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The dramatic decrease in commercial, industrial and retail space available in the Salt Lake Valley is an indication of the strength of the area's economy, but new space needs to be constructed to keep the trend going.

That assessment of the real estate situation was made by Bill Martin, president of Consolidated Realty Group, to the board of governors of the Salt Lake Area Chamber of Commerce.Of the 14.8 million total square feet of office space available in the valley, only 1.2 million or 8 percent is vacant, Martin said. The vacancy rate, which dropped from 20 percent to 8 percent in two years, is the result of limited new construction that points to tighter market conditions.

Martin said the Central Business District had 616,037 square feet of space available in June 1994, 324,400 square feet of space were absorbed and there is only 150,000 square-feet under construction.

Vacancy of Class A space in the Central Business District in June 1992 was 19 percent, which dropped to 10 percent in June 1994. Vacancy in Class B space was 16 percent in June 1992. That declined to 8 percent in June 1994, Martin said.

In a forecast of office space, Martin said tenants must be prepared to make immediate decisions; new construction is being started by financially strong individuals as well as developers; building sales will continue to increase; sales prices have increased and will continue to increase; users purchasing their own small buildings are becoming a driving force in the marketplace; and tenants should expect to pay a great deal more for improvements.

Talking about industrial space, Martin said industrial vacancy is at a record low at 3.7 percent with the greatest shortage in the space with less than 5,000 square feet. Martin said the area's six major industrial parks report vacancy of 5 percent or less.

A trend in industrial space, Martin said, is that short-term lease proposals and temporary tenants are being rejected by landlords in favor of more secure, long-term contracts. He said more construction is being started by owners/ users.

In his forecast for industrial space, Martin said 1994 absorption will exceed that of previous years; most buildings with more than 50,000 square-feet will be removed from the market by year's end; planned new construction will lead to balanced market conditions; market supply of small space will remain severely restricted; new buildings will command lease rates significantly higher than in past years; and undeveloped parcels will be improved and marketed at higher asking prices.

In the retail real estate market, Martin said 3 million square feet of space under construction in 1994 will come on line in 1995 and overbuilding is less likely than in times past.