As markets across the country begin to approach plateaus in terms of occupancy and rent growth, Salt Lake City is continuing to see sharp declines in vacancy and steady hikes in pricing. The average vacancy rate for 2013 is expected to come in at 2.9 percent—1.4 percent below the national average.
Underlying the strong performance is the city’s burgeoning technology sector, which is concentrated primarily in the southern portion of the Salt Lake Valley. A new Adobe campus is Lehi is attracting investment from across the country, and many existing employment hubs are expanding their operations.
Marcus & Millichap reports that 29,900 jobs are expected to be added by year’s end—representing a 4.6 percent increase and pushing employment to nearly 6 percent above its pre-recession peak. While tech jobs did make up a large portion of the increase, sectors such as leisure and hospitality also expanded considerably.
As a result of this and the aforementioned rise in occupancy, average rents are expected to jump by another 4.9 percent by the end of 2013—to $862 per month. This is a sharp rise from last year, when rents rose a mere 2 percent to $815 per month.
Marcus & Millichap notes that rates are highest in South Salt Lake and the Downtown/University area. In the Sandy/East Valley/Park City submarket, rents rose 0.1 percent in the last 12 months to $895 per month—the highest rate in the metro. Meanwhile, the downtown area recorded the lowest vacancy rate—at 1.9 percent—with rents of $852 per month.
With such a strong performance in major fundamentals, developers are ramping up construction and expect to deliver 2,100 new units to the metro this year. Such represents a slight increase from the 1,450 units delivered over the last four quarters. An interesting dynamic, however, is that just over 1,050 of the new apartments will be market-rate, with the rest consisting of student, seniors and affordable housing.
Furthermore, while the gap between renting and owning remains relatively small in Salt Lake City, observers expect strong occupancy levels to continue due to an inability of many potential homebuyers to make a down payment and the convenient lifestyle renting enables.
Notable developments in the metro this year include the massive 294-acre Independence at the Point in Bluffdale, which will consist of 1,900 single-family homes, townhomes and apartments, and Aclaime at Independence—a 1,000 unit development with 21 acres set aside for mixed-use commercial structures.
Bluffdale continues to be an attractive submarket for regional developers due to its proximity to major tech employers.
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