Commercial Real Estate Utah
The Utah Chapter of NAIOP recently held its 2014 Year End Commercial Real Estate Symposium titled “Destination Utah”. The event provided a fantastic overview of the Utah Commercial Real Estate Market. Overall, the commercial real estate market in Utah is very strong boasting low vacancy rates, increasing lease rates and a robust commercial real estate investment market that is still providing opportunities for private and institutional investors alike.
There were several take-away’s for me that I found very interesting and telling:
- Only 5% of the commercial real estate transactions nationwide in 2014 were distressed compared to 20% in 2010. With that being said, there were almost no distressed deals in Utah in 2014.
- Foreign investors were increasingly seen in the Utah Commercial Real Estate Investment market seeking the strong fundamentals that the market offers.
- Nationally more money is flowing into secondary markets as commercial real estate investors seek yield not found in primary markets.
- Although the Utah Commercial Real Estate Investment market boasts strong fundamentals, the increased presence of institutional and foreign investors makes Utah more sensitive to the global capital markets than it has been in the past.
- Despite the severity of the economic recession, values for institutional grade properties in the US are 15% higher than the 2007 peak.
- 2014 marked near record commercial real estate investment volume in Utah totalling $1.3 billion in sales (excluding multi-family). This does not include owner-occupied sales. The trough saw volume at only $194 million.
- Average overall cap rates are at 7.25% which is the lowest in history (overall including all property types except multi-family)
- Of the $1.3 billion in total transactoin volume, there were 112 deals under $20 million totalling $427 million and 11 deals over $20 million totalling $900 million.
- The average cap rate for properties under $20 million was 8.03%. (7.93% for industrial, 8.23% for office and 7.94% for retail) which shows that the 11 largest deals greatly pull down the average overall cap rate.
- The Utah Commercial Real Estate Investor Composition was 46% from out of state investors and 54% for in state investors. Of those investors 84% were private with 16% being institutional. 61% of commercial real estate investors in Utah were repeat buyers with 39% being new to the Utah market.
- If you include multi-family properties the total transaction volume is $1.8 billion.
As you can see the market is very strong with a bright 2015 forecast limited primarly by supply of good commercial real estate investment product.
Following are a few other market statistics that are worth highlighting:
- Overall vacancy is down to 10.02% in 2014 from 11.06% in 2013.
- Overall lease rates were relatively flat slightly increasing from $20.08 to $20.10 per square foot.
- Total industrial vacancy sits at only 5.5%.
- Overall achieved lease rates increased from $0.31 to $0.38 per square foot.
- There is a surge of speculative construction coming in the 100,000 SF + segment.
- Overall vacancy dropped to 6.2% down from 6.9% in 2013.
- Overall asking lease rates increase from $16.94 to $18.98 per square foot.
Although difficult to find there are still opportunities to invest in commercial real estate in Utah. Those already invested here are positioned well and may have more value than they may have realized.
Please contact me at firstname.lastname@example.org for additional detailed market information or to discuss any commercial real estate needs that you may have.