Recovery in Progress in Utah's Apartment Industry

Boulder Canyon (280 market rate units) is one of several new properties under construction in Utah.

By James Wadsworth and Greg Barratt

Henrdicks & Partners

Market Trends

The sharp decline in rents has ended as owners and managers have been pulling back deep discounts offered during the winter months. Some properties are back to market rent levels. Vacancy inched close to 10 percent as new product has been introduced to the market. The worst appears behind us with concessions off their peak one year ago. Expect improving conditions through the summer as job losses taper off and a new crop of graduates bloom.

Jobs

Utah continues to lose jobs, but at a slower rate. Unemployment is at 7.2 percent compared to the US at 9.7 percent. The state has lost approximately 22.500 jobs over the past 12 months with a negative job growth rate of -1.9 percent. The good news is that temp agencies are starting to hire. Temp agency data is the best indicator of things to come.

Transaction Velocity

The investment market has come off its stand-still. A number of small deals have been concluded in the past quarter. One or two large deals are under contract. Buyers are starting to come off the sidelines. Most seller are holding, waiting for higher NOI’s as the recovery matures.

Leasing Activity

Most properties across the valley are reporting higher leasing activity as warmer weather has entered the valley. Even the new Farmgate complex, the property farthest away from the city center in the southwest quadrant of the valley is reporting high traffic and brisk leasing activity. Competitive rental prices, approximately one month free rent and brand new units are attracting renters out of compressed households into the new communities.