Utah Apartment News: Window of Opportunity

Settlers Landing is a newly constructed and stabilized property in Weber County. Weber County has only lost 4 percent in street rents since the beginning of the recession. Photo courtesy SettlersLandingApts.com

By James Wadsworth and Greg Barratt

Hendricks & Partners

Salt Lake County: Street rents have nosedived by 8.5 percent  in the last year as owners attempt to keep occupancies up. The good news is that job losses are beginning to taper off, and vacancy is not getting any higher. Concessions are down as owners choose to lower rents instead of giving away free rent.

Weber County: Settlers Landing is a newly constructed and stabilized property in Weber County. Don’t underestimate this county, which has a surprisingly strong rental market with occupancies as good or better than Salt Lake County. Weber County has only lost 4 percent in street rents since the beginning of the recession. Liberty Junction, a new 93-unit property in downtown Ogden, is already full with a waiting list. Colonial Court also added new units this past year and experienced rapid lease-up.

Utah County: The county is gearing up for the $1.5 billion National Security Agency facility in Lehi. Expect 10,000 new construction related jobs in the county for the
next two years. Combine that with the massive construction on I-15 in the county including Pioneer Crossing and a new four lane road west to Saratoga Springs. Also work recently began on the $130 million expansion of SR92 between Thanksgiving Point and Alpine. Don’t forget Front Runner. Work is underway on the new high speed commuter rail line from Salt Lake to the southern part of Utah County. Like Salt Lake County, rental vacancy is up, but expect things to tighten as these projects move forward.

New Construction: Developers are scrambling to take advantage of the unusually low cost of construction. Our latest estimate shows 1,925 units will be completed this years in Salt Lake County with 2,777 to be completed next year. Announcements on several new projects in Davis and Utah counties are forthcoming. New construction could further dampen the rental market in the short term, but forecasts indicate there could be a shortage of apartments in 2013.

Short-term Forecast: With interest rates expected to spike up sometime in the middle to latter part of 2010, buyers are starting to show up touting that they will buy at more aggressive and reasonable cap rates than in the past. They see that now is the time to find deals before interest rates rise. Phoenix and some other markets have already experienced a dramatic change in deal activity in just the past few weeks. If the interest rates do rise -- and most predictions are that they will jump by about 100 basis points -- it will take years for rents to catch up and values to get back to today’s levels.

Property Taxes: Most Utah owners were stunned with the increase in property taxes this year. Average increases were approximately 28 percent. According to the county assessor the tax burden was shifted from lower performing commercial real estate to the residential and multi-family sectors. Appeals can only be filed during a 45 day window after the notices are mailed out each July. Taxes in Utah are due on Nov. 30. A 2 percent penalty goes into affect after that, and interest starts to accrue in January.

Light Side: Utah hit the top of the happiness chart for the fifth straight year according to a study by University of Cambridge. Utah scored a 70, the highest in the nation.

Sources: DesNews.com, SLTrib.com, Utah.gov