— By Jarrod Hunt, vice chair, Colliers —
The Utah industrial market continues to perform very well given the reduction in the average deal size in 2023 (illustrated in the charts for both Utah and Salt Lake Counties below).
The entrepreneurial spirit that continues to be the backbone of Utah’s economy is evident with the smaller lease sizes. This was a welcome opportunity for companies confined to limited options for growth over the past economic run-up. However, we have seen a notable increase in out-of-market tenant inquiries, with many in search of larger blocks of space in the New Year. We expect the pendulum to swing the other direction this year with an increase in the average square footage of completed deals, an overall increase in the number of deals and a reduction in the vacancy rates, which will put a solid floor on lease rates.
The reduction in vacancy is most attributable to the stark reduction of construction deliveries in the two main county markets, Salt Lake and Utah counties (per the charts below). This dramatic reduction in speculative building activity is “on brand” for Utah, being a very disciplined market for new construction compared to several other high-growth Western markets that we are often compared to. While we see some continued interest from the institutional developers, it’s the local developer set that has remained sold on the Utah story.
Several large-scale development projects appear more viable now. This is partly due to a rapid expansion of Utah’s Inland Port Authority, which will include seven new submarkets from the initial charter at Salt Lake’s airport-adjacent north west quadrant. This action opens up opportunities and benefits in terms of being under the umbrella of the Inland Port Authority for outlying areas where land and labor are attractive. At the same time it expands the Port Authority’s mission of implementing sustainable logistics solutions for the state.
We believe the outlook for 2024 will be a remarkably healthy year for Industrial movement in the state. There are many exciting things currently in the works that we are unable to disclose just yet. Stay tuned!