What’s Driving Growth Throughout the Wasatch Front?
Lowe Property Group’s Keith Smith on why Salt Lake City’s multifamily market has a bright future.
Strong economic fundamentals and solid employment drivers, backed by the great outdoors, have all been fueling in-migration in Salt Lake City over the past few years. More recently, the strong demographic trends have helped the metro’s multifamily market rapidly rebound from the effects of the health crisis.
Lured in by the metro’s more affordable cost of living compared to other West Coast markets, renters continue to relocate to the Wasatch Front, feeding demand for new multifamily product.
Lowe Property Group has been an active multifamily investor and developer in Greater Salt Lake City for more than 35 years. Multi-Housing News asked Vice President Keith Smith to share his views on the metro’s growth prospects.
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How did 2022 treat Lowe Property Group so far?
Smith: 2022 has been a solid year so far. We continue to witness strong metrics that favor multifamily development. Multifamily cap rates remain historically low and we’re seeing a continuation of strong rent growth carry over from the double-digit rent increases we experienced in 2021.
What can you tell us about Salt Lake City’s multifamily market? Please tell us more about the trends you’re noticing.
Smith: Salt Lake City’s multifamily market has never been tighter than it currently is. Vacancy rates are at historic lows, rental rates have never been higher and record numbers of rental units have been developed and are under construction. An unprecedented number of permits continue to be issued in Salt Lake County.
Salt Lake is no longer the sleepy market it used to be, thanks to a multibillion-dollar expansion of Salt Lake International Airport and more high quality and high-paying job opportunities moving to the state. Rapid net in-migration is also a key growth factor, as an increasing number of jobs go remote and individuals seek to take advantage of Utah’s great outdoors.
A couple of trends we are witnessing are the emergence of more and more mid- to high-rise residential developments, along with a shifting focus toward elevating the quality of building design. Lowe Property Group has made quality architectural design a major focus in recent years, as evidenced by our many collaborations with MVE Architects, a world-class multifamily architecture firm out of Irvine, Calif.
Where are developers most active? Which of the metro’s submarkets are most attractive nowadays?
Smith: Salt Lake City continues to be Wasatch Front’s most attractive metro to develop, due to rental rates being substantially higher than the ones in the surrounding suburbs. According to the Kem Gardner Policy Institute, more than 60 percent of the units currently under construction and proposed within the county are in Salt Lake City. The metro’s two most inviting areas to build are the Downtown and Sugar House Market, due to the proximity of various urban amenities—entertainment venues, dining options and cultural events.
To what extent has the pandemic-induced labor shortage impacted your development activity?
Smith: We have been strategic and fortunate to have partnered early on during the development process with strong and capable contractors, who have deep subcontractor relationships. Doing so has allowed us to navigate the labor shortages, supply chain challenges and COVID-19-related health restrictions.
Tell us more about your participation in the Post District development. How will this project shape the metro’s urban area?
Smith: The Post District is a 13-acre, mixed-use development that is located along the main entrance and exit boulevards of the city. This project will act as the next great expansion piece of Salt Lake City and will enhance the Granary neighborhood.
Lowe Property Group is directing the development of 580 Class A multifamily units, which will provide a wide variety of residential spaces, including loft living, workforce housing and contemporary apartment options, along with an unprecedented amenity offering. The Post District is scheduled to deliver units and new, upscale dining as soon as this summer.
Among all the multifamily projects that you’ve worked on so far, do you have a personal favorite? If so, which one and what makes it so special?
Smith: Having to choose a favorite is like choosing a favorite child, each is so different, unique and special.
The Post District is a very incredible project. However, 6th and Main will be another phenomenal one as well. It is located only a few blocks east of the Post District, along 600 South, and will feature a similar quality amenity package, including a double-height fitness center, an elevated resort-style pool deck and infinity pool, and a sky lounge that provides spectacular views of the city and mountains. It happens to be located steps away from the nightlife and heart of downtown.
We also have two additional MVE-designed projects in the Sugar House neighborhood. The first, Dixon Place Apartments, was completed in April 2021. We anticipate delivering the other one, Sugar Alley, in the first quarter of 2023.
What are your immediate plans for multifamily development across the Wasatch Front?
Smith: We continue to pursue multifamily development projects across the Wasatch Front, but are doing so with greater caution given the current climate of unpredictable construction costs and rising interest rates. We have upcoming projects in the pipeline in Salt Lake City, but always welcome new partnerships with great concepts and ideas that further enhance our state and other nearby markets.
How do you expect the metro’s multifamily market to perform in the short and long term?
Smith: In the short term, there is quite a bit of supply hitting the market which keeps us vigilant to absorption and vacancy rates. However, given the trend of high quality jobs moving to the Wasatch Front and an increasing number of young working professionals relocating to Salt Lake for its desirable lifestyle, we expect a bright long-term future for Salt Lake’s multifamily market.