2020 was an interesting year for multifamily, with nearly everyone stuck inside their units. Prior to the lockdown, the motto was, “the smaller the better” for space; tenants were out exploring the city, eating at restaurants, and traveling.
Since the pandemic, we have seen several renters realize the space they once desired has changed from what they wanted 20 months ago. People are looking for units with more living room space, and separate rooms to have their own space if they live with a significant other or roommate. Developers have said that it has caused them to rethink room sizes and layouts. The amenity race among developers has become important to attract future residence. Amenities are no longer an afterthought they are front and center.
A Landlord’s Market Still Exists
Based on current vacancy rates, and highly desirable locations, landlords are still able to get premiums for their units. For example, for Salt Lake City only, we are seeing vacancy rate right around 4% with the average rent being $1,349 and the highest rent per unit is discretionary which is $1,901. These numbers come from some of our property management groups, however, these numbers typically do not consider projects that are less than 50 units. Concessions, incentives, and tenant improvement allowance remain in a property’s favor in desirable locations like downtown Salt Lake City, Holladay, and Lehi, with the state average hovering at 4.7 percent.
New development is taking place throughout the entire state, which is having a huge impact on neighborhoods, with the Salt Lake valley seeing the highest development. According to a construction report from the State of Utah, there are approximately 21,535 units either under construction or planned as of today, which is a total of 103 projects.
High Optimism for High Rises
One sector that we have not historically seen is high-rise (skyscrapers) being built for multifamily in Utah. There is a number that is currently under construction, such as Liberty Sky Apartments which is a 24 story 300-unit high-rise being developed by The Boyer Company and Cowboy Partners, in downtown Salt Lake City. There are also many proposed, such as the Kensington Tower on State Street and 200 South, Hines proposed a project on Main Street where the old Utah Theater was, and the Worthington Tower on 300 S. 200 E. All of these will change the meaning of downtown living and raise the standard for new projects in the future.
Some of the most active developers we have seen in the city have been Woodbury, ICO/Ivory, Bridge Investment Group, dbUrban, Boyer Company, and Cowboy Partners. There has also been movement in the landlord and property management space over the past year. This includes Greystar, which acquired Property Management Business Alliance – a move that’s given them a huge presence in the property management arena. Having Greystar in the Salt Lake market has been a huge bonus to the community.
Though there is no telling what will happen to the multifamily market – either locally or nationally – over the next year, Salt Lake developers are confident in what they’re seeing. And if the old adage is true, since they’re building it, renters will hopefully come.
By J.R. Howa Principal and Agent, Mountain West Commercial Real Estate
Published by Western Real Estate Business www.REBusinessOnline.com