July 26, 2007

  

A Publication of the Economic Development Corporation of Utah
CEO Jeff Edwards

PRESIDENT'S

MESSAGE

Utah Enjoys Strong Commercial Real Estate Market
With an annual growth rate of over four percent, Utah is ranked number one in the nation for job growth. We continue to receive accolades, including the recent Forbes ranking naming Utah the second best place in the nation to do business and the Kauffman Report that named Utah's economy the most dynamic in the nation. It should therefore, be no surprise that Utah continues to defy national construction trends that point to a slow down in development.

Today's article features recently released information from Coldwell Banker Commercial on Utah's commercial real estate market. This week's edition of the Economic Review also includes links to many of the ED-related news stories from the past week.

As always, if you have comments, suggestions or topics you'd like to see in the Economic Review, please contact us by clicking the Comments link at the bottom of this page. Enjoy!

Jeff Edwards
Jeff Edwards
President and CEO


FEATURE

All Sectors Remain Strong in Commercial Real Estate Market


Utah's commercial real estate market, like most other business sectors in Utah, is hot. This trend looks as if it will continue into 2008. All market sectors remain strong, with land values increasing, vacancy rates remaining low, demand for investment property growing, and several new national retailers entering the market. Thanks to its strong economy, Utah is extremely attractive to out-of-state businesses looking to relocate to a business-friendly state.

Russ Booth, a senior vice president at Coldwell Banker Commercial NRT, says the office market slowed down in the first half of 2007, but just long enough to catch its breath. The company's mid-year report predicts 2007 will close as another strong year. The question on most minds is, after four years of historic growth, will the market allow for the absorption of nearly one million square feet of office space that is currently available or under construction in the Salt Lake Valley? Based upon the economy and current trends, Coldwell Banker Commercial NRT is quite optimistic. “Our office team believes the answer is yes, that by spring of 2008, it will be clear that current construction levels were justified and developers who build well-located, premium-quality projects will be rewarded,” says Booth. “Despite a slowing of the national economy during the past year, the local office market will continue to experience growth with stable occupancy levels for the foreseeable future.”

Downtown Salt Lake City

The Central Business District continues to experience a renaissance with on-going development of the much-anticipated City Creek Center, and continued success of the Gateway District. Lease rates in the office market continue to increase and an abundance of mid-range and luxury residential properties have been completed or are under construction. “We have not seen such vibrancy in the downtown area since the 1960s,” says the mid-year report. "Class 'A' lease rates increased by 7.07 percent during the prior six months, and overall lease rates increased by 4.22 percent; both indicate a strengthening market." On the down side, the current vacancy rate of only 2.01 percent in the Class “A” market leaves few options for businesses looking to expand. The limited inventory provides explanation for the negative absorption of 31,368 rentable square feet during the first six months of 2007. Presumably, some tenants looked to the suburbs to meet their requirements.

Key Developments

Still, Coldwell Banker Commercial office specialists say the central business district needs additional high-quality inventory to provide the options required by office users, otherwise, there will be continued migration to the suburbs.

Suburban

More than ever, quality and location are the elements of landlord success in the suburbs. Booth says developers are showing a commitment to higher-quality developments, and tenants are responding by showing a strong preference for leasing in such projects. The South Valley area is where the prime suburban commercial tracts are located, where the bulk of the labor pool lives, and where new office development is primarily taking place. More than 933,000 square feet of new office development has, or will come on-line in this sector of the market in the next calendar year.

According to the mid-year report, vacancy rates in the South Valley area through mid-year remained almost unchanged, while average lease rates during that period increased 5.08 percent. Although actual absorption of 345,427 rentable square feet was lower during the first half of 2007 than during the prior six months, the second half of 2007 is expected to be strong for the suburban office market.

Industrial Sector

Vacancy rates in the industrial market have fallen from 6.67 percent to 6.5 percent over the first half of 2007--the lowest in more than 11 years. This has created a surge of new construction, the majority of which is centered on speculative big-box facilities. The decreasing supply of industrial property available below 50,000 square feet has increased sales prices on new property to the market. If the overall trend continues and interest rates remain relatively low, developers will continue to build speculative projects to accommodate market demand, according to the report.

Utah County has been enjoying record-breaking occupancy levels and available industrial space in the northern part of the county is virtually non-existent. Land prices in Salt Lake County industrial zones will continue to increase as the supply of available properties diminishes, with some areas seeing increases as high as 25 percent in the past year, according to the report. The South Valley and I-15 corridor has the highest industrial rates with land sales reaching $12 per square foot, in some cases. Coldwell Banker Commercial expects that South Valley locations near I-15 and in Northern Utah County will be in high demand and command the highest prices. A push is underway to develop the northern and southern boundaries of Salt Lake County, where access to the Davis and Utah County markets is easier along the I-15 corridor. Steady demand and lowering vacancies will create pressure for additional space in the second half of 2007 and into 2008. Meanwhile, lease rates are likely to increase approximately five percent annually, according to Booth and industrial agents with Coldwell Banker Commercial.

Significant Projects:


SAVE THE DATE

EDCUtah Annual Meeting Thursday, August 16, 2007


EDCUtah will host its Annual Meeting on Thursday, August 16 at the Downtown Salt Lake City Marriott, located at 75 South West Temple. Registration will begin at 7:30 a.m., with the business meeting beginning promptly at 8:00 a.m. This event will also mark the kick-off of EDCUtah’s 20th Anniversary year. As such, we hope you will make a special effort to join us to mark the celebration.

Reservations

Seating is limited this year and reservations must be made in advance. Tables (seating for 10) are available for $250 and individual seats are available for $25. Please RSVP to Trina Stanley at 801-328-8824 or tstanley@edcutah.org.

Parking and Transportation

Parking is available at the Marriott and can be accessed from West Temple. Additional parking is available across the street at the Salt Palace. The Temple Square Station is the appropriate stop for meeting attendees interested in riding Trax. It stops half a block north of the Marriott Hotel on South Temple.

IN THE NEWS

Utah may have gained 5,270 jobs


Source: Deseret Morning News
"If the fiscal year 2007 efforts of the Economic Development Corp. of Utah are fully realized, the state will have gained 5,270 new jobs and retained 840.

Jeff Edwards, president and chief executive officer of EDCU, told the Governor's Office of Economic Development Board on Friday that the operations of the companies recruited by EDCU, working in conjunction with GOED, totaled more than 2.5 million square feet. EDCU's pending announcements involve more than 800 jobs and $884 million in capital investments, he said. For the past two years, EDCU has been under contract to manage corporate recruitment for the state.

Edwards listed several recruited companies: Conestoga Wood Specialties, West Liberty Foods, Smith Sport Optics, Syracuse Castings, US Holdings and KraftMaid, which will have grand openings or other special events in coming months. And EDCU's successes include 64 new jobs and 265 retained at Smith Sport Optics, 130 new jobs for Allegheny Technologies, 230 new jobs at Amer Sports and 500 new jobs for West Liberty Foods. Edwards also noted that of the 65 "most active" projects among the 180 EDCU is handling, 26 involve manufacturing companies, 15 are in business services, 10 are in distribution or warehousing and six are in information technology/electronics.

Jason Perry, executive director of GOED, said many people work hard on corporate recruitment. "Everyone's been filling very important pieces of this whole puzzle," Perry said.

Economic Development Headlines from the Past Week

Silver Shovel Award honors Utah economy

- Utah recently was one of 10 states to earn a Silver Shovel Award from Area Development magazine in recognition of the state's excellence in economic development. (Morning News)

Utah sweetens film incentives

- Utah has sweetened the pot as it tries to get filmmakers to shoot more productions in the state. (Morning News) (Salt Lake Tribune) (KCPW)

Partnership Promotes Business

- Sew-N-Save owners opened their doors 30 years ago in Davis County and have stayed and flourished. A new tri-county partnership hopes to attract and help more entrepreneurial ventures like the locally owned fabric shop, community leaders said. (Standard-Examiner) (Davis County Clipper)

State development office is busy, potentially fruitful

-  Only a couple of years old, the Governor's Office of Economic Development has been busy and potentially fruitful--to the tune of 10,000 new jobs from economic incentives granted to companies. (Morning News)

Governor's office planning a trade mission to India

-  The Governor's Office of Economic Development on Monday announced that a trade mission to India has been scheduled for Sept. 21-30. (Morning News)

Clark tells of China

- On July 7, Rep. David Clark, R-Dist. 74, went to China for an up-close look at one of its largest industrial bases in Liaoning Province. Clark said the purpose of the trip was opening government and educational exchanges. (Spectrum) (Salt Lake Tribune) (KCPW) (Morning News)

Business alliance director resigns

- In the midst of a difficult and controversial process of remaking the way the Downtown Business Alliance of Provo is funded, the alliance's director announced her resignation Thursday. (Morning News) (Daily Herald)

So far, marketing plan works

- The Park City Chamber/Bureau marketing plan's slogan for 2007-08 could be: "If it ain't broke, don't fix it." (Park Record)

Salt Palace gets its chance to show off

- Newly expanded venue aims to impress when convention brings in thousands of industry peers
(Salt Lake Tribune)

Renewable energy the coming boom?

- Utah and the West could see the kind of investment that California's Silicon Valley enjoyed during its technology revolution if Congress establishes a national renewable energy standard, bill supporters said Tuesday. (Salt Lake Tribune)

Jobs aplenty in Utah; employers yearn for workers

- Debbie Jacketta is a small-business owner with dreams of expanding. But like other employers in Utah's super-tight labor market, she has put any ambitious growth plans on hold because there are simply not enough workers to go around. (Salt Lake Tribune)

Utah leads nation in job growth

- Utah's job growth numbers continue to sizzle, with retail trade and construction posting the biggest employment gains as strong in-migration helped ease a tight labor market, the State Department of Workforce Services reported Tuesday. (Daily Herald)

Weber State USTAR program off and running

- Former Nike Inc. executive Curtis Roberts has Weber State University's new technology outreach center running at a fast pace from the starting line. (Standard-Examiner)

USU Progressing With USTAR

- Utah State University is working hard to help companies with inventions and patents as part of the Utah Science, Technology and Research (USTAR) economic development initiative, said a university administrator. (Standard-Examiner)

Novel Economic Development

- Higher-paying jobs. And more of them. That's the goal of economic development -- the holy grail of states, counties and cities looking for increased tax revenue and a higher standard of living for residents. (Standard-Examiner)

Utah County Real Estate Market Strong, Commerce CRG Says

- The Utah County market resurgence that began in 2006 has continued at a steady pace in 2007, according to Commerce CRG market research. (Utah Business Magazine)

EDCUTAH PARTNERS

Current Partners
Why Be a Partner?
Board of Trustees