CBRE
Salt Lake City Office Market
www.cbre.com/slc
Second Quarter 2012
Salt
Lake’s
office
market
experienced
fastest growing state for science and tech
continued improvement during the second
jobs. This area’s growth will be supported
quarter of 2012. In summary, net absorption
by a large number of startups and expansion
was positive, vacancy decreased and lease
of existing firms.
rates essentially held steady. Improvement
tasked with supporting the National Security
in the office market can be attributed to
Agency’s new $1.5 billion data center at
a resilient and growing local economy.
Camp Williams will further bolster current
Although growth is occurring and conditions
trends.
Furthermore, contractors
in the office market are improving, uncertainty
looms and downside risks are increasing.
Quick Stats*
Although the greatest concentration of growth
associated with tech firms is taking place in
Current
Vacancy
15.4%
Asking Lease Rates (FSG)
$19.24
Net Absorption (SF)
235,558
Under Construction (SF)
378,400
Change from last
Preliminary data released by the Bureau of
the Thanksgiving Point area, both the Sandy
Year
Labor Statistics (BLS) for Salt Lake County
and Draper submarkets are undoubtedly
indicates continuing employment growth
benefiting from tech growth and maintain
in the office using sectors.
Employment
vacancy averages significantly lower than the
in financial services expanded at a rate of
metro average. Such growth is expected to
1.7% for the 12 months ending in May of
continue and will result in lower vacancies
2012. Meanwhile, professional and business
and new construction as large blocks of
services grew by an impressive 6.5% over
space become scarce in the area.
Quarter
*The arrows are trend indicators over the specified time
period and do not represent a positive or negative value.
(e.g., absorption could be negative, but still represent a
positive trend over a specified period.)
the same period, far outpacing the average
Hot Topics
•Positive Absorption
•Vacancy Decreases
•Lease Rates Stable
across all sectors, which is currently 3.3%.
While there are many reasons to be bullish on
the Salt Lake office market, external threats
According to the joint Salt Lake Chamber/
do remain.
CBRE Salt Lake City Spring 2012 Economic
(now in a more acute phase) will continue
Outlook, healthy job growth in the metro area
to weigh on the global economic outlook,
is expected to continue. Across all sectors,
with the potential to destabilize financial
job growth should approach the state’s
markets. Furthermore, geopolitical tensions
long-term average of around 3%. Financial
in the Middle East persist. Closer to home,
services employment is expected to grow by
an election year dynamic complicated by
2.6% during 2012, while professional and
the expiration of tax cuts and spending cuts,
business services should expand by 5.1% over
known as the “fiscal cliff”, will come into focus
the same period; such growth will produce
during the second half of 2012. As these
healthy demand for office space.
risks are weighed, markets will experience
Europe’s sovereign debt crisis
volatility and growth may be affected in Salt
Further improving the outlook for office
Lake. As such, downside risks to the outlook
properties in Salt Lake is a developing tech
are increasing.
corridor extending from southern Salt Lake
County into northern Utah County. According
to a recent report produced by the US
Chamber of Commerce, Utah is the fourth
© 2012, CBRE
Market Statistics
Total
Availability SF
YTD
Absorption
Total
Vacancy %
Avg Lease
Rate (FSG)
Under
Construction
(SF)*
Airport/International Ctr
1,276,185
185,594
(14,355)
11.1%
$16.50
-
Central Business District
7,096,041
1,580,876
(50,922)
19.5%
$22.26
-
CBD/Periphery
3,497,952
728,144
67,451
15.3%
$17.20
-
West Valley Lake Park
1,837,290
449,442
65,231
22.2%
$16.63
-
Research Park
1,130,364
23,259
1,151
1.4%
$24.11
-
Interchange
701,693
64,874
1,651
9.1%
$11.08
-
Sugarhouse
472,744
42,634
(148)
9.0%
$18.87
-
Foothill Corridor
243,356
43,838
(9,114)
13.9%
$17.96
-
Central Valley
2,044,009
515,372
49,387
20.3%
$17.57
-
Central Valley East
2,468,077
658,590
(12,972)
23.5%
$16.15
-
Union Park District
2,084,960
366,454
41,476
16.1%
$18.53
-
1,853,730
231,884
(11,977)
8.5%
$25.83
234,000
4,191,498
667,184
82,644
10.0%
$19.21
-
180,000
0
0
0.0%
$23.50
-
1,557,005
215,794
26,055
11.0%
$19.26
144,400
30,634,904
5,773,939
235,558
15.4%
$19.24
378,400
Cottonwood
Sandy South Towne
Southwest Valley
Draper
Totals
Salt Lake City
Building SF
Submarket
* Multi-tenant over 20,000 SF
Completed Construction
1,000,000
800,000
600,000
400,000
200,000
0
Completed SF
2007
2008
2009
2010
2011
2012*
1,108,896
995,133
559,771
278,500
0
693,940
*2012 estimate based on current multi tenant buildings over 20,000 SF currently under construction in Salt Lake County
Page 2
© 2012, CBRE
Second Quarter 2012
During the second quarter, construction on Gateway VI wrapped up adding an additional
103,540 SF to the market base. During the second half of 2012, more projects will
come online. Old Mill Corporate Center IV and the second building at The Pointe in
Draper are the most prominent projects that will reach completion during the next six
months. All together, nearly 400,000 SF of space will be added to the market’s base
square footage during the second half of 2012. When discussing new construction
in the market it is important to mention the area around Thanksgiving Point in
northern Utah County. While this area is technically outside of the Salt Lake market,
its proximity to the south end of the Salt Lake Valley and rapid growth elevate its
importance. At the present time approximately 2 MSF of new office space is planned
in the Thanksgiving Point area alone, with construction likely to commence on new
office buildings in the near-future.
1,200,000
Absorption
600,000
400,000
200,000
(200,000)
(400,000)
(600,000)
(800,000)
Multi-tenant Downtown
Multi-tenant Suburban
Total Multi-tenant
2008
6,699
318,705
325,404
2009
(267,424)
(414,979)
(682,403)
2010
105,484
186,000
291,484
2011
139,046
513,335
652,381
2012 YTD
16,529
219,029
235,558
Salt Lake City
800,000
On a market-wide basis, absorption was positive in Class A and B while Class C
properties were in the red for Q2 2012. Class A properties experienced 89,575 SF of
positive net absorption during the second quarter, with 80% of all positive absorption
in the class taking place downtown. Class A absorption downtown was bolstered by
one move: Barrick Gold’s occupancy at Gateway VI. During the last three months,
Class B properties were responsible for almost half of all positive net absorption market
wide; however, it should be noted that all positive Class B absorption took place in
the suburban market. Downtown Class B absorption was somewhat negative, but
largely due to Barrick Gold’s relocation from a Class B to Class A property. Class C
properties continue to underperform, experiencing negative net absorption in both
the suburban and downtown office markets. Overall, market conditions are expected
to remain stable and positive net absorption will continue, barring any major shocks
to the broader economy.
Vacancy
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Downtown Vacancy
Suburban Vacancy
Metro Vacancy
Class A
11.7%
6.0%
8.3%
Class B
21.7%
15.0%
16.9%
Class C
21.2%
20.4%
20.7%
Total
18.1%
13.9%
15.4%
Salt Lake’s office market saw a decrease in vacancy over the last three months, edging
down from 15.5% to 15.4%. On a market-wide basis, Class A properties continue
to enjoy the lowest vacancy at 8.3%, while Class B properties are at 16.9% and
Class C maintains the highest rate at 20.7%. Submarkets across a wide geography
in Salt Lake continue to improve. However, West Valley, Central Valley and Central
Valley East continue to struggle with vacancy rates over 20%; in fact, these three
submarkets contain almost one out of every three vacant square feet in the entire
market. Moving forward, large blocks of space will enter the market due to relocations
and new construction. As such, significant improvement in market-wide vacancy is
not expected during 2012, in spite of positive absorption.
Lease Rates
Lease rates essentially held steady during the second quarter of 2012. The average
asking lease rate for Salt Lake’s office market edged downward from $19.29 to
$19.24. Looking ahead, average asking lease rates are expected to remain somewhat
stable, with some variation as new space enters the market. The combined effect
of both new supply and a subdued economic environment will keep any increase in
average asking lease rates to a minimum. Furthermore, tenants remain sensitive to
costs as rising uncertainty continues to weigh on decision makers in organizations
both large and small.
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
2007
$23.52
$18.85
$14.87
$18.76
2008
$24.27
$19.49
$13.99
$19.11
2009
$26.26
$19.85
$15.05
$20.25
2010
$25.77
$19.80
$14.90
$19.54
2011
$25.15
$19.83
$15.11
$19.12
Q2 2012
$24.96
$19.78
$14.73
$19.24
Page 3
© 2012, CBRE
Second Quarter 2012
$0.00
Class A
Class B
Class C
Average
Salt Lake City
Top 5 Transactions Q2 2012
Size (SF)
Tenant
Building
Transaction Type
82,000
LANDesk
Jordan Valley Tech I
Renewal
69,000
Clearlink
Wingcrest II
Renewal
58,740
L3
Franklin Covey
New
26,000
EHealth
Lake Pointe
New
22,000
Sun Products
Gateway West
Renewal
Submarket
Map COUNTY
SALT LAKE
OFFICE SUBMARKETS
W 2300 N
a
Airport/International
Airport/International
Center
Airport/InternationalCenter
Center
´
´
SALT
SALT LAKE
LAKE CITY
CITY
SALT LAKE
LAKE CITY
CITY
SALT
INTL Airport
Airport
INTL
W 600 N
W 100 N
SOUTH TEMPLE ST
CBD
CBD
CBD
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CBDPeriphery
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Interchange
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Sugarhouse
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Foothill
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VALLEY CITY
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WEST
BANGERTER HWY
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CentralValley
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REDWOOD RD
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W 11800 S
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Draper
Draper
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RIVERTON
RIVERTON
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Net Absorption
The change in Occupied Sq. Ft. during the period
for all Existing properties
Base Inventory, Base or Building Square Feet
The sum of the Rentable Building Area for all
competitive properties
Occupied Square Feet
Rentable Building Area less Vacant Space
Under Construction
Buildings that have begun construction as
evidenced by site excavation or foundation work,
and is on-going
Available Space
Space being marketed to potential occupants, in
Rentable Sq. Ft. (direct and sublease combined,
unless otherwise indicated)
FT UNION BLVD
(
(
(
(
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W 7800 S
AM
GH
BIN
Cottonwood
Cottonwood
Cottonwood
Union
Union
Park
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District
District
District
(
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Salt
Lake
City
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Salt
Lake
City
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SaltLake
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Salt
Lake
City
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Salt
Lake
City
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Market Coverage
‘Existing’ completed competitive properties
DR
ILL
17TH S
E 21ST S
Completions
Rentable Building Area completed during the
period
(
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TTTT RRRR A
(
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Asking Lease Rate
Average of Asking Lease Rates for each property
weighted by the associated Available Space.
Includes Direct Available Space unless otherwise
indicated
DRAPER
DRAPER
Availability Rate
Available space as a percentage of the Base
Inventory or Building Sq. Ft
Vacant Space
Available Space that is physically vacant, in
Rentable Sq. Ft
Vacancy Rate
Vacant space as a percentage of the Base
Inventory or Building Sq. Ft
BANGERTER HWY
2.5
2.5
2.5
2.5
2.5
2.5
Miles
Miles
Miles
Miles
Miles
Miles
KM
KM
KM
KM
KM
KM
2.5
2.5
2.5
2.5
2.5
2.5
© 2012 CBRE, Inc. This information has been obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property.
You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners.
Salt Lake Office
All Rights Reserved. Sources: CBRE Mapping Services (877) 580-4674; Nielsen, StreetPro. MapFiles\Work2012\268068.wor 2/22/2012
The Salt Lake City office was originally opened in 1984 as a
small, boutique real estate firm. The combined Utah offices
of CBRE comprise 41 sales professionals and 105 total
employees. In 2011, our professionals advised clients on
$756.5 million dollars in commercial real estate activity.
© Copyright 2012 CBRE Information contained herein, including projections, has been obtained from
sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make
no guarantee, warranty or representation about it. It is your responsibility to confirm independently
its accuracy and completeness. This information is presented exclusively for use by CBRE clients and
professionals and all rights to the material are reserved and cannot be reproduced without prior
written permission of the CBRE Global Chief Economist.
For more information regarding the MarketView, please contact:
Stephanie Marthakis, Marketing & Research Manager
CBRE
222 South Main Street, 4th Floor
T. 801.869.8085 F. 801.869.8080
[email protected]