Salt Lake's Industrial Market Shows Signs of Strength
Much like the economy in general, commercial real estate has experienced its share of ups and downs over the past 10 years. However, the strength of Utah’s economy, established infrastructure and strategic regional location are sustaining the Salt Lake industrial market and securing its position as one of the most resilient in the nation.
For three consecutive years, Utah has been ranked as the “Best State for Business” by Forbes magazine. It was also recently designated as a boom state by the U.S. Chamber of Commerce. The strength of the local economy has convinced many national and international companies to relocate to Utah, and new construction has followed close behind. By the end of the first quarter of 2013, there were 1.4 million square feet of industrial space under construction, 70 percent of which was pre-leased. Although overall market activity slowed during that quarter, as compared to 2012, the Salt Lake market continues to experience growth. Consequently, industrial availability remains below the average for the Western region.
Another sign of market strength is the improvement in lease rates. Utah’s industrial market experienced increasing lease rates and positive net absorption. In fact, from March 2012 to March 2013, the overall achieved lease rate increased 10 percent, rising from $0.37 per square foot to $0.41 per square foot.
Improving employment has also had a positive impact. According to the most recent data from the Bureau of Labor Statistics, Salt Lake County’s employment increased 4.5 percent for the 12-month period ending this past March. Manufacturing is the second largest employment sector in the state, and has definitely helped to bolster Utah’s industrial market.
Due to limited supply and established infrastructure in the area, almost all of the 1.52 million square feet of industrial construction underway in the Salt Lake area is taking place in the California Avenue submarket. This region is in close proximity to an international airport, an intermodal rail hub, two interstate highways and several state highways.
In addition to infrastructure, Utah’s unique location is another factor that positively impacts the local industrial market. Utah is positioned at the “crossroads of the West,” and the American Association of Railroads believes Utah’s intermodal activity will experience continued growth at a minimum of 6 percent per year. The state is also an important distribution hub for the Western states. The Utah Department of Transportation stated that Utah is the crossroads for long-distance trucking in Western America, having the highest truck traffic percentage at 23 percent. The speed to market offered by Salt Lake’s location benefits the local industrial market and is a major pull for companies looking to establish a presence in the Western region.
The local industrial market is gaining strength, giving Salt Lake the ability to compete with larger markets both nationally and internationally. Recent transactions by notable companies like Boeing, Sun Products and Sportsman’s Warehouse illustrate a high level of demand in the market. These three companies alone accounted for transactions in excess of 2.1 million square feet in 2012. Of this space, more than 782,000 square feet was new construction. As 2013 progresses, positive trends are expected to continue, bringing another year of gradual, steady growth to Salt Lake’s industrial market.
— Tom Dischmann, senior vice president with CBRE's Salt Lake City office