Salt Lake City Climbs The Ranks Of America's Major CRE Powerhouse Cities
Salt Lake City is one of the fastest-growing cities in America.
In 2022, the Kenan Institute of Private Enterprise, a business policy think tank, released its American Growth Project report where it named Salt Lake City the seventh fastest-growing area in the country alongside the San Francisco Bay Area, Austin, Seattle and other cities that are moving the "center of gravity" for economic activity away from the East Coast.
In PricewaterhouseCoopers and Urban Land Institute's 2023 Emerging Trends in Real Estate report, Salt Lake City was ranked No. 19 out of 80 on a list of U.S. markets to watch for its overall real estate prospects, beating out Los Angeles, Manhattan, Chicago and several other major cities.
The report quoted a ULI focus group participant from Salt Lake City who said, “Quality of life and affordability have been great draws to the market. Sustained high growth will test these factors long-term.”
Data Center Demand
One area where Salt Lake City particularly stands out is in the ever-growing data center market. Data center demand is expected to grow by 10% year-over-year in the U.S. until 2030.
In the PwC and ULI report, Salt Lake City was named one of the top North American data center markets by capacity. This is partially due to the fact that Utah has some of the lowest electricity rates in the nation, making it an ideal spot for energy-hungry facilities like data centers. If rates stay low while data center demand continues to rise, Salt Lake City may be able to further capitalize on this market.
Industrial Fundamentals
The Salt Lake City industrial market has also remained strong, with 3M SF of industrial space leased in Q1 2023, second only to Q1 2021 in terms of total leasing activity in the first quarter. However, like many other parts of the country, Salt Lake City may have bitten off more than it can chew in terms of industrial demand. Despite the strong leasing numbers, Q1 2023 saw 1.3M SF of industrial space delivered, only 28.3% of which was leased upon delivery.
Office Woes
Salt Lake City was not immune to the office vacancy issues that have plagued the rest of the country. While some new deals were made in Q1 2023, new office space contributed to the direct vacancy rate staying steady at 12.3%. The majority of office deals getting signed in the area seem to be coming from smaller users, with 84.7% of leases signed at the beginning of 2023 coming in at 10K SF or less.
Multifamily Stays Strong
Salt Lake City saw record-setting multifamily investment sales volume in the first half of 2022, and despite the fact that those numbers have tapered off due to rising interest rates and growing market uncertainty, CRE professionals remain confident in the market’s potential. Rawley Nielsen, president of investment sales at Colliers Salt Lake City, said that as Utah’s population continues to grow at an impressive rate, maintaining new development will remain crucial to meet the demand.
“All eyes will be on the construction pipeline for the foreseeable future as developers grapple with the state’s longstanding housing shortage,” Nielsen wrote for REBusiness Online. “Despite new supply coming online, Salt Lake County demand remains high and should stay strong. Salt Lake City is transforming with developments that will reshape the skyline.”
Overall, it is an exciting time for the Salt Lake City CRE market, and Bisnow is ready to keep the industry informed of all the changes heading its way. Subscribe to our Salt Lake City Top 10 starting on May 19 to stay up to date on the latest news in the area.
