Coming off a record year in “the second longest expansionary period in U.S. history,” the Wasatch Front commercial real-estate market is showing “no signs of slowing down.”
That’s the view of CBRE, a Los Angeles-based Fortune 500 commercial real-estate services and investment firm that has an office in Salt Lake City, in releasing an annual report that showed investment sales along the Wasatch Front in 2017 reached a record $2.2 billion.
“Development and demand levels across all market segments remain elevated,” said Lloyd Allen, managing director of CBRE’s Salt Lake City office, adding, “2017 was a great year. With continued momentum, 2018 has potential to be a very good year as well.
“The heightened level of commercial activity in late 2017 carries a momentum that crosses over into 2018,” he said. “Salt Lake will retain a position of strength relative to markets nationwide.”
Institutional funds and money coming in from out of state helped fuel this commercial sales growth, up from $1.9 billion in 2016. In 2010, just after the depths of the Great Recession, annual sales had amounted to just $300 million.
Utah’s surging population — third in the nation last year at 1.9 percent — also figured prominently in lifting sales of multifamily housing projects to their highest level ever, almost $1.1 billion. The other $1.1 billion of growth occurred in the industrial, office and retail markets, Allen said.
“The industrial market continued to defy cyclical considerations and posted another record year for construction,” he said, particularly in sales of properties for large distribution and logistics companies. “The number of new leases signed for over 100,000 square feet nearly tripled the historical average. Vacancy continued to decrease and market demand is not likely to soften soon.”
The downtown Salt Lake City office market has been more susceptible to a cyclical slowdown in response to earlier building, with the CBRE report describing last year’s sales volumes as “subdued.”
“Demand remained strong for quality product,” Allen hedged, while noting that “construction continued to boom in the suburbs. The near-term outlook is positive with a strong construction pipeline set to drive activity in both the suburban and downtown areas throughout 2018.”
Of the three commercial markets, retail has been the spottiest. Allen cited the demise of several large retailers, Toys R Us among them, as reflections of the ongoing evolution of retail sales in the age of online shopping.
But he added optimistically that “retailers and landlords are adapting and [retail sales] activity improved dramatically in the second half of the year. Population growth has been a primary driver, resulting in significant construction in the [valley’s] southwest quadrant.”
Utah’s economy also is vulnerable to disruptions from disputes over trade and immigration policy, Allen said on a day when China prepared to retaliate for President Donald Trump’s imposition of tariffs on 1,300 Chinese products. U.S. immigration issues remain far from being resolved.
“Stricter immigration rules,” he added, “could exacerbate existing labor supply issues for critical industries like construction and manufacturing.”