Marcus & Millichap

Salt Lake City Industrial Investment Forecast

Salt Lake City Metro Area, 2018 Outlook

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Room for Growth in Metro’s Western Sections; Yield-Driven Investors Arrive From West Coast

Market retains tight vacancy despite intensified development. As Salt Lake City’s reputation as a secondary logistics hub strengthens, builders remain inclined to construct speculative space along with scheduled build-to-suit facilities on the Wasatch Front. In 2018, the metro will register a fourth consecutive year of heightened deliveries, with this year’s sum headlined by Amazon’s 856,000-square-foot fulfillment center just west of Salt Lake City International Airport. While larger facilities are situated in the city’s outskirts, smaller projects are constructed closer to the CBD, aiding the last-mile distribution strategy to the metro’s most densely populated areas. Amid rising development levels, vacancy will post an uptick as the metro attempts to regain supply-and-demand equilibrium. Rent gains act in accordance as growth is tempered compared with last year’s significant price advancement.

Class C properties remain foothold behind investor interest. Amid a period of heightened consumer confidence, e-commerce sales continue to rise this year, making industrial projects attractive options for investors looking to reposition their portfolios. Local buyers remain the constant behind the market’s strong deal flow, with properties in Salt Lake City proper accounting for the majority of transactions. In-state buyers place emphasis on Class C space typically below the 150,000 square-foot-mark near the I-15 and I-80 intersection. Here, cap rates in the mid-6 to mid-7 percent span are attainable. Manufacturing centers occupying land near Utah 201 in the Glendale neighborhood lure a sizable number of out-of-state buyers, particularly those coming from the West Coast. This space generally trades with initial yields ranging in the low-7 percent realm, in line with the metro average.

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