Dismal Outlook in Washington County's Commercial Real Estate Market

The St. George Utah Replacement Airport will be five times the size of the current mesa-top airport at 1,200 acres.

By Ken Holman

Overland Group President

Jeremy Dickamore and Travis Perry, both from Commerce Real Estate Solutions, and Stan Perkins of Tonaquint Properties each gave their perspective on the condition of the commercial real estate market in Washington County, along with moderators Craig and Stan Morley of the appraisal firm, Morley & McConkie, at the 13th Annual Washington County Economic Summit held on Wednesday, Jan. 13, at the Dixie Center in St. George.

The Washington County commercial market overview is anything but upbeat. Washington County experienced a major downturn in all key sectors of the market. With unemployment standing at 8 percent and a significant decrease in property values for both residential and commercial properties, any recovery has been hampered. New construction consisted mainly of governmental projects with the infrastructure improvements along the I-15 interchanges and construction of the new regional airport, which is slated for completion in early 2011.

The St. George office market in 2009 reacted to the declining national and local economic conditions by reducing lease rates to 99 cents per square foot per month on a triple-net tenant. Vacancy increased in 2009 from 10.3 percent to 13.6 percent. Total office inventory stands at 2,203,924 with current vacant space at 300,800 square feet. Construction of office space was at a virtual standstill. In 2007, 338,000 square feet were added to the existing office market. In 2009, 38,760 square feet of new space was completed and 7,800 square feet is currently under construction.

The slowdown in the Washington County industrial market began in 2008 and continued through 2009. Few industrial land and buildings sold throughout the year. The total inventory of industrial space stands at 7,893,444 square feet with a current vacancy rate of 15.51 percent. Land values for industrial land range from $2.27 per square feet to $4.95 per square feet with annual lease rates averaging $3.60 to $7.80 per square feet. More than 155,000 square feet of new industrial space was constructed in 2009, with 24,512 currently under constructed and 642,394 square feet on hold in the planning stage. Several regional and national companies are continuing to investigate the area for future expansion, but most are taking their time analyzing current economic conditions. Financing also seems to be hampering project expansions.

The Washington County retail outlook had some positive new entrants to the market, including a Wal-Mart Supercenter in Hurricane and other restaurants chains such as Red Robin, Brick Oven, Five Guys Burger & Fries, and three Roberto’s Taco Shops. Natural Grocers also opened its doors in the area. However, with the exception of these new retailers into the market, the vacancy rate climbed from 7.5 percent to 11.66 percent and lease rate ranged between $9 and $24 per square feet per year, depending on location. Currently 4,933,839 square feet of total retail inventory is in the Washington County market. Anchored centers and stand alone restaurant properties generally fared better than un-anchored or Class B and C properties. All major retail development has been put on hold.