Tech Jobs Spur Multifamily Development
Technology growth in the southern portion of the Salt Lake Valley is prompting additional development of multifamily properties. A new Adobe campus in Lehi, located between Utah’s major employment areas, has led to further technology sector investment in this region. The company expansions and job creation that is occurring in Lehi is certainly driving the need for new housing.
In Bluffdale, located about 20 miles south of Salt Lake City, several hundred acres are being developed into two mixed-use apartment projects. The recently acquired Aclaime at Independence development is expected to include 1,000 residential units and 21 acres designated for mixed-use commercial structures. Adjacent to this development is Independence at the Point, a master-planned community containing 294 acres. This project will include 1,900 single-family homes, townhomes and apartments, as well as 27 acres of commercial development.
Overall, steady demand for housing will continue to draw investors and developers to the region as vacancy remains limited and rent growth outpaces the rest of the metro. Metro employers are expected to add 29,900 new jobs by the end of 2013, an annual growth of 4.6 percent, which pushes employment nearly 6 percent above the pre-recession peak.
Completions are set to total 2,100 units in the metro this year, with more than 1,600 coming on line as market-rate units. Another 300 units will be affordable housing, while seniors housing will round out the completions. Vacancy is forecasted to fall to 2.9 percent by year-end, a 120 basis point decline from last year due to strong job growth in the metro, which will spur additional demand for apartments this year. In the previous 12-month period, vacancy dipped by 30 basis points.
The big news is the impact on rents. As vacancy further constricts throughout the rest of this year, operators will lift rents at one of the fastest rates since the recession. By year-end, effective rents will reach $862 per month, which translates to a year-over-year growth of 4.9 percent. The gap between owning and renting is relatively small and many residents will remain tenants due to the inability to meet down payment obligations. Others are attracted to the lifestyle that renting allows with its low maintenance and amenity packages.
Value-add assets are limited in Salt Lake Valley. Investors looking for these assets in the metro will be forced to change investment strategies or leave the market altogether. It is anticipated that any private, local buyers will turn their attention toward stabilized Class C properties.
— Daniel Shin, senior associate and member of the National Multi Housing Group, Marcus & Millichap Real Estate Investment Services