In a possible sign of slowing in the red-hot Salt Lake City real estate market, the developer behind a mid-density residential project in the Liberty Wells neighborhood is planning to sell the property rather than develop it.
The fall-through of the Cleveland Court project doesn’t come as a shock: the primary representative behind it has previously spoken about how inflation and the high costs of inflation have made it difficult to complete projects even if they’ve been approved by the city.
The third-acre site at 375 E. Cleveland Ave (about 1430 South), which has been rezoned to allow for seven homes, is now one of several similar sites that are for sale after the real estate market quickly shifted in recent months.
375 E. Cleveland is now for sale for $1.1 million. While it’s listed as a “rare” multifamily lot in Liberty Wells, the site actually sits amid a broad swath of multifamily zoning in the historically suburban scale neighborhood near Liberty Park.
Peter Corroon, the former Salt Lake County mayor and lead representative behind the project, had already hinted in March that rising interest rates could become an impediment to projects in the capital city.
“Construction costs were already making projects difficult to pencil,” he said at the time. “Rising interest rates could be the nail in the coffin for some projects unless rents continue to rise.”
Rents that rose at much higher rates than the historical average have recently begun to taper off nationally, and some research has found that demand plummeted in the third quarter of the year.
Corroon continued: “For those who build affordable housing, rents are capped by the area median income, so developers may have no choice but to abandon projects or hold off until construction costs go down.”
Corroon told us his firm, Sentry, was choosing to preserve its cash for other projects.
“With the increase in construction costs and the uncertainty in the economy, Sentry decided to conserve its cash for other opportunities,” Corroon told us. “The project is permit-ready for another developer who would like to build seven for-sale townhomes in the Liberty Wells neighborhood.”
But Corroon’s project is one small display of turbulence in the real estate market and developers with approved plans deciding to sell their improved land rather than build on it.
On the west side of town, two projects with approved plans for the land have been put up for sale in recent months.
At 1179 S. Navajo in the city’s Glendale neighborhood, Axis Architects is trying to sell its land that has been rezoned to allow for 57 for-rent townhomes. The firm is asking for $4.9 million for the 2.37 acres of land that was rezoned earlier this year.
In Fairpark, the site that was approved for the Villa Nueva micro apartments is for sale after more than three years of attempts to win approval to develop the property. That project is a five-story, 35-unit micro apartment project, at 909 W. 200 N. It’s for sale for $1.75 million.
Those aren’t the only two west side projects that are up for sale after winning city approval.
Some of these projects have been for sale during a period that rent continued to climb above historical highs.
Others are new. Regardless, while some projects continue to be proposed every day, the market that had been red-hot five months ago is now showing signs of slowing. Continuously rising interest rates are adding another drag on the market.
“That’s having a big impact,” said Kip Paul, vice chairman of investment sales for Cushman and Wakefield. “I think you’re going to see some of the projects that are in various planning stages get paused.”
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Editor’s note: This post was updated with a comment from a developer selling a project.