Commercial office developers are still preferring the suburbs

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The new corporate headquarters for inContact in downtown Sandy. Photo by Isaac Riddle.
The 111 Main tower. Image courtesy Wilkinson Ferrari & Co.

The Salt Lake City urban area is in a historically unique position.  Like most cities in the country, Salt Lake’s population began to drop after the completion of the interstate made suburban living more appealing.  Utah’s capital city is still the state’s largest job center but after decades of losing

Utah’s capital city is still the state’s largest job center but after decades of losing residences to the suburbs, the housing and job trends are beginning to shift.   The city leads in residential construction, specifically in multifamily housing, while the suburbs are leading in commercial construction.

According to the Q1 2017 MarketView report by CBRE, the suburbs continue to dominate in office space construction activity, with over 1.4 million square feet of office space currently underway in the suburban market.  Of the 15 submarkets in Salt Lake County, office construction is underway in four,  downtown Sandy, Draper, Cottonwood and Central Valley which includes the Bingham Junction area in Midvale, with Midvale and Sandy contributing to the bulk of under-construction office space.

Office vacancy rates are also lower in the suburbs.  According to CBRE’s report, the vacancy rate downtown is 14.0 percent compared to 10.3 average vacancies in the suburban market.

Salt Lake County Office Market Statistics.

Thanks to the opening of 111 Main last year which added440,000 square feet of office space, downtown Salt Lake leads the county in net absorption of new office space.  Besides 111 Main, in 2016 most of the new downtown office space came from adaptive reuse or retrofitting of retail space.  The Gateway added 84,000 square feet of office space that was previously used as retail space.  The School Improvement Network’s adaptive reuse of a former car dealership into an office building added nearly 130,000 square feet of office space to the south end of downtown.

While all regional office space under construction is underway in the suburbs, around 65 percent of multifamily units under construction are in Salt Lake City proper.  According to an April 2017 Multifamily market report by CBRE, there are 7,760 multifamily units under construction in Salt Lake County.  Building Salt Lake estimates that Salt Lake City accounts for 5,048 of multifamily units actively under construction countywide with another 2,100 units in the planning stages in the city proper.

The cost to live and work downtown may be a key contributor to the growing office presence in the suburbs.  In general, leasing is more expensive per square foot in downtown Salt Lake.  According to the CBRE market report, the average asking rate in the downtown market is $24.75 per square foot compared to an asking rate of $24.09 per square foot in the suburban market.  Despite downtown’s higher asking rate, leasing downtown is cheaper per square foot than leasing in the Cottonwood, Sandy and Research Park office markets.

Despite the spike in residential units underway in the city, most of Salt Lake City workers come from outside of the city with 84 percent of city workers living in the suburbs.  According to a live/work survey included in the Growing SLC housing draft plan, 52 percent of in-commuters surveyed would consider relocating to Salt Lake City if housing were more affordable.

Some developers have noticed the growing trend toward reverse commuting.  One of the largest residential projects underway, the Hardware Village development, is strategically placed next to the North Temple FrontRunner station to connect potential residents to the tech centers in Lehi and the south end of the county.

 Although the suburbs are leading in commercial construction there are several commercial office projects in development in the city.  Despite delays in a construction start time, Boyer Company still plans on building 151 State, a proposed 18-story office tower on the 100 South block of State Street.

 Houston-based developers, Patrinely Group, plan to build two ten-story office buildings on the 600 South block of Main Street.  Developers, Salt Development, plan to build a 10-story office building as part of the third phase of the Hardware Village development.

About Isaac Riddle 568 Articles
Isaac Riddle grew up just outside of Salt Lake City, Utah. He has a BA in English literature from the University of Utah and a Masters of Journalism from Temple University. Isaac has written for Next City, The Philadelphia Public School Notebook and Salt Lake City Weekly. Before embarking on a career in journalism, Isaac taught High School English in the Kensington neighborhood of Philadelphia. Isaac is the founder of Building Salt Lake and can be reached at isaac@buildingsaltlake.com.
  • Bailey

    Sandy’s downtown getting some love! Awesome article, and it’ll be interesting to see the development split between city and suburb further on down the road.

  • Interesting that downtown isn’t the most expensive to lease, though I bet it can be the most expensive to build. Businesses are getting really good value to be downtown compared to somewhere like Cottonwood.