Industrial market.

• Position: STATE OF THE MARKET - Statistical table

OVERVIEW

Economic stability painted an optimistic outlook for institutional investment organizations now looking at Utah as a viable alternative to major markets like New York, Los Angeles and Chicago. Large investment firms like Clarion Partners have identified various industrial opportunities and committed capital to industrial development across Salt Lake County.

Salt Lake County

SUMMARY

By mid-year, several developers noticed the increased demand for Class A space and began aggressively building industrial product. 2014 brought the largest amount of speculative industrial space under construction since 2007. This new development surge sent ripples throughout the market, but stalled when some projects were delayed. In turn, this caused a lack of available industrial product for tenants looking to expand or relocate. The Salt Lake County market experienced a steady decline in vacancy rates landing at 7.40%. 2014 was a competitive environment for industrial tenants. Robust leasing activity was seen in mid-sized industrial product, ranging from 10,000-50,000 SF. Larger tenants had to find temporary locations while waiting for blocks of class A industrial space to come online. Fortunately big-box accounted for the majority of 2014 industrial construction.

FORECAST

Expect to see a temporary increase in Salt Lake County vacancy rates going into early 2015, as large speculative construction is completed. Tenants will quickly absorb Class A space with superior freeway accessibility, modern amenities and efficient clear height. Lease rates will stay strong or slightly increase until more space becomes available. Older big-box space must remain price competitive within the market and offer an increased tenant improvement allowances. Developers should demonstrate confidence in building new industrial product as quality speculative space is quickly absorbed. Construction of mid-box space will also increase due to higher demand and strong returns.

Utah County

SUMMARY

A lack of available large blocks of industrial space and affordable inventory were the main obstacles facing the 2014 Utah County industrial market. Many tenants looked toward the South-end of Salt Lake County to satisfy their industrial needs. Vacancy rates in Utah County were extremely low which caused an upward pressure in lease rates. Industrial land prices also saw price increases along with a 15% hike in construction cost. This made a challenging situation for industrial developers...