Utah’s Commercial Real Estate Market: Opportunities in Multifamily, Industrial, Retail, and More
10/04/2024
Utah’s commercial real estate (CRE) market continues to thrive, bolstered by a growing population, a business-friendly environment, and strategic infrastructure investments like the Salt Lake City International Airport. As more people and businesses flock to Utah, various CRE sectors—such as multifamily, industrial, retail, NNN (triple net lease), and hotels—are experiencing unique growth patterns and challenges. Here's a detailed look at the state of Utah's CRE market in 2024.
1. Multifamily Market: Demand Driven by Population Growth
Salt Lake City's multifamily market remains a bright spot, driven by strong in-migration and affordable rental prices compared to national tech hubs. Although rent growth has moderated, Utah's population growth continues to fuel demand for housing. In fact, Salt Lake’s rental vacancy rate stands at 5.5%, lower than the national average, making it an attractive market for multifamily investors [Source].
As people continue to move to Utah for job opportunities and a lower cost of living, especially from pricier markets like California, the demand for Class A properties is rising. Rent for high-end units remains relatively affordable compared to other tech cities, presenting opportunities for both developers and investors to capture incoming talent [Source].
2. Industrial Market: A Surplus of Sublease Space
Utah's industrial sector has undergone a transformation in the post-pandemic era. Once a hotbed for distribution centers and ecommerce-driven demand, the state is now facing a significant influx of sublease space. In Salt Lake City alone, nearly 2.8 million square feet of industrial space is available for sublease, a 45x increase from 2022 [Source].
This surplus presents both challenges and opportunities. Companies looking for industrial space now have access to fully-equipped, discounted facilities, creating potential for businesses that want to enter the market or expand at a lower cost. However, it also signals an overbuilt market, with developers now competing not only with each other but with tenants offloading surplus space [Source].
3. Retail Market: Resilient Consumer Spending
Utah’s retail sector has fared better than the national average, largely due to stronger consumer spending and increased retail trade employment in Salt Lake City. While many U.S. markets saw declines in retail jobs, Salt Lake posted an 8.6% increase in retail employment [Source].
This growth reflects the area’s economic resilience and the ability to attract new retailers. The city’s relatively affordable retail rents compared to other markets also provide a compelling case for retail expansion, especially for businesses seeking to capitalize on the influx of new residents.
4. Triple Net Lease (NNN) Market: Stability in Uncertain Times
Triple net lease (NNN) investments continue to be a stable option in Utah, particularly in times of market volatility. The region’s growing population and expanding business landscape create reliable demand for commercial properties that offer long-term, stable returns. NNN leases remain attractive to investors looking for minimal management responsibilities and steady income.
5. Hotel and Hospitality Market: A Gradual Recovery
The hotel and lodging sector in Salt Lake City and surrounding areas has faced challenges, particularly as leisure travel has been slower to recover post-pandemic. However, with Salt Lake City's International Airport expanding and more businesses returning to in-person events, the hospitality sector is seeing signs of recovery. As more people move to Utah, the demand for short-term accommodations is likely to rise [Source].
Key Areas to Watch in Utah
As Utah continues to grow, certain areas are emerging as key hotspots for CRE investment:
- Salt Lake City: The epicenter of commercial activity, offering a mix of multifamily, retail, industrial, and office opportunities.
- Lehi: Known for its “Silicon Slopes” tech hub, Lehi is experiencing rapid growth in office and industrial developments, attracting both startups and established tech firms [Source].
- Spanish Fork: With industrial availability increasing over 100% in recent years, Spanish Fork is becoming a significant player in Utah’s industrial market [Source].
Conclusion: A Market Poised for Growth
Utah's commercial real estate market is positioned for continued growth, driven by population expansion, a business-friendly environment, and strategic developments like the Salt Lake City International Airport. With opportunities across multifamily, industrial, retail, and NNN sectors, now is the time for investors and agents to explore Utah’s evolving landscape.
Brevitas can help agents connect with the right opportunities in this rapidly growing market. By leveraging tools that simplify property search, deal rooms for negotiation, and a platform that fosters relationships, Brevitas empowers agents and brokers to stay ahead in Utah’s competitive CRE market.
