Silicon Valley may be the epicenter of innovative technology, but tech clusters have been popping up from coast-to-coast. Salt Lake City and the broader Wasatch Front (aka the Silicon Slopes) is gaining attention as one of the hottest up-and-coming tech markets in the country.
Tech Market Fuels Demand for Office Space
Last year, Salt Lake City ranked #3 in CBRE’s annual list of tech talent momentum markets behind #1 Madison, Wisconsin and #2 Fort Lauderdale. CBRE measures the change in tech job growth and the city’s ability to attract and grow tech talent. Salt Lake’s tech talent pool grew 22.2 percent from 2015 to 2016. Salt Lake City also ranked high for its young talent pool with millennials making up 21.8 percent of Salt Lake City’s urban population.
Tech firms are targeting expansion opportunities all along the Wasatch Front, which is a narrow stretch bordering the Wasatch mountain range in north-central Utah. The region contains the majority of the state’s population and includes key cities such as Salt Lake City, Sandy, Provo and Ogden among others. The Wasatch Front is home to operations for big name tech firms such as Microsoft, Adobe, Tesla and Snapchat along with an increasing number of homegrown start-ups such as Pluralsight (a tech learning platform) and Qualtrics (experience management solutions).
Tech is fueling an in-migration of companies and people. According to the Bureau of Labor Statistics, Salt Lake City added nearly 18,000 jobs in the past 12 months through March and is reporting one of the lowest unemployment rates in the country at 3.3%. Growth occurring in tech, and across other industries such as energy, aerospace and defense and outdoor recreation, is spurring demand for office space with vacancies that are expected to dip to 10.5% this year, according to Marcus & Millichap.
Salt Lake City Office Sales
Strong fundamentals are piquing investor interest. Reonomy data shows that office sales across the Salt Lake City metro have been robust for the past five years. Sales reached a high of 355 transactions in 2016 followed by 298 sales in 2017 with an average price per transaction of $3.1 million, according to Reonomy. Although the Utah investment market has traditionally been dominated by local investors, more California buyers are stepping into the market in search of higher yields.
The challenge is finding investment opportunities in what remains a small market. The office market in the Salt Lake City metro spans nearly 40 million square feet, which is a fraction of the size of bigger markets, such as Chicago that has an inventory of more than 225 million square feet of office space. These days, one of the main hot spots for emerging opportunities for both developers and investors is not in Salt Lake City, but 15 miles south in suburban Sandy.
Sandy Office Sales
Sandy is in the midst of creating a whole new “sustainable” CBD with a vision that spans some 1,100 acres in the center of the city. The city unveiled its master plan for “The Cairns” in 2015 that will include 20 million square feet of housing, hotels, office and retail along with links to mass transit, greenspace and trails. The Cairns has since been moving forward with key infrastructure, as well as construction starts on public and private projects ranging from luxury apartments to a new theater.
One new office project underway is a new 327,000-square-foot office building at 9800 S. Monroe Street just east of I-15. The 11-story building is a notable first step forward in the city’s goal of building out its new downtown. The building, which is set to open later this summer, will house the headquarters for Utah-based Mountain America Credit Union, and it also includes several floors of speculative office space.
Downtown Sandy is an area that will continue to take shape in the coming years, along with continued expansion throughout the broader Salt Lake City and Wasatch Front. The economic and population growth is supporting real estate investment opportunities across all real estate asset classes. One of the notable amenities of the region is its abundant outdoor recreation that is proving to be a magnet for millennials who want a live-work-play lifestyle. Employers that are following that talent base are putting Utah on their short list of location options, and real estate investors are certainly taking note of the current and future opportunities to be found in the market.
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