contains 13 buildings and totals 5.7 million square feet. The Scannell Logistics Campus development will attract industrial partners in a wide range of industries.
Utah’s projected growth over the next 45 years is 75 percent, or nearly 6 million residents by 2065. This will make distribution facilities critically important to the region. The location of Scannell Logistics Campus offers direct access to I-15 and I-80, and is ideal for local, regional and super regional distribution. The building is slated to be completed by the end of 2023.
The Salt Lake City industrial market is shifting, and there is a lot of activity from manufacturers, regional distributers and data centers. The city’s Northwest quadrant continues to outperform the rest of the market in terms of leasing, absorption and deliveries.
With that in mind, we don’t see land values dropping. We see some construction developments waiting for the next cycle to see how absorption is in 2023 before they go vertical with new builds. After some time, we think lease rates will stabilize in 2023.