As Utah’s building boom ends, renters are getting the upper hand

Sign up to get free Building Salt Lake emails in your inbox. Building Salt Lake Pro and Premium Members can search for any building permit in Salt Lake City. Stay in the know in the market by becoming a Member today.

Salt Lake City’s record growth and building boom have delivered a massive new supply to the market. This has led to the market tipping in favor of renters as property managers try to fill units in a now-saturated market. 

 After a period of quickly rising rent, Salt Lake City is now seeing average monthly rent fall and vacancy rates climb. As a result, concessions are spiking. 

Recent data on rent trends and concessions provided by Costar shows that rent concessions offered in the Salt Lake City submarket are at almost 40%, last seen during the height of the pandemic as people, mostly students, moved home.

Rent Concessions in Salt Lake City. Proivded by CoStar

These rent concessions can be anything from waiving admin fees to almost two months of free rent and gift cards. Both Costar and Cushman & Wakefield have found these to be more concentrated in the downtown submarket of Salt Lake City as new deliveries start to open and attempt to lease up. 

Michael Pretrivelli, the Director of Marketing Analytics for Nevada and Utah at Costar, sees these pressures as part of a temporary oversupply of deliveries and pressures for more rent stabilization. 

“Rent as of last month [November 2023] has fallen on average 1.8% Y-O-Y. However, Salt Lake is still on track to continue growing, and absorption [demand] should continue climbing,” said Petrivelli. 

The market is reacting to change of more supply than demand, tipping more in favor of renters. 

Kip Paul, the Vice Chair of Investment Sales for Cushman & Wakefield in Salt Lake, pointed to his firm’s recent housing report to show a positive trend for rental vacancies and lease-ups. 

“We have been racing to open new projects, and it is catching up to us. In our Downtown submarket, we have delivered almost 10-12% of our total rental stock, which puts temporary pressure on vacancies,” Paul said.

Salt Lake City is among the top markets in the country for added housing supply as a proportion of its former apartment stock, according to rental data firm RealPage.

CoStar found that while the supply of new apartments being delivered is large, with nearly 5,000 new units in 2023, demand is only at around 3,500 units. This is much higher than the previous year when demand was around 1450 units, a record low since 2013. 

“The other big issue we are seeing is lease-up times for new projects is jumping from an average of 12-14 months to almost 18-24 months,” Petrivelli said. 

Even then, CoStar and Cushman & Wakefield point to similar data that shows nearly all new development has stopped in the region, indicating a future slowdown where demand again outpaces supply. 

“Assuming [population] growth continues, 2027 should bring back the extremely tight market we had a few years ago since many projects are on pause,” Paul said. 

A slowdown of new construction, higher supply than demand, and slower lease-ups all seem to point to a few years of renters having the upper hand in the market. 

Stephen Alfandre, a Founding Principal with UrbanAlfandre, shared many of these same observations, seeing all of this as a temporary bump that is all but expected in a way. 

“We are in an overbuilt environment at the moment. October – December is usually the slowest leasing season of the year,” Alfandre said. “Judging today’s leasing number likely isn’t representative of a normal month.” 

Concessions are high as property managers and owners try to cover the cost and pay off debt services when the expectations for returns were much different at the time of building. 

However, Alfandre is more positive about seeing a trend in favor of suppliers as soon as next year.

“The market will remain soft coming into 2024, potentially even into the summer, but relatively few new buildings are starting,” Alfandre said. 

Many developers have paused projects as building material costs remain high, interest rates have not seen much relief, and this current oversupply problem. Whether the tight rental market returns as early as next year or not until 2027, the region should see continued downward pressure on rents, especially in the Downtown Salt Lake submarket. 

“The growth expectations for renters and population overall in Salt Lake City is still on track and points to the problems we are seeing now as near-term and most likely temporary,” Petrivelli said. 

Large new projects, the Astra and Worthington towers, are expected to open in the spring of 2024, adding over 600 more higher-end units to the Downtown core. Those will be among the cohort of new buildings that, when finished, will mark the end of the past apartment-building boom cycle in Salt Lake City. 

Time will tell when the next one begins.

Sign up to get free Building Salt Lake emails in your inbox. Building Salt Lake Pro and Premium Members can search for any building permit in Salt Lake City. Stay in the know in the market by becoming a Member today.

Email Zeke Peters

Posted by Zeke Peters

Zeke Peters is a dual-masters student at the University of Utah studying Urban Planning and Public Administration. He works as a planner and designer in Salt Lake City. He currently resides in downtown Salt Lake and is from Austin, Minnesota, the birthplace of SPAM.