Office market.

• Position: STATE OF THE MARKET: 2015 COMMERCIAL REAL ESTATE REPORT

OVERVIEW

Following record absorption in 2013, Utah's office market carried similar momentum throughout 2014. Overall vacancy fell, absorption remained positive, and lease rates increased, while concessions decreased for landlords in most submarkets. More build-to-suit requirements dictated the market than at possibly any other period in state history.

Former barriers of county lines disappeared for site selectors as cities across the Wasatch Front converged. Large users finalized contracts and moved into sizeable blocks of space across northern Utah. As Salt Lake, Utah, and Davis/Weber counties form a metroplex, accurate analysis of the Utah office market must incorporate research from outside the Salt Lake corridor.

Salt Lake County

SUMMARY

The Salt Lake County office market experienced remarkable stability. Net absorption continued its fifth consecutive year of net positive absorption at 850,589 square feet, with 5 out of the 7 submarkets experiencing positive absorption. The leasing of large blocks of space continues to drive these high absorption rates.

Total absorption returned to pre-recession numbers. This is further justified when reviewing the past two years' absorption numbers of 1,170,727 square feet positively absorbed in 2013 and 850,589 square feet in 2014- In comparison, net annual absorption totaling above 2 million square feet over a two-year span directly mirrors numbers posted from 2004 to 2007. This data evidences consistency within a strengthening office market. Early indications suggest 2015 will trend similarly.

Positive absorption levels over the past two years are even more impressive when contrasted to pre-recession totals, considering companies are taking less square footage per employee. Tenants are utilizing space more efficiently as employee density increases. The average square footage per employee was 225 square feet in 2010. Tenants reduced that number to between 145 and 175 square feet per employee by the end of 2014. The tech-industry can be linked as the primary source for these decreases, but this reduction trend has filtered into many other segments of the Utah market as well, including financial services. Landlords must account for this trend to effectively assess parking ratios in coming years.

DOWNTOWN

Vacancy rates decreased 1.98% throughout the Downtown market for an overall direct vacancy factor of 12.25%. This decline correlates directly to a variety of transactions with no one instance skewing...