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Utah apartment market still hot, report says

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A UTA bus moves along 200 South while construction of a luxury apartment building progresses in Salt Lake City on Wednesday, Jan. 31, 2018. The Wasatch Front rental housing market is maintaining a level of prosperity for investors and meeting the ongoing demand of prospective tenants in search of places to live, a new report shows.

Laura Seitz, Deseret News

SALT LAKE CITY — The Wasatch Front rental housing market is maintaining a level of prosperity for investors and meeting the ongoing demand of prospective tenants in search of places to live, a new report shows.

Released semiannually, the Greater Salt Lake Area Multifamily Market Report issued by the Salt Lake City office of commercial real estate firm CBRE provided detailed data and information on the multifamily rental market for the four-county region that includes Weber, Davis, Salt Lake and Utah counties.

With the area’s population increasing at a robust pace, analysts said the market has been fueled by employment growth and the state’s strong economy. In-migration driven by job creation has bolstered demand for apartment units and has contributed to ongoing low vacancy, which registered at 3.9% for the third year in a row, according to the report.

The rate of annual rent growth came in at 5.1%, while the average monthly rent across all property classes was $1,157. The greatest rent increases occurred in Salt Lake County, which hit an average of $1,187 through the first six months of 2019.

While those prices might seem a bit expensive to many Utahns, they are not nearly as high as some newcomers have become accustomed to in other cities, a local analyst explained.

“A lot of the new renters are thrilled at the pricing even though it’s on the upper end (for Salt Lake City) because they’re coming from markets like San Francisco, Chicago, New York, Dallas or other larger gateway markets where costs are even much higher,” said CBRE vice president and multifamily specialist Patrick Bodnar. “Here, they’re maintaining most, if not all, of their salaries yet realizing a much lower price point and still getting a much better overall (apartment) package.”

He noted that new units are being leased up — absorbed — as quickly as they become available, which is why the vacancy rate has been so steady for the past few years.

“The greater Salt Lake multifamily market has experienced robust midyear rent growth year over year, in addition to healthy absorption numbers and consistent low vacancy,” said CBRE senior vice president Eli Mills.

Bodnar said affordability along the Wasatch Front is still much greater than some other large metro areas in competing markets.

“We’re not as high as other markets,” he noted. “We’re quite a ways off of what some of these markets like L.A., San Francisco — these much larger markets are experiencing.”

He said developers will also have to work on ways to manage affordability issues that may arise as a way to mitigate some potential legislative solutions some municipalities have taken up to deal with increasing housing prices — particularly in the multifamily sector.

With such strength in the local rental market, he said many out-of-state developers are interested in the Salt Lake area due to its high-growth potential that has been largely untapped by outside developers, a news release stated.

So far this year, nearly 3,000 units have been brought online with another 4,764 units planned for completion across the four-county area by year’s end. Most of the new multifamily development is happening in Salt Lake County, where 5,565 new units are expected to come online this year, the release stated.

The report indicated the market is continuing its record sales volume pace, according to data from the first half of 2019. Sales volume registered at just over $585 million as of midyear 2019 and is now on track to exceed last year’s historic high of $1.44 billion, the report noted.

“Multifamily continues its commanding presence and is the preferred investment vehicle over all other asset types — both locally and nationally,” Bodnar said.