Steve Tobias quoted in a recent Salt Lake Tribune Article

Commercial real estate activity returning to normal

Forecast » Utah’s strengthening economy brightens outlook for 2013.

Salt Lake County’s mutifaceted commercial real estate industry — made up of retail, industrial, office and apartment markets that don’t always move in tandem — is entering the new year in better shape than in a long time.

It’s not back to 2007, when industries were humming and the recession was yet to hit in full force. But many of the components that the commercial real estate sector uses to measure the sector’s vigor have stabilized over the past two years, and 2013 shows signs of shaping up nicely.

"The market feels like it’s definitely improving," Scott Lovell, Salt Lake City -based regional research director of Cushman & Wakefield Commerce, said Friday. "I don’t think anybody will be upset with 2013. It’s going to be a good year."

Last week, the commercial real estate and consulting firm released its annual review of commercial real estate action in Utah’s biggest counties. Although the office, industrial and real estate markets are each driven by different factors, the overall level of activity suggests that the industry is returning to normal long-term performance levels.

"I think that all segments of our commercial real estate market place are in recovery, and multifamily (apartments) is probably the strongest. It’s very solid. It almost appears that it’s better" than ever, said Michael Jeppesen, president of IPG Commercial Real Estate in Salt Lake City.

Commercial activity is strong enough that Steve Tobias, director of Keller Williams Commercial in Salt Lake City, wants to hire another partner or two to help expand his company’s business. Tobias’s 15 agents are all reporting higher sales, and "I’m about as busy as I want to be," he said.

For consumers, retail is king, and the retail vacancy rate in that sector of Salt Lake County’s market fell last year to 8.8 percent, close to the 10-year average of 8.4 percent. Pushing the rate down has been strong consumer spending, helped by the opening of City Creek shopping center in March, and of Scheels, the 220,000-square-foot sports store in Sandy, in September.

Lease rates continued a long-term downward trend in 2012, from close to $21 a square foot in 2008 to about $17 last year, but Cushman expects that rents will move slightly higher this year and that vacancy rates across various types of retail categories will fall further.

"Overall, 2013 will be steady, as existing properties look to create higher occupancy," the Cushman report said.

Lovell said the industrial real estate market is largely driven by population growth, and Utah has had one of the fastest-growing populations in the U.S., even during the recession. That’s pushed sales and leasing activity to the highest levels since the mid-1990s. Although the vacancy rate rose to 9 percent last year, it was still just 1 percentage point above the 10-year average of 8 percent, he said.