WESTERN SNAPSHOT, JUNE 2009

Salt Lake City Office Market

1. MARKET MOVE: Developers continue to hold off in 2009 with almost all new speculative projects tabled until financing and tenant demand normalizes. One exception is Hamilton Partners’ 22-story office building located at 222 South Main. Scheduled for delivery in November 2009, the 459,000-square-foot (425,000 rentable) building is 20 percent preleased. At the asking lease rate of $32 per square foot full service, the stabilized building is projected to have an estimated fair market value of approximately $117 million at the prevailing cap rate.

 2. MARKET MEASURE: Office vacancy increased from 10.82 percent in 2006 to 12.45 percent in 2008 and is likely to continue as 2009 progresses. The downtown vacancy rate rose from 11.2 to 11.6 percent in first quarter 2009 to begin the fourth straight year of increasing vacancy. Downtown Class A space currently has significantly lower vacancy (4.2 percent) than all other classes (13.23) and the suburban areas (13.79). Overall lease rates increased steadily from $15.82 per square foot in 2005 to $19.03 per square foot in 2008.

3. THE MARK OF A MARKET: Utah has been ranked second among the 50 states by Beacon Hill Institute for investment opportunity as measured by employment, technology, tax incentives and infrastructure. These factors will be beneficial in propelling Utah ahead of surrounding markets as the state emerges from the current economic downturn. The greater Salt Lake office market has been somewhat insulated from some of the more extreme national market cycles. Recovery may come sooner in Salt Lake City than other markets as general underlying economic conditions remain strong and there is significant long-term positive development in the central business district. The area is likely to be a target for individual and institutional investors coming back into the commercial real estate market.

— Kent Mommsen is an associate broker for RE/MAX Commercial in Salt Lake City.

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