SW-UTAH_THE-ADVISOR-2024

ADVISOR THE

10-YEAR

ANNIVERSARY

One decade of predictions

STATE OF THE MARKET

WELCOME

Dear friends,

Thank you very much for joining us in celebrating our TENTH ANNUAL Advisor magazine!

At Colliers, we are excited to continue the tradition of sharing our latest insights and market research on Utah’s commercial real estate industry.

Once again, we are pleased that many leading national surveys continue to rank Utah as the country’s most dynamic economy and state. Especially in these uncertain times, Colliers continues to lead Utah’s commercial real estate sector to help you meet today’s constantly changing business environment.

To help you navigate the often-choppy current economic waters, our latest Advisor provides you with actional information on a wide variety of topics. These relevant articles include not only key forecasts but also the latest on Utah’s largest university, surprises about growth in our aerospace and defense industries, the latest on the rapid expansion of data centers and medical coworking spaces, and Utah’s sports revolution. We conclude with our annual “State of the Market” report with vital statistics detailing core Utah submarkets.

As your trusted advisor, Colliers is privileged to be an integral part of not only Utah but also of the national and international commercial real estate markets. We look forward to serving you in the years ahead and helping you prosper in your commercial real estate requirements. Please contact us for any questions, recommendations or ideas you wish to share.

With our warmest regards,

Your partners at the Colliers Utah leadership team

Chairman | Utah

Brandon D. Fugal brandon.fugal@colliers.com

CEO | Utah

Lew Cramer lew.cramer@colliers.com

Public & Media Relations | Utah

Bryan Welch bryan.welch@colliers.com

colliers.com/SaltLakeCity

Contributors

John Adams

Judd Bagley

Rachel Barnes

Heather Bergeson

Angelika Brewer

Ernie Cottle

Jack Dodson

Megan Donio

Megan Donnell

Austin Facer

Izzy Howell

Melanie Jones

Samantha Kight

Mike Koepp

Mekenna Malan

Mindy Martinez

Dainon Moody

Amber Napiwocki

Amanda Nogales

Brett Scothern

Laura South

Savannah Beth Withers Taylor

Bryan Welch

FEATURES

04 | THE ADVISOR: AHEAD OF THE CURVE

Accurate predictions made in Advisor articles over the last 10 years.

12 | THE DECADE AHEAD

A 10-year forecast on the commercial real estate industry.

18 | BUILDING UTAH VALLEY UNIVERSITY

What was once a small vocational school, Utah Valley University adds students and square footage to meet modern demand.

26 | A UNIFIED ASCENT

How Utah’s aerospace and defense industry is boosting commercial real estate.

DEVELOPMENT

32 | OGDEN: UTAH’S FIRST—AND NEXT—FRONTIER

Unlocking Ogden’s past and future through art, culture and strategic development.

36 | PROVO, UTAH, WILL SOON BE AN INTERNATIONAL TRANSPORTATION HUB

How the strategic expansion of Provo Municipal Airport supports Utah’s economic growth.

44 | VIRTUALLY NO VACANCIES

The role of commercial real estate in the surge toward data centers.

MULTIFAMILY

50 | MULTIFAMILY TO THE RESCUE

How Utah’s booming economy, increasing population and lack of residential construction are amplifying the need for multifamily housing options.

OFFICE

56 | THE OFFICE, REIMAGINED

As the world grapples with a mix of remote and in-person work, a new trend of coworking spaces is transforming office landscapes in many industries—including health care.

RETAIL

62 | GAME-CHANGING DEVELOPMENTS

Between major league baseball, a national hockey team, the 2034 Olympic Games and more, Utah is on the edge of a sports revolution.

MARKET REPORT

68 | STATE OF THE MARKET

Checking the pulse of major markets throughout the state of Utah.

Photo courtesy of John Adams

THE ADVISOR: AHEAD OF THE CURVE

Accurate predictions made in Advisor articles over the last 10 years.

By Mekenna Malan and Savannah Beth Withers Taylor

The ability to foresee market trends is an invaluable skill i n the ever-evolving landscape of real estate. To celebrate the 10th anniversary of The Advisor, we reflect on predictions made in previous Advisor magazines and celebrate the ones that came to pass.

2022

“Inflation could be here for the long haul”

Prediction: Inflation highs and supply chain problems are creating robust pain points in our economy. “I think it’s just been a ripple effect across the board, from raising supply costs to fuel, which then affects shipping,” said Gatehouse No.1 Furniture and Designs owner Stephanie Holdaway.

Results: According to YCharts data, U.S. inflation peaked in July 2022 at 9.06 percent, dropping to 6.45 percent by the end of 2022. At the end of 2023, inflation remains higher than peak pandemic levels.

2021

“Cranes on the skyline: New investments downtown are going to make our capital city thrive”

Prediction: Salt Lake City’s skyline is rapidly changing. “The renaissance that has been ‘downtown’ is going to get another gear of sophistication that is architecture and skyline,” said Colliers Utah Managing Director Chris Kirk.

Results: In October 2023, the final beam was placed on the 41-floor Astra Tower located at 200 S. State Street. The tower redefines the city’s urban skyline as Utah’s tallest building.

2020

“The future of Utah manufacturing”

Prediction: Utah’s manufacturing industry is fertile ground, even amid our relatively meager population base compared to markets like Chicago, Osaka or Seoul. “We have to work a little harder to maintain our competitive

advantage to compensate for the lower population,” said Colliers Utah Vice Chair Jarrod Hunt. “Lower taxes, quality of life, a young and skilled workforce—these act as an equalizer to the disadvantages we have.”

Results: Today, manufacturing is one of Utah’s largest industries by employment. According to a 2023 report by the Department of Workforce Services, Utah’s manufacturing industry provides more than 150,000 jobs and pays more than $10 billion in wages annually. In February 2023, tech leader Texas Instruments announced plans to invest $11 billion in Utah with a new manufacturing facility.

“Taking flight: Utah’s next key market cluster”

Prediction: Utah’s aerospace industry is quickly growing, with prominent organizations like Hill Air Force Base, Boeing, Northrop Grumman, Lockheed Martin, Janicki and Duncan Aviation finding a home in the state. “Utah has a clear path to become a leading player in the global aerospace marketplace,” said Colliers Utah Chairman Brandon Fugal.

Results: 47G—previously known as the Utah Aerospace & Defense Association—was founded in 2022 with over 100 members and 20 academic institutions serving three national sectors. The organization hopes to build the world’s premier ecosystem for aerospace, defense and cyber companies.

“The rental generation”

Prediction: Experts today are seeing an emerging trend that’s driving younger generations away from homeownership and toward renting. “Without someone building affordability into the equation, Utah will price its workforce completely out of the [housing] market,” said Colliers Utah EVP of Investment Mark Jensen.

Results: In October, the Deseret News reported it costs twice as much to buy than rent in Utah. A 2023 RealPage survey found that more than half of Gen Z believes renting is a better option than buying a home. Gen Z is, by and large, driving rental demand even more than millennials were in the past few years.

UTAH:

Graphic

2019

“How Utah’s planned inland port will open up new opportunities for the state—and the world”

Prediction: There’s a growing urgency to move cargo away from seaports and rapidly into distribution channels, and inland ports like the one planned for Utah can help facilitate this. The inland port will affect IT, aerospace, agriculture, the life sciences industry and manufactured goods that are exported around the world.

Results: The Utah Inland Port Authority has now announced eight inland port project areas across the state. Utah has also targeted Mexico for export growth and nearshoring opportunities. In February, figures released by the U.S. Department of Commerce announced that Mexico has officially overtaken China as the leading source of goods imported to the United States for the first time since 2002.

2018

“Matching company culture to corporate headquarters”

Prediction: Every business has a personality, and that personality informs its culture, brand and corporate headquarters. Having an office space that matches this personality will be of growing importance. “Companies are benefiting from not only a renaissance in progressive architectural design and development but also a resurgence in redevelopments, creating a diversity of options to choose from,” said Brandon Fugal.

Results: After the COVID-19 pandemic and the rise of remote work, this prediction is more true than ever. Today, Utah’s top companies have moved into—or retrofitted—office buildings that entice their employees to embrace in-office work. Thanksgiving Park and Thanksgiving Station in Lehi, Utah, are just two examples of complete renovations that updated office spaces with light, bright modern buildouts.

“Navigating opportunities in site selection”

Prediction: The performance tax credits and incentives offered to businesses in Utah will encourage more companies to expand or relocate to the state.

Results: In 2023, Utah was named the No. 1 best state for business by WalletHub and the state with the best economy by the U.S. News and World Report. Texas Instruments, OmniTeq and Lakeshore Learning are just a few of the business giants that have made Utah home over the last year.

“Smart cities are connecting communities through innovation”

Prediction: Smart cities will be one of the century’s hot new sectors. “Cities across the U.S. have felt the impact of a global technology revolution that will continue to shape how communities are built and how companies compete on the international playing field,” said Lew Cramer, Colliers Utah CEO.

Results: Today, there are 141 smart cities across the globe—and more are on the way, according to the IMD Smart City Index 2023.

2017

“Online and traditional retailers are merging customer experiences”

Prediction: Instead of giving up and dying in the face of technological transformation, retail shopping is evolving. “The marketplace is seeing a transformation of clicksto-bricks,” said Lew Cramer. “Conventional storefronts are finding that e-commerce flourishes around physical locations. … Consumers want immediate purchasing power but also to touch, see and try products.”

Results: Today, retail is having a major comeback. 2021 saw brick-and-mortar sales grow faster than e-commerce sales for the first time ever, with 18.5 percent growth in physical sales compared to 14.2 percent e-commerce growth, according to Forbes.

“The influence of cloud computing on commercial real estate (CRE)”

Prediction: CRE will utilize cloud computing as a service at a growing rate. Companies’ move to the cloud will affect real estate choices. Server rooms will disappear, retail warehouses will shrink, and data centers will represent a large real estate sector.

Results: Today, CRE companies are leveraging cloud-based storage solutions to store and manage vast amounts of property-related data, including lease agreements, tenant information, property documentation and financial records, Colliers Utah Business Development Marketing Manager Brett Scothern says. “Cloud storage offers scalability, accessibility and cost-effectiveness compared to traditional on-premises storage solutions. Ongoing AI and other expanding IT cloud technologies are creating better inventory control, smarter automation, and more efficient warehouse design and operations.”

2016

“Casual dining meets good eats”

Prediction: Fast-casual restaurants will grow in popularity. “Fast-casual restaurants have become neighborhood-style restaurants,” said Melva Sine, president of the Utah Restaurant Association.

Results: Today, the size of the fast-casual restaurant market in the U.S. is estimated to grow by $55.4 billion from 2022 to 2027, according to Technavio Research.

“Where are the wealthy foreigners investing in the United States?”

Prediction: The United States’ largest cities have long been attractive targets for foreign investors looking to put their money into commercial real estate. Now, as more and more foreign investors flood into the market, they’re looking beyond the big cities and into up-and-coming markets like Salt Lake City.

Results: The U.S. has been the biggest recipient of foreign direct investment (FDI) worldwide since 2019. In 2020, this position was solidified through higher direct investments from countries like Japan, Germany and the Netherlands, according to the International Monetary

Fund. Utah continues its move upward from a tertiary CRE market to a solid secondary CRE international investment market. “Utah’s geographic location as the ‘Crossroads of the West’ is expanding to becoming the ‘Crossroads of the World’ with the expanding Salt Lake International Airport, inland port project areas, and the centrally located rail and interstate highways all attracting international direct investment for easier overseas business connections,” Lew Cramer says. The United Kingdom, Australia and Germany were the top sources of FDI in Utah in 2022, according to a report from SelectUSA.

“University Place creates a model for nextgeneration city centers”

Prediction: In the face of Utah’s population boom, Envision Utah laid out a growth strategy that included an interconnected pattern of mixed-use neighborhoods and urban centers.

Results: In 2023, many mixed-use developments were announced or built—including The Post District in Salt Lake City; Utah City, a master-planned community in Vineyard; and The Point, 600 acres of redevelopment at the Point of the Mountain.

2015

“The age of the mall isn’t over—it’s just changing”

Prediction: Shifts in consumer habits and expectations, in addition to many other factors influencing in-person shopping, will require malls to adapt or suffer the consequences.

Results: In 2020, Coresight Research projected that 25 percent of the country’s approximately 1,000 malls would close shop in the following 3-5 years. While the fate of many shopping malls remains unclear, The Gateway in Salt Lake City has found success by

evolving some of its retail spaces into office space for Utah’s BioHive hub, including the home of Altitude Lab and Recursion.

“The next industrial revolution”

Prediction: “New technology in lighting, heating and base building materials has improved construction, making buildings much more efficient—giving the finished building a longer physical lifespan, utilitarian function and reduction of operational costs for the tenants in the long-term,” said Jarrod Hunt.

Results: Today, updated building codes and continuous insulation have ensured a uniform thermal envelope and a reduced heat loss of between 1030 percent, says Big-D Construction VP Steve Kieffer. Innovative materials like Type IP cement could reduce embodied carbon by up to 20 percent, and implementing LED lighting systems and rooftop solar at scale will continue to maximize every dollar spent.

“Professional corporate services provide value to growing businesses”

Prediction: “Corporate services create value by adding depth and clarity to the real estate decisionmaking process, which shortens transaction times and creates greater efficiencies for clients,” said Colliers Utah VP Kent Kohlhase.

Results: Professional corporate services now have rapidly expanded to routinely provide critical assistance in site selection; navigating regulatory, zoning and licensing challenges for CRE development; and in smarter and more cost-efficient construction management and building space and energy utilization, Lew Cramer says, continuing, “Many more valuable corporate services are on the near horizon as well.”

THE DECADE AHEAD

A 10-year forecast on the commercial real estate industry.

By Rachel Barnes

Photo courtesy of Brett Scothern

Utah’s business-friendly culture is driving a growing number of people to migrate to the state. According to a 2022 report by the Kem C. Gardner Policy Institute, Utah’s population is slated to increase from 3.4 million in 2024 to almost 5.5 million by 2060. In the face of this population growth, innovative developments like The Point, Mountain View Village and the state’s eight proposed inland port project areas are top-of-mind.

Location is key

Population density lends itself to profit when it comes to real estate. Each of the experts consulted for this article mentioned the population growth occurring in Utah County.

“Utah County is going to be the epicenter of growth,” says Scott Cuthbertson, president and CEO of the Economic Development Corporation of Utah. “The largest percentage of relative growth [in the state] happens in Utah County.”

Dejan Eskic, senior research fellow at the Kem C. Gardner Policy Institute and adjunct real estate market analysis professor at the University of Utah, agrees.

“The last two years, nearly two-thirds of our growth has come from people moving here, and about 39 percent of those people move to Utah County,” he says.

Colliers Utah Executive VP Stuart Thain says the population of Utah County is predicted to exceed the population of even Salt Lake County in the near future. But why Utah County? What sets apart the mass of land from Lehi to Santaquin from the rest of the state?

Simply put, the reason is just that—it’s a mass of land. Thain points out that when it comes to areas that will and won’t experience high population growth, the difference

often is simply a matter of geography. “People are migrating to Utah County because of the abundance of vacant land,” he says.

This principle is illustrated with places like Davis and Weber County, which—while also experiencing growth— don’t quite compare to Utah County as a lucrative real estate market. When it comes to development in those areas, Thain points out, you eventually run into the Great Salt Lake.

The difference between good location and better one can be as simple as the presence of a lake or mountain. And, as always, the balance of cost and value.

“In areas like Saratoga Springs, Eagle Mountain, Santaquin, Payson … they’re just getting started with their residential development there, so it’s still somewhat affordable,” Thain says.

What’s The Point?

A bit further north, at Point of the Mountain, a new project is underway. A 600-acre redevelopment, The Point is being looked at as a model for smart growth by national and global experts—and in addition to exemplifying Utah’s growth, it’s predicted to augment it.

When Cuthbertson was asked which real estate projects he believes will be the most significant in the next decade, The Point was the first to come to mind. “It’s on state-owned land, which gives it the advantage of being built out more patiently,” he says.

With walkability, sustainability and affordable housing prioritized, Cuthbertson believes The Point is primed to become an economic driver for the state that will attract companies across various industries.

“The first phase of [The Point] will be about 100 acres,” Cuthbertson says. A few local firms have been awarded

WASATCH FRONT POPULATION GROWTH RATES

Graphic courtesy of Ernie Cottle

15

HISTORICAL AND PROJECTED CHANGE, 2010-2060

the rights to develop the first phase, which will bring about 400,000 square feet of retail event space, about 3,300 multifamily units, hotel space, green space, a couple million square feet of office space and a new FrontRunner station to the area.

Going west

As for Salt Lake County, growth is trending toward the west side—specifically the southwest corner, Eskic says.

“If you look at where the land is, the east side [of the Salt Lake Valley] is pretty much built out,” he continues, indicating that development on the east side tends to be reconstruction—old buildings being demolished or reconverted. This means that, in Salt Lake County, the west side is the place for new development while the east side is the place for redevelopment.

One project that has taken advantage of growth in west Salt Lake County is Mountain View Village, a shopping mall in Riverton, Utah.

“It’s brought retail experience to one of the fastest growing areas in Salt Lake County,” Eskic says, noting that while residents in Herriman, Riverton and South Jordan once had to drive east to do their shopping, they now have a retail/mixed use development of their own.

“It’s finally serving a demand that’s been there for years,” he continues.

The Northwest Quadrant inland port project area is also predicted to boost real estate in Utah as it generates the property taxes required to make real estate projects in the area feasible.

“The property taxes generated within a geographic area of an inland port are specifically allocated to public infrastructure in those areas,” says Colliers Utah EVP Jarrod Hunt. “Let’s say a developer has a thousand acres of land. There are no roads and no sewer, no water, no electricity. That could cost millions—even tens of millions—to bring all that infrastructure onto that site. With this inland port concept, … we can take the millions of dollars this project generates a year in property taxes and earmark a large portion of that property tax to pay back that investment.”

5.5 million by 2060

Above all, Hunt predicts that migration to Utah will continue to grow.

“The last 10 years in the Utah economy have been very growth-oriented; … e-commerce has really changed the landscape. It has equalized locations,” he says. “If everything’s going in a brown box and delivered to a customer, nobody really cares where that brown box is coming from.”

Hunt believes a thriving e-commerce sector has allowed business owners the freedom to prioritize personal preferences of where they want to live. A lower cost of living and a more favorable tax environment have replaced proximity to customers as the priority for business owners, providing landlocked and less populated areas—like Salt Lake City—with the opportunity to flourish.

“I see that speeding up,” Hunt says.

The last two years, nearly two-thirds of our growth has come from people moving here, and about 39 percent of those people move to Utah County.”

Dejan Eskic, Senior Research Fellow, Kem C. Gardner Policy Institute

BUILDING UTAH VALLEY UNIVERSITY

What was once a small vocational school, Utah Valley University adds students and square footage to meet modern demand.

By Heather Bergeson

Photo courtesy of Utah Valley University

The story of Utah Valley University (UVU) begins in the wake of the Great Depression and on the brink of the United States’ involvement in World War II. In the fall of 1941, vocational classes taught throughout Utah were consolidated into the Central Utah Vocational School in Provo, Utah. Here, students were trained in the critical skills needed to construct arms and ammunition for the war.

After the war ended, advocates for the school petitioned for funding to make the school a state-supported, two-year vocational school. In 1945, Wilson W. Sorensen (Willie the Wolverine’s namesake) was appointed director and obtained a 13-acre site for a Provo campus.

In his almost 40-year tenure, Sorensen was instrumental in the institution’s development. By 1971, the Provo campus was already beyond capacity, and Sorensen began looking for larger pieces of land where they could establish a new campus. One hundred and eighty-five acres of farmland were purchased in southwest Orem adjacent to Interstate 15. This initial campus was dedicated in March 1977.

Utah Valley University’s rapid expansion

After decades of transformative growth, the institution grew into a community college, then a state college and, finally, a university. Today, in addition to the central Orem campus, UVU manages university locations in Provo, Lehi, Vineyard, North Orem and Wasatch County—as well as a planned facility in Payson—with a total of about 524 acres and 4,051,112 square feet of building space.

When UVU gained university distinction in 2008, the fall enrollment was 26,696, and it has only continued

to grow—bucking national trends—increasing its student population by approximately 4-5 percent each year. In fall 2023, enrollment reached 44,653 students.

UVU’s Orem campus buildings have also continually expanded, using concourse connections to link many of its main buildings and create a distinctive university experience that students especially appreciate in the winter. In the past five years, four new buildings have been constructed on the Orem campus, including the Noorda Center for the Performing Arts, the Scott C. & Karen Keller Business Building, the Brandon D. Fugal Gateway Building and the Young Living Alumni Center.

One of the biggest projects currently underway on the main campus is the Scott M. Smith Engineering and Technology Building, which broke ground on September 21, 2023. The state-of-the-art facility will educate future engineers to fill crucial gaps in Utah’s workforce and help drive the innovation economy forward.

But UVU has also been expanding beyond Orem. Utah, Summit and Wasatch counties all fall within UVU’s service area, and university planners are committed to aligning new and expanded campuses according to the forecasted population increases in those areas. The university planners work with Colliers Utah when exploring specific projects.

As part of its 80th anniversary in 2021, UVU released an updated Facilities Master Plan. “This plan looks to the future,” says UVU President Astrid S. Tuminez. “It will facilitate UVU’s ability to deliver inclusive, effective and affordable education. It honors our commitment to meet the educational and workforce needs of the state of Utah and beyond. We will expand our digital and physical footprint to serve students, industry and the community more effectively.”

Photo courtesy of Utah Valley University

Strategic expansion for better education

UVU has intentionally located campuses near FrontRunner stations to help relieve the area’s burgeoning transportation challenges. A key to developing these campuses was ensuring they were accessible by multiple modes of transportation. The Orem, Orem-West, Lehi and Vineyard campuses are located near FrontRunner stations, and UVU funded the construction of a pedestrian bridge across I-15 to help students using the Orem FrontRunner station on the west side of the freeway get safely to UVU’s campus on the east side.

UVU’s enrollment has increased yearly, but it also has Utah’s smallest square feet per full-time student in the state as of 2019. With rapidly growing communities putting extreme pressure on city and neighborhood planning, land is becoming a diminishing resource in Utah Valley. UVU’s Master Plan is trying to scale the campus’s capacity to support sustainable future development.

The fastest-growing area in Utah County is currently Vineyard. Situated on the property formerly occupied by the Geneva Steel Plant, Vineyard has grown to 107 times its original size in the past decade, expanding from a population of 110 people in 2010 to 11,866 in 2019.

As developers grappled for space, UVU was able to purchase around 225 acres of land in Vineyard. While they have set up four interim sports fields to help alleviate strains on their main campus athletic facilities, the university has impressive plans for future development, including a “Health and Wellness Village” that will provide health services to the community and clinical space for UVU students as they support the Huntsman Cancer Institute planned for that area.

Location was also key in purchasing a building and additional acreage for UVU’s Lehi Campus, strategically located in Silicon Slopes to build partnerships and synergies between industry and academia. The convergence of these giants and startups naturally creates an international hub of ideas and innovation in which UVU has strategically positioned itself.

“Our mission is simple—to educate every student for success in work and life through excellence in engaged teaching, services and scholarship,” says UVU VP of Administration and Strategic Relations Val Peterson. “None

Photo courtesy of Utah Valley University

UVU AT A GLANCE

43,099

total students

27, 646 concurrent enrollment students

13,612 faculty and staff

full-time equivalent students

5,437 are employed

support at least one child

are adult learners (age 25+)

are students of color

are female

are first-generation students

HISPANIC/LATINO STUDENTS MAKE UP UVU’S LARGEST GROUP OF STUDENTS OF COLOR AT

of this can happen without physical structures where faculty can teach and students can learn with the latest technology.”

UVU’s rapid expansion has drawn the attention of major players in Utah who are willing to invest in the university’s development. Scott and Karen Keller, doTERRA, James and Andrea Clarke, Karen and Scott Smith, Young Living, and Brandon Fugal have all contributed millions of dollars to building projects.

At the opening of the Brandon D. Fugal Gateway Building, Fugal shared, “Utah Valley University is my school. It is in my DNA. It gave me a solid foundation that helped me launch my real estate and business career. There are many people who taught and showed me the way. Now, I want to give back to help those who follow me.”

With so many plans on the horizon, the story of UVU is still unfolding. From a small vocational school to boasting some of the highest enrollment numbers in the state, UVU continues to prove itself a major player in Utah’s higher education. University leaders are sure that the planned additions to their campuses will only improve the value and quality of a degree from Utah Valley University.

“Artists need performing venues and space to showcase their work,” Peterson says. “Business students need a learning environment that allows them to engage in group work, presentations and access to the latest technology. Engineers need lab and office space, classrooms, and technical infrastructure that can exist with emerging technologies. These buildings are the foundation of excellent learning.”

Graphic courtesy of Samantha Kight

A UNIFIED ASCENT

How Utah’s aerospace and defense industry is boosting commercial real estate.

By Dainon Moody

The fast-growing aerospace and defense industry is in a symbiotic relationship with Utah’s commercial real estate industry— each is serving to benefit the other, as growth is pointed steeply upward for both.

That’s good news. Brandon Fugal, chairman of Colliers Utah, the largest commercial real estate firm in the state, shares what Utahns can expect.

“Utah’s defense, aerospace and intelligence sectors drive significant economic development and expansion,” he says, adding that they anticipate future growth and expansion in these same sectors.

At Colliers, Fugal has the privilege of working with Northrop Grumman and BAE Systems on recent expansions at Falcon Hill Aerospace Research Park in Hill Air Force Base (HABF), one of the largest of its kind in the country. In addition, Colliers represented large aerospace and intelligence firms like OmniTeq and VirnetX as they relocated their headquarters to Farmington in 2023.

According to Fugal, Falcon Hill will continue as a center of gravity for future aerospace and defense expansion

with hundreds of acres still being master planned on HABF, including both inside and outside fence opportunities.

A mutual dependability

What’s good currently will get better. According to Chris Stewart, former Utah congressman and recently appointed chairman of 47G, the growth taking place now will inevitably lead to improved scenarios. 47G (formerly Utah Aerospace & Defense Association) is the first convening body for aerospace and defense companies in the Beehive State, partnering with the Utah Governor’s Office, World Trade Center Utah, the Utah Legislature and others.

While the state’s economy has been largely tied to the agricultural, energy and tech industries in years past, ups and downs caused by factors like weather or recession have plagued each. The aerospace and defense sector may actually prove to be more dependable than all three put together, pointing to an expected increase in economic stability.

“If you look at defense spending, it doesn’t really trend downward,” Stewart says, adding that any downturn

Graphic courtesy of Samantha Kight

•

•

UTAH AEROSPACE

Materials and information technology contribute to the Beehive State’s aerospace acumen.

944 ESTABLISHMENTS

31,390 EMPLOYEES

4TH in the nation for aerospace manufacturing attractiveness (PwC)

$78,540 AVG. INDUSTRY WAGE

5TH in the nation for most concentrated tech workforce

30.7 YEARS median age (youngest state in the nation)

8TH in the nation for total tax climate (Tax Foundation)

14,300 employed in advanced composites industry

Career development

• Utah Aerospace Pathways

• Tech Pathways internship program

• Women Tech Council SheTech program

Military/defense

• Hill Air Force Base (home to the F-35 Lighting II)

• Ogden Air Logistics Complex

• Dugway Proving Ground

AREAS OF EXCELLENCE

Higher education

Major universities, colleges

• Utah State University

• Weber State University

• University of Utah

• Westminster College

• Salt Lake Community College

• Utah Valley University

• Brigham Young University

• Snow College

• Southern Utah University

• Dixie State University Aircraft component

Advanced materials

Utah Advanced Materials & Manufacturing Initiative (UAMMI)

• Utah Composites Laboratory Advanced Composites Working Group (ACWG)

• Society for the Advancement of Material & Process Engineering (SAMPE), Utah Chapter

Sources: www.business.utah.gov; www.edcutah.org

Technical colleges

• Bridgerland Tech

• Ogden-Weber Tech

• Davis Tech

• Tooele Tech

• Mountainland Tech

• Uintah Basin Tech

• Southwest Tech

• Dixie Tech

Unmanned systems

Mountain West Unmanned Systems Alliance Utah Test & Training Range (UTTR)

• Center for Unmanned Aircraft Systems (C-UAS)

AVUSI Mountain West Chapter

• Manned Unmanned System Integration

in the economy is not likely to affect the aerospace and defense industry in any noticeable way. Defense spending remains generally consistent year after year, and that’s not expected to change.

“We’ve seen examples where the unfortunate war in Ukraine has led to increases in spending in the defense industry here that some businesses have benefited from,” he continues. “The bottom line is, although we can’t discount the concern of [a recession], aerospace and defense are insulated from that concern. That’s good news for the state of Utah.”

Aaron Starks, 47G’s president and CEO, echoed Stewart’s outlook on the near future. Whether it’s Northrop Grumman’s expansion into Box Elder County or the reinvestment in Ogden Regional Airport, commercial real estate needs are increasing in all cases. Office space will be necessary in the former, and commercial revitalization will accompany the latter.

Wherever expansion and development in the aerospace and defense sector occur, the real estate market will follow.

“I’m confident that more of our economy will be shaped by the aerospace and defense industry than by any other over the next few decades,” Starks said, noting that aerospace and defense currently accounts for a healthy 20 percent chunk of Utah’s economy—$19.3 billion in economic activity from the defense sector alone, according to a report by the Kem C. Gardner Policy Institute.

Solving engineer drought

Aerospace and defense growth throughout the state is expected to lead to more job opportunities, and attracting engineers to the state has been an ongoing problem. Traditionally, supply hasn’t always met demand, and growing engineering capabilities in Utah has been a top priority since 47G’s inception, Starks

said. He pointed to Weber State University’s Noorda program as a huge asset to the next generation of aspiring engineers.

“We’re starting to see universities and colleges change their curriculum to help meet the requirements of this industry,” he said, noting an uptick in support from higher education.

A workforce leader

Looking beyond commercial real estate, Starks believes the growing aerospace and defense sector will allow for growth in other ways, especially in creating additional jobs. According to Starks, this is integral to the future of Utah’s economy, and roles will largely focus on deep tech, including aerospace defense, cybersecurity, machine learning and data analytics.

“This is the tech industry in Utah,” he said. “As we look at the next decade, we want to create a movement of people coming into the industry from university and college campuses—the next generation of talent being recruited. As an industry, we want to resonate with the median age of our state, [which is] 30 years old, so we can win talent from competing industries.”

The goal is for Utah to be known nationwide as the world’s premier ecosystem for aerospace and defense companies, where entrepreneurs in this space can grow their companies through access to talent, capital, commercialization, research and development, and tax incentives.

As the industry becomes more prominent, more commercial real estate will flourish throughout the state. It’s simply a matter of time at this point.

“If I’m on a plane, flying out of Atlanta, Georgia, five years from now,” Starks said, “and I hear the passenger in the seat next to me tell me how great Utah and all of the amazing work taking place within aerospace and defense here is, I’ll know I accomplished my job.”

OGDEN: UTAH’S FIRST—AND NEXT—FRONTIER

Unlocking Ogden’s past and future through art, culture and strategic development.

By Angelika Brewer

Photo courtesy of DesignWorkshop

Nicknamed “Junction City,” Ogden, Utah, has long been known for its roots as a rough railroad town. It was classified as the first permanent development in Utah by European settlers, where Union Station was to become a major terminal for the transcontinental railroad. Historic 25th Street was a bustling strip of businesses and hotels originally built for railroad workers and travelers passing through. Today, with a unique combination of mountainous terrain and urban cityscape, Ogden is attracting visitors and new residents at a rapid rate—and an involved local community is setting the tone for the next generation of the city and its inhabitants.

A crucial component to the Ogden boom is the city’s intentional effort to support local arts, culture and events. In recent years, Ogden City established the Nine Rails Creative District between Grant and Madison Avenue from 24th to 26th Street. Within this district are protective zonings put in place requiring developments to include public art on their buildings.

“What the arts and culture scene in Ogden does is make it easier to develop,” says Lorie Buckley, Ogden City arts administrator. “We have created an environment that is attractive to visit. People want to live here because there are a lot of things culturally and outside of work that enhance your quality of life.”

Buckley—along with members of the Ogden Arts Advisory Committee and the Arts, Culture and Events Division—has been working to bring to life a master plan created by the city that designates more live/work combination spaces for creatives to exist, spaces for culture and community to thrive, and a lively downtown area that brings in great revenue to the city.

“It is a small amount of investment but a huge return when you put money into the arts,” Buckley says.

The Ogden City Council also adopted the Make Ogden Downtown Master Plan, which contains new zoning standards and a new zoning map to

Photo courtesy of DesignWorkshop

increase downtown employment, housing and walkability. This plan “establishes a 25-year vision for the growth of downtown Ogden through a series of catalytic projects in key locations around the Central Business District, which will occur in ‘episodes’ or phases in which the City investment in the public realm, coupled with developer incentives, will attract private investment.”

One of the first stages of the Make Ogden plan included the Ogden Express rapid transit line, which opened in August 2023. Another key project is known as the WonderBlock development, a private/public partnership between developer J. Fisher Companies and the Ogden City Redevelopment Agency.

“The WonderBlock development will be a combination of residential dwellings, retail, offices, services, food and beverage, as well as hospitality,” Ogden City’s website reads. “All of the project elements will be connected via attractive public spaces that will support special events, creating a unique sense of place that will draw people throughout the region to our awesome downtown.”

Featuring 354 high-amenity residential units, the WonderBlock will bring more residents to the downtown area. The development will also include a new hotel and approximately 100,000 square feet of Class A office space, 50,000 square feet of retail space, 20,000 square feet of grocery store space, and access to public parking, pedestrian pathways and amenities. A projected completion date has not yet been announced.

In early December, Amir Jackson—founder of the key arts nonprofit organization Nurture the Creative Mind— organized a community Q&A with Damen Burnham of Ogden City, Robb Berg of Design Workshop and Ryan Davis of J. Fisher Companies. The event intended to get locals involved in a conversation with those working on the massive redevelopment of the Union Station building and the surrounding land, another component of the revitalization of Ogden’s Downtown area. Davis and Berg highlighted the specifics of the Union Station project and answered questions from concerned community members about water usage, overcrowding, housing costs and impacts on local businesses, assuring residents that they were listening to feedback and being attentive to the needs of the city.

Attendees learned that the Union Station project and the development projects surrounding it are intended to

be of growth benefit to one another. Burnham explained that areas like the viaduct at 24th Street, the WonderBlock, Historic 25th Street and other surrounding areas will all be revitalized in efforts to “reverse mistakes made in the past.” He shared that decisions made in the city prior to the 2000s regarding housing, industrial and business developments actually drove people further away from Ogden and into neighboring cities.

“When we look at individual projects, we want them to align with the Make Ogden Downtown Development Plan,” Burnham said. “That plan looks at development over the next 20-30 years in Ogden as a means to help continue Ogden on the path toward financial sustainability from a municipal service standpoint, as well as providing access to service and opportunities. As for the future, we do try to take a look at Ogden’s past successes and failures. Ogden’s original success came from vast economic opportunities mixed with an urban downtown development pattern. Make Ogden looks to renew Ogden as the hub for economic opportunity in northern Utah.”

Colliers Utah EVP Don Enlow leads a team of real estate professionals that specializes in the industrial segment of Ogden. Enlow believes Ogden continues to be the industrial anchor in the “top of Utah.”

Large sections of the city are currently utilized for industrial purposes, such as the Business Depot Ogden, which sits on 1,118 acres with 13 million square feet of warehousing, manufacturing and office space with an additional 225 acres of ground available for new development. Enlow highlights the value of this area, saying, “Business Depot Ogden has been an incredible economic driver, though large available development parcels in the park are becoming more limited.”

Enlow believes the anticipated developments to the west of Ogden—which include the 903-acre parcel looking to be designated as an inland port and the planned Promontory Commerce Center business park—will add valuable office warehouse and manufacturing space.

“As there becomes more certainty regarding interest rates in the coming year, developers will have a clearer picture of development challenges and overall costs,” he continues. “The vacancy rates for office warehouse and manufacturing space in Ogden and the surrounding areas remain relatively low, which bodes well for future development.”

PROVO, UTAH, WILL SOON BE AN INTERNATIONAL TRANSPORTATION HUB

By Amber Napiwocki

How the strategic expansion of Provo Municipal Airport supports Utah’s economic growth.

Photo courtesy of Provo City Airport

As the state with the best economy in the nation, according to the U.S. News & World Report, Utah is flying high—and the expansion of the Provo Municipal Airport stands as a symbol of the state’s economic growth.

Provo Airport’s new terminal opened in July 2022, with Allegiant and Breeze Airways announcing decisions to establish their bases of operation at Provo Airport.

“Both of those carriers are low-cost carriers which don’t offer many frills,” says Provo Airport Director Brian Torgersen. “You can fly extremely affordably if you choose to.”

The affordable and accessible flight options quickly attracted travelers, and the need for expansion became evident. “We have nine commercial aircraft parked here, which immediately put us over our capacity,” Torgersen says. “The apron and the terminal we designed is designed for four aircraft.”

According to Torgersen, Provo Mayor Michelle Kaufusi proactively initiated plans for the expansion, including the potential addition of gates in the future. The terminal’s original design incorporated expansion possibilities to maintain the core infrastructure’s integrity. Her forward-thinking approach resulted in the successful acquisition of funds and subsequent airport construction.

“It’s been a cool experience to see all levels of government working together the way they should,” Torgersen says. “You see how those partnerships across levels of government are critical and work together to benefit the people.”

High altitude, high demand

The demand for additional gate space from both airlines has led to the current construction of extra apron space to facilitate up to 12 gates. The expansion will take place in both the north and south directions, introducing three to four gates on each side. The initial phase targets the south end and will introduce three passenger gates, two of which will be equipped to handle international flights.

With the aim of attracting more international flights, the Provo Airport launched the Business Air Task Force in September 2023. Torgersen originally started the task force with his air service development consultants, but it has since grown into a powerful driver for development.

The initiative involves more than 120 companies and is committed to attracting major carrier services to Provo, developing the airport into a central hub for global connectivity. As carriers with extensive networks allow travelers to depart from Provo and seamlessly connect to destinations worldwide, the airport solidifies its status as a key player in international travel and a central aviation hub.

The evolution of the Provo Airport is intertwined with the simultaneous development of the Salt Lake City International Airport, which is undergoing significant transformation with its Phase 3 expansion. This expansion is scheduled to open in fall 2024 and includes the addition of nine gates to Concourse B, along with 12 stores covering 19,260 square feet of space.

As part of the broader redevelopment program, the final phase of the Salt Lake City International Airport’s expansion will further enhance the airport’s capabilities, adding 16 additional gates to Concourse B and bring -

Photo courtesy of Provo City Airport

Graphic courtesy of Ernie Cottle

ing the total number of airport gates to 94 by 2027. The comprehensive plan aims to improve the capacity and efficiency of the airport.

Jetting past congestion

The Provo Airport’s expansion may alleviate congestion at Salt Lake City International, reflecting a broader national trend of emerging secondary airports.

Secondary airports—often located near major metropolitan areas—serve as complementary alternatives to primary airports, easing traffic and offering more accessible and affordable travel options. According to a report by the American Institute of Aeronautics and Astronautics, airports like the Chicago Midway International Airport, Fort LauderdaleHollywood International Airport and Long Beach Airport fall into this “secondary” category.

“These airports have proven that there are viable options for increasing the capacity of regional air transportation systems,”

the report continues. “As traffic is expected to grow in the upcoming years, the pressure on original and emerged core airports will become greater. … New secondary airports will be required to accommodate this growth.”

Secondary airports are also valued because of their convenience for the community. With some parking stalls located just 100 yards from the terminal, the Provo Airport provides a fast and convenient experience for travelers.

A birds-eye view

“As Utah County continues to be one of the fastest-growing markets in the nation, having an expanded municipal airport is more important than ever,” says Brandon Fugal, chairman of Colliers Utah and co-owner of Aero Dynamic Jets.

Within the growing Provo Airport, Aero Dynamic Jets’ 30,000-square-foot private hangar facility—one of the only licensed charter jet operators in the state of Utah— supports economic development and aids companies in

Photo courtesy of Brandon Fugal

their site selection endeavors. Flights are staged using either the Airbus H130 helicopter or Cessna private jet.

“Commercial aviation has been an important part of our expanding commercial real estate platform in Utah,” Fugal says. The use of aviation allows these companies to assess potential locations from the air, providing a unique and strategic perspective in their decision-making process and underscoring the Provo Airport’s role as a crucial asset in the region’s economic development.

“Utah has transitioned from being the crossroads of the West to the crossroads of the world, primarily attributable to the development of aviation infrastructure and resources,” Fugal says. “With Provo Municipal Airport and the Salt Lake International Airport in continuous expansion … Utah is poised to extend its hospitality globally.”

As Utah County continues to be one of the fastest-growing markets in the nation, having an expanded municipal airport is more important than ever.”

Brandon Fugal, Chairman, Colliers Utah

Photo courtesy of Provo City Airport

VIRTUALLY NO VACANCIES

The role of commercial real estate in the surge toward data centers.

By Izzy Howell

As automation and AI applications become ever more present in our tech-first society, the nature of how work gets done is shifting. With the rise of remote work and the ability to put rote tasks on autopilot, it’s becoming less unnecessary for workers to be present in the office—a phenomenon leaving a significant amount of office space and other commercial real estate empty.

However, to power the future, the tech sector does need ample real estate for one vital thing: data centers. But data centers require an immense amount of power to run, which means as the demand for data centers rises, so will the demand for water and other energy sources to fuel them.

The state of Utah is seeking innovative strategies to keep up with the need for new data centers and is set to transform its commercial real estate spaces into these much-needed technological hubs. But two questions remain: What challenges stand in the way of rapidly expanding data centers across the Beehive State, and can the growth of these data centers solidify Silicon Slopes as the tech sector’s new kingpin?

Where do we get the water?

“Utah is an attractive location for data centers because of the [abundant] power that is available, and the cost of power is relatively low in relation to many locations across the U.S.,” Don Enlow, EVP at Colliers Utah, says.

Even so, data centers still require immense power to function correctly.

“To be re-developed into a data center, any empty commercial real estate must be near very robust power sources, as data centers are incredibly power hungry,” Enlow says. “Most of the recently vacated office space would not have the attributes to provide sufficient power for today’s modern data centers. In addition, data centers are so specialized and of such a large scale most vacant buildings could not be converted.”

While Utah has the unique combination of tax incentives and low humidity that makes it one of the top-tier locations for new data centers, the state is lacking something that these centers need to operate: water.

“Water use continues to be a major concern across all business segments in Utah, as Utah is the third-driest state in the nation,” Enlow explains. “As business and population

DATA CENTERS USE MORE ELECTRICITY THAN ENTIRE COUNTRIES

DATA CENTERS USE MORE ELECTRICITY THAN ENTIRE COUNTRIES

continue to grow in Utah, wise and thoughtful water use becomes ever more important. The shrinkage of the Great Salt Lake has now shone a spotlight on what can happen if we are not mindful of our scarce water resources. It is a simple concept of supply and demand, and the supply seems to be coming more into question as climate conditions change.”

However, new technologies can help reduce data centers’ need for energy and water consumption. Aligned Energy, a company that offers a data center delivery model based on securing and expanding capacity as needed, is pioneering new technologies that can reduce the need for water as a source of energy.

“Aligned utilizes our patented cooling technology, which enables our data halls to use less space, power, and zero outside air and water (thanks to our closed-loop design),” said an Aligned spokesperson. “Rather than inefficiently pushing cold air into the data hall like some legacy data center designs, Aligned’s cooling technology captures and removes heat at its source, resulting in an ultra-efficient environment that dynamically adapts to customers’ IT loads.”

In fact, according to both Enlow and Aligned Energy, many data centers are turning to alternative or enhanced cooling methods to save or use no water at all.

“Data centers are also exploring ways to more efficiently recycle the water used for cooling and reducing losses due to evaporation,” Enlow says. “The source of the power can also be important to the customers of data centers, and many of these customers like to see data centers that use some of their power from renewable sources.”

Since 2013, Aligned has built data centers across the U.S., using its cooling technology to significantly reduce water consumption. Aligned has two locations in West Jordan with two more in the works. This means that its patented offering could be arriving at the perfect time, with the potential to fuel the rise in demand for new data centers.

Why data centers matter

Clearly, there are solutions on the horizon regarding energy efficiency. If they’re implemented properly and data centers in Utah can grow without major barriers, the state would be uniquely set up to provide an unparalleled of-

A midsize data center uses roughly as much water as about 100 acres of almond trees or three average hospitals, and more than two18-hole golf courses.

*Use varies depending on climate and other factors

Sources: California Department of Water Resources (orchards); James Hamilton (data center); U.S. Department of Energy (hospitals); Golf Course Superintendents Association of America (golf courses)

Source: The Wall Street Journal

fering and truly rival Silicon Valley and other tech hubs like Seattle.

“Data centers are [a] huge part of people’s everyday business and personal lives,” Enlow explains. “All things ‘internet’ are powered by data centers. With the onset of AI becoming more prevalent in the future, there will continue to be increased demand for data centers. Data centers and their functions have become synonymous with the comforts and entertainment of our daily lives.”

Aligned Energy agrees with the crucial role that data centers play in our society today: “Data centers underpin the digital world. They house the storage and computer systems that run the internet, power our businesses and keep us all connected. As long as more data is generated and we continue our reliance on digital services, the demand for data centers will continue to grow as well. Data centers will also continue their contribution to a more sustainable and connected future for the communities they are located in, creating stable, high-paying jobs, promoting secondary economic

development, spurring innovation, driving demand for more renewable energy and more.”

As the demand for data centers continues to skyrocket, the transformation of commercial real estate will have to meet this demand in the most sustainable and efficient way possible.

Colliers has a specific process when it comes to using commercial real estate to this end. “Colliers’ professionals are involved with site selection and land acquisition for data centers worldwide,” Enlow says. “Colliers has a dedicated Data Center Advisory Group, in addition to a Data Center Management team.”

Aligned Energy takes a similar approach: “We [build data centers] through the standardization, scalability and sustainability of our design and solutions, sustainable and efficient technologies, and continuous innovation.”

While we are still in the very early stages of rolling out more data centers across Utah, the beginning efforts are shaping up to be very promising.

Work is performed on servers at Meta’s Eagle Mountain Data Center in Eagle Mountain. | Photo by Jeffrey D. Allred, Deseret News

WATER CONSUMPTION BY DATA CENTERS

The NSA and Facebook data centers use a traditional water evaporative cooling system for their servers, while the C7/DataBank and Novva campuses do not.

Annual totals

Facebook (13,460,590 total gallons)

NSA (128,275,000 total gallons)

C7 (6,894,000 total gallons)

Novva (1,129,00 total gallons)

Note: The Novva Data Centers servers weren’t operational until January 2022. Sources: Bluffdale, Eagle Mountain, West Jordan

MULTIFAMILY TO THE RESCUE

How Utah’s booming economy, increasing population and lack of residential construction are amplifying the need for multifamily housing options.

By Judd Bagley

There’s no escaping the eternal economic principle of supply and demand, especially when it comes to property values. Two things the most expensive cities in the world have in common are that people really want to live there (high demand) and that their capacity to accommodate expansion is constrained by strict geographic barriers—usually water or mountains (limited supply).

High-demand cities will always see housing prices increase over time, but housing prices in high-demand cities with limiting geographies follow much steeper growth trajectories. Manhattan, Seattle, Tokyo, Singapore and the San Francisco Bay Area are prime examples, and the Metro Salt Lake area— experiencing surging demand while wedged between immovable mountains and lakes—has recently become a junior member of that club.

“I never imagined Utah would be where we are right now,” says Brandon Goodman, EVP of investment sales at Colliers Utah. “During COVID-19, young professionals working remotely in primary markets realized they could move here and not only afford a home, but also have incredible access to the kinds of recreation and lifestyle options the group finds so attractive. This produced demand nobody in 2019 could have anticipated, and we weren’t ready. If we keep doing what we’re doing, that demand will never find a pressure relief valve because we’re not a market that can just continue to build horizontally.”

Dejan Eskic, senior research fellow at the Kem C. Gardner Policy Institute, is slightly less measured in describing the status quo.

“Utah has utterly failed to meet housing demand, and we got kicked in the face because of it,” he says.

To get a handle on the scope of that failure and resulting face kick, consider that, according to the most recent research by IBISWorld, Utah ranks first in the nation for economic growth and second for population growth but 36th for growth in residential construction. That stark disparity predicts the inevitability of the Federal Reserve’s reported 40 percent jump in Utah’s Home Price Index since 2019.

That Utah was caught so flat-footed seems more understandable when considering the unique nature of new housing construction. Many industries can quickly respond to unforeseen market changes by adjusting production accordingly—but the housing industry is famously not one of them.

“Any new units entering the market today were originally conceived of as a response to the market as it was five to seven years ago,” Goodman says. “Pre-2020—when the seeds of much of today’s new inventory were planted— was a different world.”

The problem is dire enough that the Utah Legislature recently commissioned a study to get a handle on it, and the outcome of that process leads with the warning: “Time is running short to accelerate action on housing policy.”

JUST 16% OF HOMES FOR SALE IN 2023 WERE AFFORDABLE

Sources: Redfin analysis of MLS data, U.S. Census Bureau American Community Survey, Freddie Mac PMMS

According to the study, to meet projected demand, Utah must add at least 27,900 new housing units per year for the next 16 years. The only way that’s possible is by increased reliance on high-density, multifamily housing, despite the fact that “cities that prefer single-family homes or low-density zoning can use their authority to stifle multifamily or high-density residential projects.”

Goodman says this last observation is critical to understanding the lag in getting new units to market.

“It’s not because it takes that long to find financing, buy land and do the actual construction. It’s because of the challenge of securing high-density permitting. That process currently adds years to the process,” Goodman says, blaming two related factors. “First, the places where there’s room to build were originally incorporated as small towns, never expecting they’d become suburbs. Organizationally, they weren’t set up to handle high-density. Second, the city council members who vote on these permits want to get re-elected

next year and want to stay on good terms with their neighbors today. They feel a lot of pressure to keep things the way they are.”

Recognizing this, the legislature’s study suggests that a “state-level housing strategy—along with proper incentives and penalties—could better organize decentralized local government decisions toward meaningful targets for housing production. It could also provide important political cover for local leaders who can face intense pressure from constituents who do not want smaller, more affordable housing in their cities.”

Goodman says such a strategy will likely include a mechanism for developers to get up-zoning permit approvals at the state level when their projects have been subject to excessive delay at the municipal level despite being fully compliant.

“The only way we’ll ever catch up is this kind of fundamental change to the way multifamily gets approved,” Goodman says.

NOTABLE MULTIFAMILY CONSTRUCTION

As for what this means for commercial developers looking to help Utah better meet multifamily housing demand, Goodman says just as politics is part of the problem at the local level, it will likely prove the solution at the state level.

“The legislature knows that in failing to increase housing supply, there’s more at stake than just higher cost of living. Most of this growth comes from job-related inmigration, and for companies to recruit and grow and keep our economy advancing, we must be able to house these workers affordably,” Goodman says. “Legislators want to get re-elected too, and when it’s understood that

our title of the strongest economy in the nation may be at risk, stuff will get done.”

Goodman says he enjoys telling his clients what he thinks the near future will bring.

“I’m telling them to buy as much multifamily land as they can in the next couple of years because the coming changes are going to be so significant,” Goodman says. “Then I tell them to buy smaller parcels of land, assuming they’ll be able to go more vertical than before. We’re going to be able to get densities approved that we never have before, and that gets them especially excited.”

Graphic courtesy of Samantha Kight

THE OFFICE, REIMAGINED

As the world grapples with a mix of remote and in-person work, a new trend of coworking spaces is transforming office landscapes in many industries— including health care.

By Jack Dodson

As COVID-19 lockdowns eased with the distribution of vaccines, employers around the world began to discuss bringing workers back to in-person office days—but there was resistance. Early analysis showed digital connectivity had changed work-life balance expectations while productivity, concentration and hours worked had actually increased.

The work-from-home and hybrid work models had solidified enough that Stanford University’s Institute for Economic Policy Research referred to the employees refusing to return to offices full-time as “the Great Resistance” in July 2022. A survey of 5,000 workers found that in cases where employers requested five days of in-person work, only 48 percent of employees complied.

Carla Meyer, a senior director at Colliers Dallas, says there are now three main categories company real estate plans can fall into: “hybrid,” in which employees mix their time between home and office roles; “flexible,” in which there is openness regarding the hours employees work; and “agile,” in which workers can participate in work projects from anywhere.

“We’re seeing a much higher demand for these flexible and hybrid workspaces from our corporate users,” notes Mike Kay, vice chairman at Colliers Dallas. “We’re seeing corporations be much more agile in how they’re using real estate; they’re not signing long-term leases.”

Needing

an in-office community with at-home productivity

A year and a half after the “Great Resistance,” office culture has shifted again as employers are making a different argument in favor of full-time office work: strengthening workplace culture and community. According to a ResumeBuilder.com survey of 1,000 companies, 90 percent are planning to require their workers to return to full-time office work by the end of this year.

More in-person work days will cause a major shift in the office space market, which had been dramatically scaled back during the pandemic as physical needs atrophied. But as more companies implement return policies, office spaces will become crucial again.

“Sixty-four percent of respondents say their company currently has a physical workspace, 20 percent plan to by the end of 2024, 11 percent plan to in 2025 or later, and just 4 percent never plan to have a physical workspace,” the ResumeBuilder.com survey found.

Kay says the model has helped create a need for a “hub and spokes” model of office spaces, where companies can have one main check-in space that is filled with important amenities but also more flexible and satellite options to accommodate remote and hybrid workers. Meyer adds that as a result of these shifts, companies are rethinking their needs and opting for short leases around six months instead of traditional 5- to 10-year leases.

“They’re trying to see how much space they need and how many people come into the office,” Meyer says. “These companies are really trying to experiment, and that’s one of the benefits of these providers.”

As time allowed for better insights into how the pandemic’s work changes impacted professional output, Forbes reported that hybrid work models had been the most effective for productivity, increasing in comparison to full-time office work, while fully remote work options had decreased productivity slightly.

“Hybrid employees gain back roughly two or three hours each week due to reduced commuting—with a portion of this time being allocated to more work hours. They also tend to be more productive during their remote work days owing to fewer interruptions and quieter home-based working environments,” the October 2023 Forbes story stated.

However, many reports across the business world cite employers’ “emotional” response to the problem, citing their desire to physically see their workers’ productivity. In a September 2023 article, management consultant Dan Kaplan of Korn Ferry told CNBC the desire for a total return to office work wasn’t based entirely on intellectual reasons.

“There’s the popular argument that people are less connected to their company and to their peers without the office, which is bad news for employee engagement and retention,” Kaplan said in the article. “It’s easier for executives to hold on to the old notion that people are really working if they can see them down the hall. … It’s almost too hard for some leaders to comprehend a world where that option doesn’t exist or to consider a radical new approach.”

Medical coworking as a shifting model

One key area of interest for real estate sectors will be ideas like a shared medical space.

“A noteworthy trend within this transformation is the rise of medical coworking spaces. These innovative environments are reshaping the way medical professionals work, collaborate and deliver care,” wrote Shawn Janus, Colliers’ national director for health care, in a blog post last September.

The article credited this shift within the medical community to enhanced technology and changing patient expectations. Through medical coworking spaces, doctors and clinicians could rent spaces with more flexible options to see their patients. Janus pointed to already existing programs such as ShareMD Suites to demonstrate that the idea is already in action.

“The cost of establishing and maintaining a traditional medical practice can be prohibitive, particularly for independent practitioners,” Janus wrote. “Medical coworking presents a cost-effective solution, allowing users to share overhead expenses and administrative burdens.”

Innovating office space to avoid a crisis

All this sets up a significant shift in commercial real estate and workplace culture in 2024: As employers become more emboldened to require return-to-office orders, the market will adapt to shifting needs.

For the past several years, remote work dramatically reduced the commercial office rental market. A McKinsey Global Institute analysis found that in just nine megacities

across the globe, commercial rentals were set to lose $800 billion by 2030.

Colliers Utah Chairman Brandon Fugal notes the changing market has allowed many companies to create shared office spaces.

“The secular shift observed with office utilization and trends has renewed interest in not only coworking and shared office solutions but also a flight to quality, with an emphasis on Class A fully amenitized space,” Fugal says. “Shared office space offering amenities and collaborative ecosystems appear to be on the rise, as well as an emphasis on quality of workspace and locational advantages for recruitment.”

During the most extreme lockdowns and hybrid work phases, the market adapted. Adaptation was strong in those days: Restaurants converted themselves into boutique markets seeking to sell packaged goods; chefs became food creators and opted to remain influencers after lockdowns ended; universities and schools embraced online learning; and robots replaced some human jobs like manufacturing.

Commercial real estate underwent one of the more extreme transitions, with the entire planet required to stay home. McKinsey’s 2023 report on the decline of the commercial rental

market noted an urgent issue—the change wouldn’t impact just this one industry. Retail and housing in major cities would face trying times. To weather the hybrid era, companies began to lease out some of their office space or downsize, opting for smaller numbers of desks.

To make the pitch for workers to return to more time in the office, CNN Business notes companies will need to clearly define their reasons for cultivating an in-person culture. According to reporter Jeanne Sahadi, the battle is that even before the pandemic, a loose requirement of in-person days actually helped spark creativity and innovation in workers.

Sahadi referenced a Gensler Research Institute report that found a sweet spot to be three days per week in the office.

“Innovators who spent some time working away from the office reported higher job satisfaction, more meaning, and better managerial relationships. For innovators, the office is just one of the many places where work happens,” Sahadi quoted the report as saying.

Either way, as the commercial real estate sector adjusts to more in-person work in 2024, the changes may be in-

dustry-specific. According to Kaplan in the CNBC article, tech, financial services, and retail will likely spend more on office space in the years to come because they are the largest players in the office rental market.

Even as employers push more concretely for a return to in-person work, experts remain adamant that hybrid work is here to stay. For example, McKinsey’s 2023 report on the commercial real estate market argued that employee expectations for some days out of the office will remain in the years to come.

Despite a gloomy forecast for the market and a more established hybrid work culture, McKinsey found that the possibility of innovation for office spaces and urban design is flourishing under post-pandemic creativity.

“The challenges also provide an opportunity to spur a historic transformation of urban spaces,” the consulting firm’s authors wrote. “By becoming more flexible and adaptable in everything from the makeup of neighborhoods to the design of buildings—in essence, becoming more ‘hybrid’ themselves—superstar cities can not only adapt but thrive.”

GAME-CHANGING DEVELOPMENTS

Between major league baseball, a national hockey team, the 2034 Olympic Games and more, Utah is on the edge of a sports revolution.

By Austin Facer

Unrecognizable.”

That’s the word Larry H. Miller Real Estate President Brad Holmes uses when imagining what Utah might look like in the next 10 years—and the reason why will likely perk up the ears of those who turn to the evening news just for a recap on the Utah Jazz game or a soundbite from a college football practice.

If you’re a sports fan in Utah, you’re likely feeling excited about what’s to come. Some of the state’s leading figures say sports will have an enormous impact on the look and feel of Utah’s next chapter, especially through the lens of real estate development. It’s been widely reported that the Salt Lake City market is being considered for potential expansion of the National Hockey League and Major League Baseball. The Utah Jazz is reportedly exploring options for either a new arena somewhere in the Salt Lake Valley or to revamp the area immediately around the downtown Delta Center. The minor league Salt Lake Bees will relocate to a new sports-anchored mixed-use development in South Jordan’s Daybreak neighborhood. Plus, Salt Lake has been earmarked as the preferred venue for the 2034 Olympic and Paralympic Winter Games.

“It’s an exciting time,” says The Larry H. Miller Company CEO Steve Starks. “To me, I think it tracks the growth of the state in a lot of different ways: our population, our economy, our high quality of life. It’s great that we’re in all of these conversations.”

Learning from other big league cities

Of course, getting to where Utah could be a decade from now will take a lot of work and thoughtfully executed development. Those in the thick of it have found inspiration and guidance by looking at other “big league cities” around the country.

Colliers Utah Executive VP and Partner of Retail, Land and Investment Stuart Thain points to the downtown scene in San Diego as something he would love to see replicated in the Beehive State.

“You look at Petco Park in San Diego—when they opened up the ballpark downtown, it totally revitalized the Gaslamp district, and everything else was a boon for them,” Thain says, referring to the resurgence of shopping, dining and nightlife that emerged near the Padres’ stadium when it was completed in 2004. “I think if it’s done right here and it’s in the right location, something like that could really be a huge deal for the people of Utah.”

Since its opening in 2017, The Battery Atlanta—which sits adjacent to the Braves’ home field, Truist Park—has been celebrated as the model of sports-anchored mixeduse development projects. Big League Utah, the coalition rallied by The Larry H. Miller Group to bring an MLB franchise to Salt Lake, hopes to bring similar success with the Power District, the development proposal central to its efforts.

Having visited and closely studied The Battery Atlanta, Starks and Holmes are confident that Big League Utah

UTAH AND THE WASATCH FRONT SPORTS GROWTH POTENTIAL

GreatSaltLake

Graphic courtesy of Ernie Cottle and Samantha Kight

can pull off its own version of what the Braves have to offer. And in Utah’s case, the Power District’s location—set near the Utah State Fairpark on the west side of Salt Lake City—is unmatched.

“We think it’s the most accessible site in the entire Wasatch Front,” Starks says. “It’s close to the airport and is right between I-15 and I-215 and right off I-80. There’s a TRAX station right in front of the property. It’s minutes away from downtown. Whether you’re coming south from Davis County or Weber County, north from Utah County, from anywhere in Salt Lake County or even west from Tooele, you can get there very easily.”

Breaking new ground in Daybreak

For now, Big League Utah’s MLB dreams are just that: dreams. But the first game-changing sports development in the state, the Bees’ move to Daybreak, is full-steam ahead.

Following the 2024 Minor League Baseball season, the Bees will head southwest to a new home to anchor what The Larry H. Miller Group lauds as a state-of-the-art entertainment district. When Downtown Daybreak gets its full introduction to the community in 2025, it will be Utah’s first sports-anchored mixed-use development space.

But while baseball will be the centerpiece of the project, the commercial real estate opportunities around the future ballpark in Daybreak will be exciting in their own right. Restaurants, storefronts and unique office spaces will create an unavoidable buzz in the Salt Lake suburbs. One office building in the future development will even offer a view into the ballpark, giving its future tenants a one-of-akind amenity.

Photo courtesy of The Larry H. Miller Company

“What retailers, food and beverage companies, and other companies are trying to capture is peoples’ time,” Holmes says. “To have amenities that make someone feel comfortable spending two or three hours in the vicinity of good food, good shopping, good housing, a good place to work; we have all these things that can activate this center 300 days a year.”

A decade from now

For the moment, Utah’s sports-anchored future has yet to materialize. While Ryan Smith—the majority owner of the Utah Jazz and Smith Entertainment Group—has been quite vocal about his interest in bringing the NHL to Utah, it would likely require a new, larger arena for both that team and the Jazz. And, competing with a few other U.S. markets for the rights to a major league baseball team, The Larry H. Miller Group says the site at the Power District is “shovel ready” if and when the MLB gives the green light.

Starks is confident that there will be plenty to celebrate a decade from now.

“In 10 years, we’ll be finishing up hosting our second Olympic Winter Games, which will be an incredible catalyst for our community on the world stage again,” he says. “And within 10 years, hopefully, we’ll be playing our fifth or sixth season of Major League Baseball. At that point, we’ll have developed a crop of players that are coming into their own. Hopefully, we’ll be close to raising a World Series trophy in Utah.”

Regarding sports and commercial real estate in Utah— and as the line goes in the iconic ballpark-building blockbuster, “Field of Dreams”—“if you build it, they will come.”

Photo courtesy of The Larry H. Miller Company

Property sectors

Office

Retail

Multifamily Mergers

OFFICE

Davis and Weber County

The commercial office market in both Davis and Weber County had a year marked by resiliency and adaptation. Vacancy rates decreased from 5.26 percent in the fourth quarter of 2022 to 4.72 percent one year later, a marked response to heightened demand and limited supply. The region saw 83,960 square feet of positive absorption as the market adjusted.

Overall asking lease rates rose to $22.05 full-service gross (FSG) compared to $19.50 FSG at the end of 2022, a sign of perceived value but a cautious approach to providing cost-effective lease options. Demand is unlikely to be tempered, with just 124,029 square feet of space under construction at year-end and no expected acceleration in 2024. With a dedication to recovery and adaptation, the Davis and Weber region remains resilient amid various challenges, positioning itself to respond to an evolving economic environment.

Salt Lake County

Office construction in Salt Lake County slowed significantly from 626,552 square feet underway at the end of 2022 to just 218,552 square feet one year later. The largest contributors included The Royce at 120,000 square feet in the Cottonwood submarket and HighPointe Center at 75,000 square feet. All other current projects are less than 10,000 square feet in size.

Average lease rates decreased by $0.02 from the third to the fourth quarter but increased by $0.21 year-over-year, reaching $27.00 FSG. Absorption reached a record low of negative 1,085,596 square feet. However, there is room for optimism as Baltic Pointe added 130,000 square feet to the Draper submarket in the fourth quarter, generating positive absorption of 49,870 square feet. Pelion & HB Workplaces preleased several full-floor opportunities at Baltic Pointe, suggesting that sizable corporate users continue to seek space over 20,000 square feet in size.

Vacancy rates reached 16.23 percent with a 5 percent sublease vacancy rate and an overall rate of over 20 percent. Class B properties, particularly in the Draper and West Valley/

Lake Park submarkets, saw the most vacancy, with both areas reporting over 30 percent vacancy in Class B inventory. Class A properties in the Sugarhouse submarket have the highest average asking lease rates, boasting an impressive $38.51FSG average and spanning anywhere from $27 to $40.50 FSG.

Utah County

Construction in Utah County reached an all-time low, with just two buildings totaling 68,000 square feet under construction at the end of 2023. Both buildings near the new Primary Children’s Hospital in Lehi are designated medical office buildings spanning approximately 35,000 square feet each. Both are almost fully preleased, with only 9,726 square feet remaining.

The overall average asking lease rate in Utah County edged up to $24.38 FSG at the end of 2023, a $0.91 increase from the previous quarter and a $0.80 increase year-over-year. Class A properties in the north submarket recorded the highest rates, reaching $29.73 FSG, bringing the overall Class A rate to $27.15 FSG. Valley Grove III and Traverse Heights achieved the highest rates, at $33.00 FSG, followed by Valley Grove I at $31.25 FSG. Other Class A buildings in the area ranged between $27.00 and $30.00 FSG.

Utah County saw negative absorption for the first time ever recorded, totaling negative 128,825 square feet of space at year-end. However, the fourth quarter experienced a positive 27,925 square feet of absorption thanks to the securing of several spaces over 10,000 square feet in size. Vyvue absorbed 14,800 square feet of space at Sterling Square 3, while ABS Kids secured 14,780 square feet in Sterling Square 6, both part of a prominent seven-building office park in Provo.

Overall, office vacancy reached 11.12 percent for direct space at the end of 2023, with sublease vacancy reaching 6.44 percent for a total of 17.56 percent overall. Class B properties saw the most vacancy among the different property types, while Class A product in the south submarket is home to 94.84 percent of total vacancy thanks mostly to one vacant building.

RETAIL

Davis and Weber County

The dynamic Davis and Weber retail landscape saw vacancy rates decrease from 3.14 percent at the end of 2022 to 2.68 percent one year later as the region struggles to meet escalating demand.

However, sustained retailer interest is contributing to a vibrant market, with 84,840 square feet of positive absorption at yearend. With current construction at just 125,000 square feet, the area will likely be unable to meet future demand.

Overall, asking lease rates increased to $23.88 triple net (NNN) due to heightened competition for prime retail locations. If the Davis and Weber County area continues to adapt to evolving demands, plan for long-term growth and showcase its resiliency, it will position itself as a promising arena for investors and businesses alike.

Salt Lake County

Retail construction in Salt Lake County demonstrated stability throughout 2023, decreasing modestly from 574,575 square feet at the end of 2022 to 474,575 square feet one year later. The southwest submarket saw the most construction, at 398,000 square feet, or 83.86 percent of total construction. The Ranch at Bluffdale and Midas Crossing in Herriman were the largest contributors, at 210,000 square feet and 160,000 square feet, respectively.

The overall retail asking lease rate in Salt Lake County reached $21.21 NNN at the end of 2023, a marginal increase from the $21.18 NNN recorded in the third quarter and a $0.64 increase from the $20.57 NNN recorded the previous year. Regional Centers saw the highest overall asking rates, at $23.05 NNN, followed by Anchorless Strip Centers at $22.41 NNN. The southwest had the highest asking rate of all the submarkets at an overall rate of $24.98 NNN.

Salt Lake County’s year-to-date absorption reached a record-high 639,374 square feet, including 96,838 in the fourth quarter alone. H Mart leased the entire vacant Kmart building in West Jordan, and The Shops at Fort Union contributed 91,114 square feet of absorption when an undisclosed tenant took 77,531 square feet of space—Dave’s Hot Chicken and KeyBank account for the remaining portion.

Retail vacancy in Salt Lake County continued to decrease, reaching 2.28 percent at year-end. Anchorless Strip Centers have the highest vacancy at 2.56 percent, followed by Regional Centers at 2.54 percent. Neighborhood Centers in the central west quadrant had the highest county-wide vacancy rate at 4.39 percent. A lag in construction behind demand will likely keep vacancy rates below the healthy 8 percent threshold going forward.

Utah County

Utah County ended 2023 with just 196,086 square feet of retail space under construction, with the west submarket accounting for 78.59 percent of the total. In Saratoga Springs, Jacob Ranch Marketplace alone accounted for 142,845 square feet. Year-over-year growth was minimal, with only 116,845 square feet underway at the end of 2022 and 267,532 square feet underway in the third quarter of 2023.

The Utah County retail market set a record $24.67 NNN average asking lease rate in 2023, a $1.85 surge year-overyear and a $1.07 increase since the third quarter. Regional centers in the south submarket reached an average high of $40.00 NNN, highest at Eagle Mountain Town Center Marketplace and Canyon Creek Shopping Center, at $42.00 NNN and $40.00 NNN, respectively. Expect continued increases as supply is unable to keep up with demand.

Retail absorption in Utah County increased to just 173,488 square feet year-over-year, including a slight decrease in the fourth quarter of negative 22,362 square feet with the addition of 20,000 square feet of space in the Provo submarket. Vasa Fitness absorbed 60,000 square feet of space in Saratoga Springs, and Barnes & Noble secured 23,029 square feet in American Fork.

The overall vacancy rate in Utah County decreased slightly from 2.92 percent at the end of 2022 to 2.39 percent one year later. Community centers in the central submarket have the most vacancy at 6.49 percent. Retail vacancy rates should continue to adapt in response to limited construction and high demand.

INDUSTRIAL

Davis and Weber County

Demand for industrial space in both Davis and Weber County continues to outpace supply, emphasizing the region’s status as an attractive destination for industrial business. While vacancy increased to 1.8 percent in the fourth quarter of 2023—up almost 1.2 percentage points from the 0.62 percent recorded at the same time in 2022—Davis and Weber saw 479,239 square feet of positive absorption by year-end. Overall, asking lease rates increased to $0.83 NNN. Despite a recent surge in industrial construction, reaching 731,433 square feet of space at year’s end, Davis and Weber are likely to continue to experience a supply and demand imbalance and a competitive industrial market.

Salt Lake County

Salt Lake County recorded 2,330,881 square feet of completed construction at the end of 2023, and 4,896,078 square feet are currently underway. The northwest submarket commands an impressive 77.96 percent of construction, with the second-largest share in the southwest submarket. Among the 13 ongoing projects, only two are tailored for build-to-suit clients, while the rest is speculative space.

The overall asking lease rate for industrial space in Salt Lake County stabilized at $0.84 NNN at the end of 2023. The southeast submarket saw the highest rate at $1.28 NNN across just three available properties, which may not provide a comprehensive reflection of market rates. Buildings under 20,000 square feet in size have the highest asking lease rates of all building sizes, averaging $1.05 NNN, due to vacancy falling below 1 percent.

Salt Lake County saw 3,736,680 square feet of year-to-date positive absorption at the end of 2023, with an overwhelming 95.73 percent attributed to buildings over 100,000 square feet in size. The largest share came from the northwest submarket, contributing 3,333,962 square feet. Specialized Bicycle Components secured most of the 583,308 square feet of absorption at the SLC Port Global Logistics Center #6, emphasizing how larger industrial space, particularly in the northwest submarket, is driving absorption dynamics within the county.

Overall vacancy rates in Salt Lake County reached 5.27 percent at the end of 2023; a significant 2.06 percent decrease

year-over-year and a 0.91 percent increase from the previous quarter. Sublease availability contributed 2.11 percent, bringing the combined vacancy rate to 7.38 percent county-wide. The southwest submarket recorded the highest vacancy rate at 6.37 percent, followed closely by the northwest submarket at 6.17 percent.

Utah County

The completion of seven buildings added 882,769 square feet of industrial inventory in the fourth quarter. Just four buildings account for the 2,251,623 square feet of space currently under construction in Utah County. Critically low vacancy rates have necessitated additional construction to meet growing demand. Just over 90 percent of ongoing projects have been preleased, including Meta’s 2-million-square-foot expansion in Eagle Mountain.

Overall industrial asking lease rates increased by $0.05 yearover-year to $0.92 NNN at the end of 2023. The north submarket is home to the highest asking lease rates at $1.05 NNN, with 5,000-20,000-square-foot buildings reaching $1.38 NNN. An ongoing imbalance between supply and demand, as well as insufficient construction activity, will continue to push lease rates upward.

Year-to-date positive absorption reached 1,718,544 square feet in 2023, including a 665,685-square-foot surge in the fourth quarter alone. Buildings over 100,000 square feet in size in the north and central submarkets were the largest contributors, as well as the completion of preleased space. EZARC preleased 107,253 square feet of space at E15 Commerce Park Building 2 in Pleasant Grove, and Vox Fulfillment secured 70,600 square feet of space at Scannell New Vista South Building 3.

Utah County’s overall industrial direct vacancy rate reached 4 percent at the end of 2023—the highest year-end vacancy rate recorded since 2013 and a 1.74 percent increase yearover-year. Buildings over 100,000 square feet in size in the south submarket have the highest vacancy rates at 9.11 percent. However, 4 percent vacancy is still considerably “unhealthy,” underscoring the challenge of insufficient industrial supply in Utah County.

INVESTMENT

A combination of factors drove remarkable shifts in Utah’s investment market over the past several years. Sales volume soared to unprecedented heights in 2021 and 2022, fueled by low interest rates and heightened interest from investors looking to capitalize on the state’s rapid growth—a golden era of robust figures and a flourishing market. However, 2023 saw a substantial decline in sales volume and an increase in cap rates thanks to rising interest rates and an uncertain national economic landscape.

This landscape reflects a nuanced dynamic: property owners are reluctant to part with their well-performing assets in a market in transition. At the same time, potential buyers are at a crossroads, weighing possible returns against the increased cost of capital. While sales volume may not reach previous peak levels, the market still holds substantial opportunities for astute investors.

Cap rates, a key metric for gauging investment potential, reached 5.64 percent for all property types. Broken down by sector, apartment cap rates were recorded at 4.80 percent, industrial at 6.25 percent, office at 6.5 percent and retail at 5 percent. Each sector presented unique opportunities and challenges and saw varying degrees of investor interest. Industrial investment volume reached $726.1 million, office reached $368 million, apartment reached $262.6 million and retail reached $185.6 million.

This nuanced response reflects the intricate dance between supply, demand and economic conditions. There is room for optimism looking ahead as loans mature and the macroeconomic landscape transforms. Thanks to Utah’s resilient economy and dynamic investor appeal, the investment market will continue to offer opportunities to those willing to navigate.

2023 Utah report

MULTIFAMILY

Davis and Weber County

The multifamily housing market in both Davis and Weber Counties is a nuanced landscape of diverse housing needs. The vacancy rate—a critical indicator of market health— reached 13.65 percent at the end of 2023. A steady influx of multifamily developments, including 2,500 completed units and 615 additional units underway, contributes to the overall housing inventory while the area tries to balance supply and demand.

The average asking rent per unit reached $1,453, a pivotal metric influenced by location, amenities and overall market demand. Developers, investors and residents must navigate the dynamic interplay between supply, demand and rental trends.

A high vacancy rate, continued construction and increasing rents make for a complex multifamily sector. Stakeholders should monitor these key metrics when evaluating opportunities in the future.

Salt Lake County

2023 was a year of shifting key metrics in the Salt Lake County multifamily housing market. Vacancy rates reached 9 percent—the highest rate recorded in the last five years— up from the 8.6 percent recorded at the end of 2022. This increase in available space can be partly attributed to the 6,200 units completed in 2023. An additional 11,350 units are currently in the construction pipeline, which highlights the region’s response to robust housing demand.

The average asking rent per unit reached $1,550—a notable increase from the $437 average in 2015—impacted by increased demand, high construction costs, broader economic trends and evolving rental market dynamics. Stakeholders should monitor these key metrics as the multifamily market continues to adapt and meet the growing demand for multifamily housing through high construction and increasing rental rates.

Utah County

Utah County’s multifamily housing market experienced both increased occupancy and increased demand in 2023, making for a more balanced market than in years past. Vacancy decreased from 9.7 percent at the end of 2022 to 8.8 percent one year later. In a proactive response to the region’s housing demand, 1,980 units were completed last year, with 1,040 currently under construction.

Most new construction in Provo and Orem is strategically centered around the two universities—Brigham Young University and Utah Valley University—catering to the growing student population and shaping the multifamily landscape in the area.

The average asking rent per unit reached $1,555 at yearend, a notable $466 surge over the last five years. Population growth, increased cost of living and construction expenses are all factors that contribute to rising rental rates. Expect a continued commitment to development and sustained growth going forward amid an evolving rental market in Utah County.

MERGERS & ACQUISITIONS

Main Street business brokerage activity (up to $1 million in adjusted EBITDA) and lower-middle market M&A activity ($120 million in adjusted EBITDA) in Utah is growing in sync with the overall growth and popularity of the state. The two primary drivers of growth in Utah are (1) the increase in out-of-state buyers moving to Utah and (2) the number of baby boomers retiring and choosing to sell their businesses. Buyers typically outnumber sellers by about five to one.

Colliers’ mergers and acquisitions group has seen an increase in lower-middle market transactions as well as the number of private equity groups, sponsored buyers and family-office buyers looking to buy. Roll-up and consolidation activity on both the local and national levels is on the rise, including the National Hearing Aid Clinic roll-up, an HVAC service consolidation and various cabinet manufacturing and construction-related industry consolidations.

COVID-19 caused a nationwide slowdown in sales, with restaurants taking the biggest hit, particularly in labor and food costs, forcing them to raise menu prices. However, most businesses fully returned to pre-pandemic levels by the end of 2023, giving owners the impetus to reconsider a sale they may have delayed.

High-interest rates (at 10-11 percent for SBA-backed loans) are slowing activity to some degree as buyers factor high debtservice costs into their offers, leading to slight value degradation. Main street businesses, both locally and nationally, typically sell at 2-3.5 times multiples. Lower-middle market transactions typically trade at 3-6 times multiples.

Private equity group, sponsored buyer and family-office buyer demographics have shifted to include more millennial and Gen Z entrepreneurs who are looking at opportunities in the range of $1-5 million EBITDA. Sellers are primarily baby boomers, Gen X and some millennials.

Despite national downturns, the market has remained strong. Declining borrower interest rates point to an even stronger 2024.

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