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Office employment growth in Salt Lake City has averaged 2.2% annually in the past five years and has driven tenant demand. However, supply pressure, work-from-home trends, and tenant turnover have played a role in keeping the vacancy rate elevated. Salt Lake City's office market did have -520,000 of positive absorption in the past 12 months, but vacancies are still hovering around 10.9% and above the 10-year average of 7.7%. Office leasing volume has remained fairly consistent in recent quarters, however, 270,000 square feet has delivered in the past 12 months and 3.0 million square feet has completed in the past three years. About 280,000 SF of office space is underway and once completed, would expand the existing inventory by 0.3%. Rents have been impacted by tempered demand and higher vacancies, but continue to rise modestly. Office rent growth is positive at 2.0% annually. Investment activity remains muted and the state's non-disclosure status can cloud the investment picture. Like broader capital markets, both prices and cap rates have been impacted by the sharp rise in borrowing costs.
The Salt Lake City retail market vacancy rate remained near all-time lows in the past year and is currently at 2.9%, below the national average of 4.1%. Annual net absorption is -120,000 square feet, while -28,000 square feet delivered in the past 12 months. At 2.7%, mall vacancies are among the lowest across property subtypes in the metropolitan area. Neighborhood Centers have some of the highest average vacancy rates at 5.2%. The average rent per SF is $25.00 and is in line with the national benchmark. In the past 12 months, rents have increased by 8.1%. Observable sales volume has slowed significantly due to higher interest rates and tightening credit conditions. As a result, many institutional-sized deals have also become more difficult to underwrite. However, private buyers are becoming an increasingly larger share of investment activity. Salt Lake City retail trades at a discount relative the U.S. benchmark. The average price per SF is $230 compared to the national average of $250.
The Salt Lake City vacancy rate has gradually risen from an all-time low of 2.6% in 2022 to 6.7% today. Roughly 7.9 million square feet delivered in the past 12 months, compared to the five-year average of 6.7 million. The pace of new construction has outpaced demand, as measured by the 2.8 million square feet of net absorption in the past 12 months, underperforming the five-year average of 5.2 million. The glut of supply coupled with weaker demand has made upward pressure a consistent theme in recent quarters. This theme will likely continue with plenty of speculative projects in the pipeline. Of the 4.1 million square feet under construction, about 70% of space was available for lease entering 2024. Construction activity remains elevated and is heavily concentrated in logistics-oriented warehouse and distribution properties. Rent growth is decelerating in industrial assets as vacancies climb. The average rent in the metro has increased by 5.1% year-over-year compared to 13.4% at the same time last year. Investors have been more active in the industrial market versus other commercial real estate sectors in Salt Lake City. However, higher borrowing costs have slowed investment volume compared to years prior.