Industrial Market Still Struggling to Recover

Real Estate News Utah

 

Local real estate professionals gathered Tuesday morning to hear a review and forecast of the commercial market in Utah.

 

Various real estate professionals addressed the audience during the 2010 Utah Commercial Real Estate Symposium ‘Corralling Fundamentals: The Real Estate Drive for Solutions’ held in the Hilton Ballroom. Speakers shared their take on the positives and negatives of the office, retail, industrial, investment and capital markets.

 

 

Although the second quarter of 2009 showed some promise in the industrial market (the square footage activity nearly doubled), the third and fourth quarters returned to the 2008 trend of a downward slide, Travis Healey of Commerce Real Estate Solutions said during the 2010 Utah Commercial Real Estate Symposium sponsored by CCIM and NAIOP Utah. This downward trend, he said, is largely because of the limited availability of funding.

 

“Weakened market conditions can be directly traced to the severe shortage in available credit and attendant unemployment,” Healey said. “The pace at which the market is able to recover will be determined by banker willingness to loosen purse strings.”

 

The only construction within the industrial sector was done by owner/users or build-to-suits, Healey said. Vacancies increased slightly to 7.17 percent by the end of 2009 and are expected to stabilize late in 2010, he added.

 

Lease activity declined by 25 percent during the last 12 months, Healey said. But predictions suggest lease activity should rise by 10 percent in 2010. Nearly 1 million square feet of big-box space opened up to the market after several closures of large national and regional businesses, increasing the availability of sublease space in Salt Lake, he said.

 

Many tenants are taking advantage of short-term renewals which landlords are willing to agree to in order to avoid potential vacancy, Healey said. Rental rates have dropped approximately 10 percent in the last year. And landlords are now willing to negotiate lower rates and concessions. These trends are expected to continue through 2010, Healey said.

 

Industrial sales transactions fell by 22 percent from 2008 to 2009, Healey said. The acquisition of First Industrial by the LDS Church increased the total square footage sold by 38 percent although the total number of sales transactions was down overall.

 

Few land transactions and construction projects occurred in 2009, Healey said. And the lack of industrial construction is expected to remain through 2010, due in large part to the lack of available credit, picking up again in 2012.

 

“The dearth of new industrial construction will extend through 2010,” Healey said. “The lack of available credit will continue to place a stranglehold on speculative construction and any new projects are likely to be undertaken by owner/users.”