MARKET SNAPSHOT: Salt Lake City Outpaces Nation in Employment, Occupancy
By Philip Shea, Associate Editor
Salt Lake City sported one of the lowest metropolitan unemployment rates in the nation at the beginning of 2012—at 6.5 percent, down from 6.9 percent in 2011. The addition of 20,400 jobs by major employers such as eBay and IM Flash Technologies are being buoyed by major tax incentives from local and state government, making the metro one of the most attractive places for business in the country.
As the jobs picture continues to improve, occupancy and other indicators are following suit. Overall vacancy fell sharply from 5.7 percent to 5.1 percent between 2011 and 2012 and is expected to make an even more dramatic dip to 4 percent next year. According to Hendricks & Partners, the area with the lowest vacancy was West Valley City, while the area with the highest vacancy was Rose Park.
Single-family in Salt Lake continues to struggle with home prices falling 16 percent to $189,000 in 2011 and foreclosure sales accounting for 25 percent of all activity. One in five homes with a mortgage remain “underwater,” meaning the owners owe more on their mortgage than their home is actually worth.
However, Hendricks & Partners projects that average prices will likely appreciate 4.7 percent in 2012, with dwindling supply and steady demand as driving forces. The state of Utah overall ranked 13th in the nation for homeowner distress.
The stellar job growth in the area is due to a variety of factors including low energy costs—31 percent below the national average—and a low corporate tax rate. Most significant, however, is likely the tax incentive packages provided by the state government.
Gov. Gary Herbert recently set a goal of 100,000 new jobs in 1,000 days for the state, and with announced expansions by Fiberspar, IM Flash Technologies and EMC Corporation, it appears as if progress is being made. eBay recently announced it will add 2,200 jobs with an expansion in Draper that will be completed in 2013, and ITT—a global defense contractor—is expected to add 2,700 new jobs over the next 15 years.
Hendricks & Partners reports that demand for apartments in downtown Salt Lake City is likely to see a considerable upswing with the opening of a 700,000-square-foot retail center, City Creek Center. Throughout the city, 740 new market-rate units are expected to come online this year—the lowest total in over a decade. This will be a prime driver of reduced vacancies through 2013.
Average rents are expected to climb from $763 in 2011 to $798 in 2012 due to high-wage job growth and a tightening housing supply in all sectors. Hendricks & Partners project a further increase to $809 per month in 2013.
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connie vitucci
May. 11, 2012 at 2:41 pm
Although this year’s limited new supply of rental units and upswing in demand are expected to keep the Salt Lake City apartment market favorably balanced, the market’s real test will come in the years to follow. According to real estate research firm Reis, Inc., a new wave of development activity is expected to commence in 2013 with the delivery of close to 2,000 units. Somewhat lower, though still relatively high, annual deliveries are expected thereafter. In all, approximately 6,000 new rental units are currently slated to be delivered here through 2016, many headed to the West Jordan submarket. Consequently, the local government and business community will need to keep the drivers of apartment demand healthy in order to sustain high occupancy levels and higher rents over this time span.
For more apartment, retail, and office property insights in 200 metro areas and 1,800 submarkets/neighborhoods nationwide, go to ReisReports.com.
Connie Vitucci
ReisReports.com