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Utah County commercial real estate market dealing with effects of recession

Vacancy rates are up in the Utah County Commercial Real Estate market. Photo courtesy iStockphoto.

 PROVO — Commercial real estate in Utah County is not immune to the effects of the recession, but local professionals in the industry are looking on the bright side.

“Be careful of the language of doom and gloom that you hear nationally,” Jon Anderson, partner and principal broker for Commerce CRG of Utah County, told attendees at the Utah County Commercial Real Estate Conference held Tuesday.
Anderson said he believes commercial real estate in Utah is doing better than the rest of the country — especially in the retail market, the strongest sector in Utah County, he said.
“Retail was the top performing market in 2008,” Anderson said. “Considering the times, the retail market tends to do very well here.”
Retail wasn’t the only good thing touted at the conference, which was held at Tahitian Noni in Provo. Lt. Gov. of Utah Gary Herbert, who was the keynote speaker, applauded the Utah State Legislature, (“You have a great state that has a very fiscally responsible attitude.”) and its ability to balance the state budget while retaining its Rainy Day Fund.
“This may not be the end of the rain,” Herbert said. “We may need some money to weather another storm or the same one.”
Herbert briefly expressed his opinion on the perceived state of the economy, saying it may be the worst since the 1980s, but it is not the worst since the Depression.
“Today is tough, but it is certainly not the worst,” he said. “In comparison to the Great Depression, we are doing phenomenal.”
Despite Herbert’s optimism, others at the conference spoke of the continuing decline in Utah County’s commercial real estate market.
Anderson, who said he would “try to minimize the bad news,” addressed vacancy rates in the retail market, estimating the rates had increased to nearly 6 percent — a rate that he believed was still surprisingly low considering the state of the economy. Land values, which were between $7 and $26 per square foot at the end of 2008, slid the most in the retail sector of the market, according to Anderson. Lease rates were between $7.58 and $34 per square foot. And CAP rate was between 6 and 9 percent in the retail market, Anderson said.
The office market is showing similar trends to the retail market, according to Cody Black, an office specialist for Coldwell Banker Commercial.
With many companies downsizing, vacancies in the office market are rising, Black said. Lease rates, on the other hand, are dropping. And new construction has slowed, he said.
“It doesn’t look great right now,” said Cody Black, an office specialist for Coldwell Banker Commercial. “We are hoping it will get better.”
Jarrod Hunt, vice president of CB Richard Ellis, has similar hopes for the industrial real estate market where construction is almost at a standstill and vacancy has nearly doubled. Tenants are also looking for smaller, more efficient spaces to meet their current needs, Hunt said.
“It won’t be before mid-year 2010 before we see a change in our industry,” Hunt predicted.
By Kelly Lux


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