OFFICE: OFFICE MARKETS EMBRACE ADAPTATION AND FLEXIBILITY.

• Author: Fugal, Brandon

MARKET OVERVIEW--INTRO

The Utah office market has remained relatively stable in despite of grappling with the impact of a global pandemic and the resulting remote working and social distancing measures. Most economists are predicting a potentially sharp recovery and return to work, albeit with revised expectations relative to employee density, new approaches to office environments, and configuration of the workspace are expected.

The long-term impact on space utilization has yet to be fully realized or understood, as the discussion remains fluid, and surveys appear contradictory and anything but definitive.

New construction and development have continued along the Wasatch Front relatively unabated, with both the completion and groundbreaking of numerous significant Class A office projects in both Salt Lake and Utah County occurring throughout 2020.

Some large corporate occupiers have continued to maintain a remote working format, with expectations that a transition from work-from-home (WFH) to return to the office will occur in stages, and will vary depending on the industry and local COVID-19 metrics.

ECONOMIC INDICATORS

Utah's labor market continues to recover with key economic indicators improving over the past several months. No question that the short-term economy will continue to struggle. Despite the short-term economic decline, Utah is ranked one of the top states in the nation to bounce back from the current downturn. The U.S. economy is in a difficult position, with challenging short-term visibility and many decision-makers paralyzed by the pandemic.

With the successful rollout of a COVID vaccine, there is renewed hope that economic growth could accelerate by mid-2021. However, the current environment of peaking COVID cases and increased lockdown restrictions will continue to constrain the economy for an unforeseeable timeframe. Without more federal stimulus support, the recent slowing job market could once again contract, pulling the economy into a "double-dip" recession.

Initial surveys indicate interest and anticipated activity from national tenants seeking to shift operations from the coastal, first-tier markets to secondary markets. A trend toward a more decentralized, distributed office workforce could strengthen the Utah market, but this will not be fully determined for 12-24 months.

HISTORICAL ABSORPTION

Net absorption remained positive for the 44th consecutive quarter, ending at 578,211 square feet. The Class A office sector experienced positive absorption of 603,464 square feet overall. Class B recorded a positive 211,936 square feet while Class C had negative 237,189 square feet of absorption. Depending on the length and severity of the current environment, the decline in occupancy might continue into 2021.

HISTORICAL VACANCY

Vacancy increased from...