While Q4 numbers won’t be known for several months, Industrial/Logistics activity in Q3 2024 underperformed in Salt Lake County, and Q4 might close out a bleak year.
Strong numbers for deliveries since 2021 have predictably pushed up vacancy and availability rates, while sales and new construction are suffering suppression thanks to the persistence of high borrowing costs.
Yet there are bubbles of new activity in Salt Lake County, and southern Utah County has seen a recent wave of industrial projects make their way to delivery.
What might Q4 2024 and the year 2025 bring for Industrial RE in the Salt Lake region?
Looking back at the 3rd Quarter
CBRE’s Q3 Industrial & Logistics report gives a good look at the doldrums being currently experienced in the Industrial market in Salt Lake County.
Leasing activity
Even though Q1+2 were abundant with new leasing activity, Q3’s cratering has set 2024 on pace for the lowest level of leasing activity since 2018.
Only 957,838 sf of industrial space was leased in Q3, the least amount in a single quarter since Q1 2014.
Vacancy/availability
Q3 availability rate (vacancy plus spaces occupied but for lease) is at an all-time high of 7.2%, according to CBRE’s Q3 report. The authors point to “a spike in available sublease space coupled with over 25.2 million sq. ft. of new industrial space delivered since Q1 2021 in Salt Lake County” that has “directly led to this peak.”
Available space is concentrated in Salt Lake CIty’s Northwest Quadrant, home to the state’s first Inland Port TIF zone. The NWQ has provided 76.6% of the new square footage of industrial space in the region since 2021.
Sales
Still under the burden of high borrowing costs, it’s not surprising that sales activity was modest in Q3. Only 357,864 sf changed hands, the majority of it on the far west side of Salt Lake City.
Absorption
A strong Q3 2024 saw 1.1M sf of positive net absorption, reaching a year-to-date total of 3.4M sf, outpacing last year’s Q3 year-to-date numbers by a whopping 3M sf.
Construction
New builds are at a standstill: no new projects broke ground in Q3 2024. That hasn’t happened since Q3 2016.
Total square footage under construction in the region currently sits at 1.75M sf, the least in seven years. 2024 is set to finish with the lowest number of sf under construction since 2013.
Deliveries, on the other hand, were somewhat impressive. Just over 2.3M sf of new space entered the market, the most since Q2 2022.
The CBRE authors, Jared Elroy and Sierra Hoffer, remain ultimately upbeat: “Salt Lake County’s strategic position in the northwest, coupled with its growing population and one of the strongest economies in the country, will continue to drive demand for industrial space in the area.”
An uptick in Q4?
Robert Kingsford, head of the industrial real estate department at Mountain West Commercial Real Estate, said he felt the Salt Lake market saw an uptick during the last quarter of the year.
“In my own personal business, in the last quarter, Q4 2024, I feel like things have picked up a little bit,” Kingsford told Building Salt Lake. “I also think there was a little bit of a lull because of the (Presidential) election … now that the election is behind us, I think people are saying, ‘okay, at least for the next few years, we know this is probably what it’s going to look like, and we can move forward in this manner.’”
A couple of recently-announced deals highlight the ending of Q4 in and around Salt Lake.
ViaWest Group, an Arizona real estate development and investment company, sold a 172,847-square-foot Class A warehouse earlier this month, according to a news release from Cushman & Wakefield, which represented ViaWest in the deal. The warehouse, a single-tenant facility located at 3175 W. 500 South in Salt Lake City, sits on roughly 11 acres of land. The warehouse was acquired by STAG Industrial, a real estate investment trust, according to the release.
VanTrust Real Estate, a full-service development company based in Kansas City and a Building Salt Lake advertiser, announced earlier this month it acquired 32 acres of land in West Valley City that will be built into four industrial warehouses totaling 600,000 square feet. Construction on the first two buildings is expected to begin this spring, and the buildings are expected to be delivered by late spring 2026.
“The site’s prime location offers easy access to the “Crossroads of America” – a network of interstates, local highways, roads and rail lines that converge in Utah’s capital city area,” Van Trust’s release said.
Utah County
Kingsford added that southern Utah County has become a hotbed for industrial development in the past few years, as warehouses continue to be built and leased throughout Springville, Spanish Fork and parts of Payson. A 2024 Colliers Utah report projected that much of Utah’s construction growth in the next 10 years will likely happen in Utah County — as areas like Eagle Mountain and Saratoga Springs have a large amount of land to work with.
“The real question is going to be, how quickly can that be absorbed?” he said. “I think there is still a good demand down there, but if the market softens in some way, how competitive are those landlords going to become if they need it? Because there is a pretty good supply of space, especially in that larger size increment.”
Looking ahead to 2025
Though there are reasons for a positive outlook, there’s also plenty of unknowns going into 2025. Rich Lachowsky, head of research for Mountain West, said the upcoming presidential administration under President-elect Donald Trump creates a number of questions. Mainly, Lachowsky said the possibility of mass deportations or tariffs on crucial materials create a number of dangers going into 2025 and beyond.
“Generally, I think the incoming Trump administration is very business friendly, so I see it probably being a net positive,” Lachowsky said. “But there are some of these factors that I’m just not sure about yet.”
Kingsford said one thing he expects in 2025 is a continued hot market for IOS — short for industrial outdoor storage space. With open land becoming more scarce in Salt Lake County, Kingsford said developers have their eyes on converting plots of outdoor storage space into warehouses.
“I’ve had the opportunity to work on a couple of buildings, or properties with buildings and yard space, and we’ve had tremendous amounts of activity, not only from local folks, but from national groups that are looking to place capital in our market along the Wasatch Front,” he said.
For Kingsford, the industrial market in Utah has grown substantially in the past five to seven years. With Utah’s projected growth, the upcoming 2032 Winter Olympics and universities that pour out well-educated labor, Kingsford said he thinks Salt Lake will continue to grow as a hotspot for industrial real estate.
“Long term, I think there’s reason to be bullish on Salt Lake City, there’s reason to be bullish on the Wasatch Front, and Utah in general,” he said. “There’s a lot going for us.”
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