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Trends from 2010 Produce Forecasts for 2011 Market

 Commerce Real Estate Solutions released its year-end review of the four areas of commercial real estate for Salt Lake County this week.

The provided information includes trends for each sector as well as their forecast for what 2011 will hold for the real estate business.  

Salt Lake County’s Industrial real estate sector experienced significantly lower vacancy rates than other cities and is among the lowest rate in the United States. “The rise in total market vacancy has been minimized by a decline in larger buildings and the continued lack of new construction,” the report claimed.   During 2010, tenants relocated to smaller facilities that better met their space requirements.

Over the past 12 months, rates in certain size increments have fallen by more than 30 percent. Sales prices for industrial buildings have also decreased at 16.85 percent from 2009.  

Commerce Solutions suggests that industrial vacancy rates will remain stable in 2011.  

The office market shows a slow return to a healthy recovery. Vacancy rates remained almost identical to 2009, at 15.7 percent in 2010 versus 15.72 at the end of 2009.   “On a positive note, over 85 percent of the new space that came online during the year was leased and occupied by the end of the year,” the report stated. New construction in 2011 is expected to be exclusively build-to-suit projects similar to the 160,000 square foot Questar building and the 125,000 square foot University of Southern Nevada facility at RiverPark.  

Retail real estate experienced significant changes during 2010. The most notable was the drop in asking rates for large regional retail centers, where rates have traditionally been the highest. Smaller, local tenants have benefited from the low rates and were able to lease space in regional centers that they otherwise would not have been able to afford.  

An area experiencing tough competition within the retail market is the grocery segment. During 2010, Associated Foods closed two Albertsons/Fresh Market stores in Salt Lake County, adding to the total of six store closures statewide. Other grocery stores such as Harmons, WINCO, Wal-Mart and Sunflower Market experienced growth in 2010, but are expected to slow further expansion in 2011.  

Regional malls underwent cosmetic changes in 2010 as well. Fashion Place Mall underwent a complete interior remodel. Part of the construction included a new Nordstrom store. The former Nordstrom space will be occupied by Crate & Barrel, which is scheduled to open during fall of 2011.   Commerce Solutions forecasts that lease rates for retail space will stabilize in 2011 and possibly see some strength as the overall economy improves.  

Commerce is expecting to see more transactions in 2011.