Newmark Grubb ACRES

44 Pages·2014·6.31 MB·English

NEWMARK
GRUBB ACRES

2013 YEAREND UTAH/MOUNTAIN WEST MARKET REPORT
Industrial
Salt Lake County . . . . . . . . . . . . . . . . . . . . . 2
Davis and Weber Counties . . . . . . . . . . . . 10
Utah County . . . . . . . . . . . . . . . . . . . . . . . 11

Office
Salt Lake County . . . . . . . . . . . . . . . . . . . . 12
Davis and Weber Counties . . . . . . . . . . . . 19
Utah County . . . . . . . . . . . . . . . . . . . . . . . 20

Retail
Multi County . . . . . . . . . . . . . . . . . . . . . . . 21
Cache, Davis, Salt Lake, Utah and Weber Counties
Salt Lake County . . . . . . . . . . . . . . . . . . . . 28
Davis and Weber Counties . . . . . . . . . . . . 29
Utah County . . . . . . . . . . . . . . . . . . . . . . . 30

Investment & Multifamily
Utah Market . . . . . . . . . . . . . . . . . . . . . . . 31

Land
Multi County . . . . . . . . . . . . . . . . . . . . . . . 35
Cache, Davis, Salt Lake, Utah and Weber Counties
Vertical Services
Global Corporate Services . . . . . . . . . . . . 40
Property Management . . . . . . . . . . . . . . . . 41
Integrated Workspace Solutions . . . . . . . . 42
Newmark Grubb ACRES Commercial Real Estate is pleased to present to you the 2013 Yearend (YE) Report of the
Utah commercial real estate market. We have evaluated data on vacancy, absorption, lease rates and other market
indicators, and have provided a concise, up-to-date market review. Our professionals have drawn conclusions from
data as well as their experience to help identify significant happenings and current trends, and to forecast market
activity for 2014 . We think you will find the report contains valuable information about the changing marketplace,
and that the information will help you make educated real estate decisions. We are pleased to be able to provide this
report to you.

Here are several key indicators that in 2013 have had an effect on Utah’s commercial real estate market:
■ Utah continues to receive top recognitions to add to its list of economic accolades. Forbes Magazine ranked Utah
the #3, behind Virginia and North Dakota, Best State for Business and Careers; CNBC ranked Utah #5 for the
Best State for Doing Business in 2013; Forbes Magazine listed Salt Lake City as #10 in Best Cities for Business;
and Salt Lake City ranked among America’s 15 Hottest American Cities of the Future according to Business
Insider.
■ Utah is one of the fastest growing job markets in the U.S. according to Business Insider.
■ Utah is in the top 5 states in this year’s economic outlook index according to American Legislator.
■ Utah’s economy as a whole continues to outperform the nation and remains one of the most fundamentally sound
economies in the nation. The Wasatch Front commercial real estate market generally mirrors that of the nation,
but with a more optimistic outlook.
■ Utah is ranked in the top 10% in the nation for the lowest unemployment rate at 4.3% compared to a national
average of 6.7%.
■ The number of firms looking to relocate to or expand in Utah continues to be steady, if not increasing.
The rest of this report provides a more in-depth analysis of specific real estate trends in Utah. Please feel free to call
our professionals located at one of our four offices in Utah for additional market information.
At Newmark Grubb ACRES, we appreciate the opportunity to work with our valued clients and build relationships
based on creating and preserving real estate values. It’s our job to make sure we’re doing everything in our power
to help you achieve your goals. Our years of experience have taught us many things, but none more important than
this: you are the reason for our success. Thank you for your business.
Mike Falk - President Lloyd E. Allen - Senior Vice President, Principal Broker
Industrial
Salt Lake County Market Overview
The year 2013 marked another robust year of activity in all sectors of the industrial market, with the year’s total market activity of $340,227,264
and total net absorption of 3,350,100 net absorption numbers for 2013 eclipsed those of the prior two years combined. The distribution and
logistics core of our market has seen further validation of its legitimacy as a super-regional distribution hub, with a number of marquis users (e.g.
Sportsman’s Warehouse, Overstock, 1-800-Contacts) making long term commitments to Utah. Perhaps as exciting, is the attention being given
to the market for all aspects of manufacturing uses, with composites, medical device, aerospace, and food grade manufacturing users leading the
charge.
Quick Stats
Last year saw the progression of a number of fundamental changes to the logistics Year Over
2013 % change
and supply chain methodology which drives warehouse demand across the nation. Year Change
Vacancy Rate 5.15% (105) BPS
E-Commerce, third party logistics companies, and retailers with significant portions
of sales driven by consumer direct, non-store retail sales are huge drivers of space Under Construction 1,098,656 -46.42%
consumption locally and nationally (e.g. Overstock, Cabella’s, Kenco Logistics, # of Leases 251 -21.81%
IntegraCore, Sportsman’s Warehouse, 1-800-Contacts, ES Media, LLC).
Leased SF 3,835,351 -33.28%
Lease Rates $0.39 0.00%
Clearly e-commerce and direct to consumer sales is a very relevant and growing
segment of the economy. When considering the role of warehouse and logistics in # of Sales 50 -1.96%
the e-commerce supply chain, the data suggest it will continue to fuel demand for Sold SF 2,080,230 73.16%
space in markets poised for super-regional distribution.
Sales $PSF $65.30 10.45%
Users of space continued to flock to quality product, and there was a further widening
in both the level of activity and the disparity of lease rates between Class A and Class B/C space across all industrial product subtypes. Lease rates
in Class A bulk industrial product tested previous market rent barriers, and in instances broke them. Users of all product types are looking to
squeeze every ounce of efficiency they can from buildings, which has driven leases of state of the art facilities with amenities such as trailer storage,
and a requirement for more interior ceiling clearance.
Fueled by low borrowing costs, and the specter of continually increasing construction prices, owner-users seized the opportunity to acquire land
and build facilities. The market remains under-supplied with quality product available for owner-user purchasers, and prices are rising closer to
replacement cost as a result.
Notable Transactions
Property Name Address City Buyer/Tenant SF Type
KraftMaid - Bingham Industrial Park 10026 South Prosperity Road (6210 West) West Jordan Boeing 867,494 Owner User Sale
Westport Distribution Center 6075-6195 West 300 South Salt Lake City IIT Acquisitions LLC 760,266 Investment Sale
Centennial Plaza 3584-3628 West 1820 South Salt Lake City Harsch Properties 243,669 Investment Sale
Landmark 6 - Sportsman's Warehouse 5105 West 1525 South Salt Lake City Sportsman's Warehouse 209,107 Lease
Interstate Business Center 2500 South 2300 West West Valley City Harrison Properties 205,125 Investment Sale
Landmark 2 - Interline Brands 1420 South 4800 West Salt Lake City 1-800-Contacts, Inc 173,040 Lease
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 2
Industrial
Salt Lake County Market Overview
Net Absorption & Direct Vacancy Rate
• YE vacancy rate decreased 4,000,000
101 BPS from 2012 to 2013 . 7.00%
3,500,000
• YE 2013 absorption ended
3,000,000 6.00%
positive and was over twice
as much as 2012.
2,500,000
5.00%
2,000,000
are Feet 1,500,000 4.00% ncy Rate
u a
q c
S 1,000,000 3.00% Va
500,000
2.00%
0
1.00%
(500,000)
(1,000,000) 0.00%
2008 2009 2010 2011 2012 2013
Net Absorption 2,993,179 (876,391) 255,572 1,230,899 1,452,542 3,350,100
Direct Vacancy Rate 3.35% 5.33% 5.36% 5.22% 6.16% 5.15%
Vacancy Overview
9.00%
8.00%
1.36%
7.00%
1.43%
0.50% 1.66%
6.00%
0.89%
0.64%
5.00%
4.00%
3.00% 6.16%
5.03% 5.15%
2.00%
1.00%
0.00%
Yearend 2012 Midyear 2013 Yearend 2013
Direct Vacancy % Sublease Availability Contingent (Occupied) Availability
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 3
Industrial
Salt Lake County Market Overview
Direct Vacancy by Product Type
10.00%
8.98%
9.00%
8.28% 8.47%
8.00%
7.46% 7.05%
6.96%
7.00%
6.56%
6.00% 5.68% 6.00%
4.97%4.97%
5.00%
4.49%
4.00% 3.83% 3.75% 3.96%
3.49%
3.00% 2.75%2.50%
2.00%
1.00%
0.00%
Manufacturing General Purpose Bulk Distribution Medium Distribution Flex Special Purpose
Year End 2012 Midyear 2013 Year End 2013
Under Construction Overview YE 2013 New Construction Delivered Overview YE 2013
1,200,000
301,802 SF 1,000,000
1 Building 466,336 SF
2 Buildings
800,000
Speculative Construction
600,000
Owner-User Construction 991,507
BTS Construction 2 Buildings
400,000
659,839
3 Buildings 503,100
200,000 6 Buildings
-
330,518 SF Speculative Construction Owner-User Construction BTS Construction
5 Buildings
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 4
Industrial
Salt Lake County Market Overview
New Under Construction/Delivered Overview -past 8 quarters
1,500,000
1,300,000
1,100,000
900,000
700,000
500,000
300,000
100,000
0
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013
Under Construction Delivered
Average NNN Lease Rates
• Flex lease rates
$0.65
increased in each of the

last 4 years . $0.60
$0.55
• At $.39, overall lease
rates are at the highest $0.50
they have been since $0.45

2008 .
$0.40

$0.35
• Increased demand in
Bulk product type brought $0.30
an increase in rates in
$0.25
each of the last 4 years.
$0.20
$0.15
2008 2009 2010 2011 2012 2013
Overall $0.43 $0.37 $0.34 $0.35 $0.39 $0.39
Manufacturing $0.61 $0.41 $0.33 $0.39 $0.43 $0.31
General Purpose $0.49 $0.41 $0.34 $0.34 $0.43 $0.38
Bulk Distribution $0.38 $0.30 $0.32 $0.33 $0.37 $0.38
Medium Distribution $0.40 $0.34 $0.44 $0.37 $0.36 $0.38
Primary Flex $0.52 $0.47 $0.39 $0.40 $0.42 $0.44
Special Purpose $0.37 - $0.34 $0.37 $0.48 $0.58
* All lease transaction data exclude renewal transactions.
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 5
Industrial
Salt Lake County Market Overview
Leased SF
• Total sf leased in 2013
was less than 2011 & 2012 6,000,000
but accurately reflects
the low vacancy rate and 5,000,000
tightening of supply .
4,000,000
• Manufacturing sf leased in
2013 increased 55% over 3,000,000
2012 .
2,000,000
1,000,000
-
2008 2009 2010 2011 2012 2013
Overall 3,506,031 2,583,393 3,765,221 5,258,977 5,748,229 3,835,351
Manufacturing 189,742 541,437 203,138 209,629 280,633 433,624
General Purpose 296,541 203,774 267,691 612,832 345,912 299,635
Bulk Distribution 1,821,223 1,300,446 1,882,282 2,918,671 3,122,985 1,683,184
Medium Distribution 429,125 164,852 275,837 591,163 605,174 493,674
Primary Flex 618,393 370,784 689,777 850,709 1,102,406 844,644
Special Purpose 147,007 446,496 75,973 275,278 68,156
*All lease transaction data exclude renewal transactions.
Number of Leases
• Total number of leases in
350
2013 compares to 2011
but are down from the 6
300
year high of 2012 .
250
• Number of Manufacturing
leases increased 43% in
200
2013 over 2012 .
150
100
50
0
2008 2009 2010 2011 2012 2013
Overall 208 116 219 254 321 251
Manufacturing 9 9 7 7 7 10
General Purpose 27 24 30 25 34 31
Bulk Distribution 17 13 22 28 34 29
Medium Distribution 23 9 18 28 30 30
Primary Flex 126 60 131 153 199 143
Special Purpose 5 0 11 13 16 7
*Average lease rates are a weighted average and have been grossed down to a “NNN” equivalent. All lease transaction data exclude renewal transactions.
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 6
Industrial
Salt Lake County Market Overview
Owner User Average Sale Price PSF
• Sales price psf increased
$110.00
10.4% compared to 2012
and has increased in each $100.00
of the last three years .
$90.00
• Sales price psf is steadily $80.00
moving upwards towards
$70.00
the peak of 2008 and is
now only 17% under.
$60.00
$50.00
$40.00
$30.00
$20.00
2008 2009 2010 2011 2012 2013
Overall $78.83 $74.47 $61.79 $57.62 $59.12 $65.30
Manufacturing $94.39 $77.59 $49.05 $48.34 $52.11 $82.48
General Purpose $81.69 $77.54 $59.81 $55.92 $59.66 $64.39
Bulk Distribution - $65.44 - $57.14 $48.35 $46.93
Medium Distribution $52.66 $99.94 $46.88 $59.68 $41.48 $71.45
Primary Flex $70.18 $64.00 $70.96 $68.72 $64.24 $68.31
Special Purpose $62.72 - $66.20 $66.31 $74.58 $61.79
*Average sales price PSF is a weighted average and excludes investment sales.
Owner User SF Sold
• Total owner user sf sold
is at its highest level in 6 2,500,000
years .
2,000,000
• Total owner user sf sold
in 2013 increased 73%
over 2012, largely due 1,500,000
to the 867k sf KraftMaid
sale .
1,000,000
500,000
-
2008 2009 2010 2011 2012 2013
Overall 1,356,252 1,355,636 931,731 1,088,852 1,201,315 2,080,230
Manufacturing 342,792 226,218 344,149 279,049 256,644 1,133,516
General Purpose 715,718 205,016 342,621 476,876 465,154 361,364
Bulk Distribution - 870,275 - 148,747 164,631 269,375
Medium Distribution 34,181 15,580 48,000 15,500 145,919 111,654
Primary Flex 142,734 38,547 157,976 61,572 125,673 89,714
Special Purpose 55,746 - 38,985 107,108 43,294 104,007
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 7
Industrial
Salt Lake County Market Overview
Number of Owner User Sales
• Number of owner user
sales have held steady 60
near 50 for three straight
years . 50
• Medium Distribution
40
owner user sales are at
their 2nd highest level in
30
6 years .
• Flex owner user sales 20
decreased 33% over
2012 . 10
0
2008 2009 2010 2011 2012 2013
Overall 56 28 44 52 51 50
Manufacturing 11 7 7 7 6 6
General Purpose 25 11 19 31 22 23
Bulk Distribution 0 4 0 1 1 2
Medium Distribution 1 1 1 1 4 3
Primary Flex 14 5 14 7 15 10
Special Purpose 2 0 3 5 3 5
*Sale data exclude investment sales.
Industrial Average Cap Rates
• Demand for quality
investments outpacing 11.00%
available supply . 10.50%
10.00%
• Cap rates increased 9
basis points compared to 9.50%
2012 due to lack in quality
9.00%
supply .
8.50%
8.00%
7.50%
7.00%
6.50%
6.00%
2008 2009 2010 2011 2012 2013
Overall 7.89% 8.54% 8.38% 7.76% 7.93% 8.02%
Manufacturing 8.30% - - 7.17% 8.01% 8.91%
General Purpose 7.95% 8.72% 10.04% 9.68% 8.87% 7.22%
Bulk Distribution 7.91% 8.53% 8.10% 7.03% 7.52% 8.12%
Medium Distribution 7.40% 8.14% 8.52% 7.90% 8.20% -
Primary Flex 8.11% 9.87% 8.75% 10.25% 8.26% 8.21%
*Investment sale data include all investment sales in the state of Utah and exclude owner user sales.
© Newmark Grubb ACRES 2014 . All Rights Reserved Newmark Grubb ACRES Yearend Report 2013 8