CRE Industrial Market in Salt Lake City
Advice For Tenants
According to Mountain West Commercial’s industrial brokerage team, the market vacancy for Industrial has continued to reduce. The best advice for tenants, if you have a year left on your lease, right now, is a great time to start looking for the next opportunity. Also, Existing options might be limited so you might need to look at new projects under construction. Rates have continued to climb, be prepared to pay more in rent than when you signed your lease initially.
Market Challenges
There is no shortage of demand for space. One challenge is the cost to build new facilities given supply chain constraints and material availability. Lead times for steel, roofing materials, and other building components have been pushed out for various reasons and this has disrupted the delivery of new supplies. Our industrial team says it is important to give credit to the developers and contractors that have worked to manage these disruptions and have still managed to deliver products.
Costs of Material
The rising cost of materials like crude oil, asphalt, softwood lumber, and a labor shortage is partly to blame for the rising costs of construction in Utah and across the county. At the same time, steel prices have risen by about 17% in March 2022.
“Steel is the biggest issue we are seeing right now and it is the first supply construction must lock down before starting any new build,” Mountain West Agent Tyler Jones said.
Experts say the combined impact of this surge in input costs is likely to escalate the cost of construction and thus impact pricing in the commercial real estate market. Experts say the increase in raw material costs can lead to price escalation, especially for projects that are already under construction.
Labor Shortage
The Associated Builders and Contractors (ABC) released new numbers that indicate, that this year, an estimated 1.2 million construction workers will leave their jobs to work in other industries. The impacts of the so-called “Great Resignation” are being felt in Utah.
The ABC says the construction industry will need to attract nearly 650,000 additional workers on top of the normal pace of hiring in 2022 to meet the demand for labor.
Outlook Along the Wasatch Front
Salt Lake County will continue to develop on the remaining land available in the Northwest and Southwest Quadrants. Look for further industrial development to take place in Davis and Weber Counties as well as Utah County, especially in the southern part of the county. As our population continues to grow, we will need industrial real estate to supply the needs of our growing population along the Wasatch Front.
