WHAT'S ON THE HORIZON: FOR UTAH'S COMMERCIAL REAL ESTATE MARKET.

• Author: Hoffer, Sierra

It's been nearly two years since COVID-19 first shocked the world and brought about work-from-home orders, production shutdowns, and retail closures. Though the effects were felt across all industries, reverberations in commercial real estate Impacted the way we work, play, shop, eat and live, and it has taken the economy time to begin its recovery. On a positive note, the negative economic effects were far less drastic within the State of Utah than in many other parts of the country. In fact, in a recent study conducted by Wallet Hub (1) Utah's economy was ranked as the 48th-least affected In the nation. But what does this look like in the marketplace? Several economic indicators give some good insight into how Utah has fared so well, and how this relates to each property segment within commercial real estate.

There is a symbiotic relationship between the commercial real estate industry and economic performance, as commercial real estate literally houses the businesses that drive our economy. Though some property segments fared better than others, overall the industry has recovered well and is on track to continue this positive trajectory well into 2022.

INDUSTRIAL

Demand outpaces supply

If there's one property segment that has really shone over the past several years, it's industrial. Utah has become an industrial hub due in part to the macroeconomic forces at play, and these forces have helped fuel record levels of development. Demand is currently outpacing supply, and Salt Lake County's vacancy rate has been steadily declining, reaching a record low in 2021. New development is easing some demand pressure, although the majority of this year's new product was preleased at the time of delivery. Strong consumer spending, a diverse economy and the state's growing population will continue to feed the appetite for industrial product in Utah.

OFFICE

Recovery amid uncertainty

The office sector was one of the property segments most affected during the last two years. The onset of the COVID-19 pandemic drove office net absorption negative for the first time in a decade, while work-from-home mandates contributed to overall uncertainty in the market. Following this uncertainty was a period of stalled lease activity, footprint reductions, and an increase in subleases. Prior to the COVID-19 pandemic, headlines surrounding the Beehive State's real estate market were centered on growth, and expansion is still very much a part of the narrative. Cranes...