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Like broader national trends, performance in Salt Lake City's office market varies greatly by building quality. Demand for 4 & 5 Star properties remains strong, with these top-tier buildings capturing most of the market's absorption, while lower quality buildings, rated 3 Star or less, continue to see occupancy losses. Despite a sharp pullback in new supply since 2022, move-outs have pushed the vacancy rate higher, which today stands at a record high of 11.8%. More than half of the market's office inventory was built before 2000, which is where the brunt of tenant losses is occurring. With office-using employment slowing, the base case is that demand conditions will not change meaningfully in the next year or two. The forecast calls for vacancies to remain in the 11% range through the foreseeable future. For context, the 10-year average is 8.7%. With the exception of best-in-class premier buildings in highly sought-after locations, overall rent growth is expected to stagnate between 1% and 2% through the next several quarters, and tenant leverage remains substantial. Generous TI packages, more so than ramping up free rent, are prevalent in most negotiations, though they have remained relatively unchanged from two years ago.
Salt Lake City's retail market remains fundamentally tight, supported by consistent household growth, above-average income gains, and a resilient consumer base. Newer properties are driving demand, with properties built within the past five years posting trailing 12-month net absorption of 260,000 SF, led by grocery stores, fitness stores, restaurants, and auto-service users. Meanwhile, closures from struggling national brands like Joann, 99 Cents, and Rue21 have driven most of the recent demand losses. Retail rent gains have continued, albeit at their slowest pace in seven years, as availability increased and retail sales growth slowed. Asking rents have increased by 1.7% year-over-year to $26.00/SF NNN, still well above the national average of 1.9%. Rent growth has been strongest in well-located, high-growth suburban corridors. Prime suburban pads routinely quote above $40/SF NNN. Looking ahead, retail will likely remain under pressure as consumers find it difficult to sustain post-pandemic spending amid elevated prices and slowing income growth, leaving the house view's risk balance tilted to the downside, with potential for softer employment and consumption and a rise in retailer bankruptcies and store closures. However, if wage growth outpaces price increases and interest rates fall, consumption could exceed expectations, supporting stronger demand and rent growth.
Salt Lake City's industrial vacancy has climbed to a near record high as deliveries continue to outpace absorption, even with construction starts slowing. Tenant reps report a more cautious occupier base and longer deal cycles, and space leased so far in 2026 has typically sat on the market for around six months, roughly triple the two-month norm from a few years ago. With fundamental conditions softer, asking rents have largely stalled. Annual rent growth measures 0.6%, with quarterly growth trending to 0.0%. Even as momentum fades, many landlords retain meaningful renewal spreads from the pandemic-era run-up, and small-bay product is best positioned given limited recent development and scarce turnkey options. However, the vacancy rate for that segment has still risen from 1.7% at the end of 2022 to around 4% today. Over a longer horizon, Salt Lake City's unique demand drivers are intact and supportive of industrial demand, including its strategic location, robust logistics infrastructure, and a growing population. The Salt Lake City International Airport regularly ranks highly for on-time performance and service quality, further enhancing the region's attractiveness.