3rd Quarter Salt Lake Office Market Report Summary

Vacancy
Office direct vacancy has risen to 15.0% at the end of the 3rd Quarter of 2009, up from 13.6% compared to the 2nd quarter of 2009. Class B and Class C buildings have been impacted the greatest, both showing a 35% increase in vacancy and Class A buildings only showing a 5% increase in vacancy during the last 12 months.

Rental Rates
Overall asking lease rates are beginning to trend slightly downward in every submarket in the Salt Lake valley from a year ago. The pressure is mounting for landlords to offer greater concessions to lower their lease rates for current and future tenants as activity in the market decreases and new product is brought on-line.

Absorption
The positive absorption reflected at mid-year 2009 has been surpassed by the registering of 257, 400 SF of negative absorption in the 3rd quarter, resulting in a year-to-date negative absorption of 81,840. No particular submarket was immune to tenants downsizing is a direct result of job losses and the national economic crisis.

Construction
Six new buildings totaling 311,400 SF have been delivered year to date. Two additional buildings totaling 435,400 SF are scheduled to be completed in the 4th quarter. New construction has drastically slowed with only 279,500 SF of known construction to be delivered in 2010 as compared to the previous ten-year average of 910,000 SF.

Forecast
The Utah office market will continue to weather the national economic crisis better than most office markets around the country. The government's continued investment in the valley wide transportation system, the estimated $1.5 billion in construction of the City Creek mixed-use project in downtown Salt Lake City and the slowing of speculative office inventory is laying the ground work for the rebound of the Salt Lake valley office market.

Source: Commerce CRG, Dana Baird