WHAT'S THE LATEST IN UTAH'S COMMERCIAL REAL ESTATE MARKET.

• Author: Hoffer, Sierra

There has been a lot of speculation about where commercial real estate is headed as we close out the year and look forward to 2023; especially as new challenges with the economy have reverberating effects on the real estate market. Previous performance indicators tell us where we've been, but looking at the physical changes along the skyline can show us where we are going. There is a synergetic relationship between the commercial real estate industry and economic performance, as commercial real estate literally houses the businesses and individuals that drive our economy. Though many development projects along the Wasatch Front are still in progress, the rapid pace at which new projects break ground is projected to taper as we head into the new year. Below is a glance into the principal commercial market segments for a deeper look at what transpired this past year, and a glance at what to expect in the coming months.

INDUSTRIAL

Despite heavy construction, vacancy compresses

In the past several years, the global industrial market has led-out as a shining star among property types, and activity in the local Utah market is a prime example of this broader phenomenon. Utah's industrial development has reached unforeseen levels in 2022, where 7.9 million square feet were delivered as of September--an all-time high for a single year--and 8.5 million additional square feet are still under construction. Despite this, vacancy within existing product in Salt Lake County reached a record low of 1.3%. While a low vacancy rate is good news for landlords, it proves problematic for tenants. Lease rates have spiked as a result. As of right now consumer spending, a demand indicator for the industrial market, is still healthy and isn't expected to decrease in the near-term. However, challenges for users within the sector include a tight market, increasing lease rates and the current economic conditions.

OFFICE

Market softening continues

Though Utah is ranked among the quickest-recovering states considering economic fallout from the COVID-19 pandemic, the office sector continues to face substantial challenges in this changing market. Beginning with the rise in remote work and the overall reduction of on-site office use, office vacancy has progressively increased this year, while leasing activity has continued to decline. As a result, subleases are on the rise throughout the Wasatch Front. As such, traditional office development within the office sector has had...