After a record-breaking year in 1995 in the industrial real estate market, stabilization is the key word for the first six months of 1996, according to a report from CB Commercial Real Estate.
Noting that the Salt Lake industrial real estate market is healthy, the report said the number of people coming to the Salt Lake area slowed somewhat in the first six months of the year. In spite of that fact, several large national developers are continuing to look at Salt Lake City.Overall, the report said, the pace of activity in the first six months of 1996 is one-third the level for the same period a year ago. "This flattening in the marketplace is to be expected as a result of the past five record-setting years."
Vacancy of industrial space is at 2.8 percent for the first six months of the year, up from the 2.1 percent vacancy for all of 1995 and above the 1.5 percent in 1994.
The report said sale activity has declined sharply due to the unavailability of buildings for sale. In the middle of 1995 there were seven sales of more than 50,000 square feet, and so far this year there has been only one sale, the report said.
For the remainder of 1996, CB Commercial experts believe tenant choices will increase, resulting in competition; I-15 construction will play a more significant role in site selection; construction activity will be about 66 percent of the total in 1995; and vacancy rates will continue to rise and then level off at a more average figure.
Regarding office space in the Salt Lake area, the report said the health of the market will be driven in 1996 and 1997 by the amount of new office construction.
Since December 1995, developers have completed or began construction on more than 2.1 million square feet of office space in the Salt Lake area. More than 50 percent of this space is occupied or committed to single tenant users.
"Although the amount of new office space coming on line is substantial, it is barely meeting demand, resulting in continued limited availability. Vacancy rates will remain low for all office market segments, particularly Class A space," the report said.
Salt Lake City's downtown vacancy rate for office space at 6.5 percent is among the nation's lowest. The vacancy rate in the suburban area is 4.9 percent as of June 30, 1996.
For the remainder of the year, CB Commercial officials said lease rates will continue to rise but at a slower pace; leasing demand and activity will remain strong and investors will continue to spotlight Salt Lake City.
Regarding the retail market, the report said that in spite of rumors, Salt Lake City's retail market isn't overbuilt. It said that since the beginning of the year, big building users and specialty retailers such as electronics, restaurants and discount grocers have continued to enter and expand into the local market, acquiring blocks of space ranging from 50,000 to 100,000 square feet.
CM Commercial employees believe lease rates for retail outlets will continue to rise, there will be a strong demand from speciality retailers; and there will be some consolidation of "big box" users.
The report said the demand for land development remains very strong for all commercial and residential real estate segments. "Analogous to demand, sale prices continue to increase. We anticipate that land prices will continue to increase 10 percent through the remainder of 1996, slowed only by the limits developers receive on their improved land or lot inventories," the report said.