Industrial Completions Reach All-Time High, Retail Posts Record Leasing Levels And Office Leasing Options Broaden And Evolve

The Salt Lake City office of CBRE has released its Q4 2018 MarketView reports; click here to download full copies of each report.

INDUSTRIAL MARKET CONTINUES TO REACH RECORD EXPANSION LEVELS

Finishing the year with 4.7 million square feet of new industrial deliveries, 2018 was a top year for industrial development and was the second straight year the market achieved record-breaking numbers. This elevated development was concentrated in the Northwest Quadrant and whether speculative, build to suite or owner/user, included some of the largest facilities ever completed in Salt Lake. Even with such sustained, elevated development activity, overall user demand is keeping up with the market and will continue to balance overall fundamentals as development continues at a breakneck pace.

“Demand from large industrial occupiers continued to surge in 2018, propelling annual lease activity to an impressive 5.3 million square feet,” statedJeff Richards, senior vice president. “With so many users in the market—notably large, market-moving users—and the robust development taking place—particularly in the Northwest Quadrant—the outlook for 2019 is for elevated activity levels to continue in the industrial segment.”

RETAIL LEASING ACHIEVES ALL-TIME HIGH

Retail occupiers signed 1.25 million square feet of new leases in Salt Lake during 2018, smashing 2017’s record by more than 30 percent and setting a post-recession high. The majority of this elevated user activity is due to re-tenanting of vacant big-box retail sites, where most space is being repurposed to mirror modern consumer priorities for destinations that provide experience, value and lifestyle options.

“Not that long ago there were a plethora of headlines predicting the demise of the retail segment as a good deal of big-box users reduced their overall footprints, but 2018’s activity has painted a clear picture of the evolution currently taking place,” stated JR Moore, first vice president. “In just a few short years, the retail industry has completely reinvented itself. As most large closures have already occurred, the downside risk as we enter 2019 is relatively low for Salt Lake and things are expected to continue stabilizing, with vacancy most likely decreasing and conversions and redevelopments continuing to rise.”

OFFICE LEASING OPPORTUNITIES EVOLVE, PROVIDING MORE OPTIONS AND GREATER FLEXIBILITY

The Salt Lake metro’s net absorption (measuring the change in occupied square feet) reached a post-recession high of 1.2 million square feet in 2018, with 91.3 percent coming from the suburbs. This leasing activity, combined with a temporary lull in delivered construction, has kept overall vacancy low, which is creating a challenge for users who are searching for large blocks of space. In Q4 2018, there were only three existing Class A properties downtown that could accommodate at least 40,000 square feet of contiguous space. However, this tightening in the office market is being alleviated by recent market innovations that have helped provide more options for users.

“The office market is experiencing its own evolution as coworking, creative space and agility have become more prevalent themes. At the end of 2018, approximately 241,000 square feet of flexible space was either operating downtown or was set to open in 2019,” stated Eric Smith, senior vice president. “Roughly 67 percent of the coworking space downtown was signed within the last year alone and has assisted users of all sizes become more agile as they look to expand, contract, or relocate their workforce in a timely and effective manner to meet their business needs.”