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Heading into spring 2025, Salt Lake City's office vacancy rate of 11.1% is at an all-time high. While a supply/demand imbalance caused vacancies to rise between 2020 and 2022, more recently, it has been due to a spate of move-outs. Net absorption in 2024 fell to -500,000-SF, the worst mark on record. While tech exposure is not as high as in Provo, the industry's shift to smaller footprints has contributed to weaker demand in the urban core. New office leases in Salt Lake City have settled in about 30% smaller than the 2015-2019 average. With office-using employment slowing, additional space reductions or closures are on the horizon and the forecast calls for vacancies to remain in the 11% range through the foreseeable future. For context, the 10-year average is 8.1%. Supply-side pressure is not an issue. Over the past 12 months, total inventory has changed by -140,000 SF, as more office space has been demolished than added. Roughly 60% of the 390,000 SF underway is pre-leased. Much of the unleased space is coworking space within the mixed-use Holladay Hills, which is on the site of the former Cottonwood Mall. Upon build out, the project will include over 600 housing units and around 750,000 SF of office and retail space.
Market conditions have become increasingly tight due to consistent demand and a lack of new construction. In the past five years, 720,000 SF of retail space has delivered, increasing inventory by less than 1%. In contrast, from 2015-2019 nearly 2.5 million SF completed, expanding stock by 3.4%. Supply-side pressure remains limited. Currently, around 410,000 SF is under construction throughout Salt Lake City, which would expand inventory by just 0.6%, and most of that space is pre-leased. The modest construction pipeline is not the only factor keeping availability at record lows. Store closures have been rare beyond a few struggling national retailers such as Big Lots, Walgreens, and Rue 21. When large big boxes come on market, many experiential tenants have often pounced at the opportunity. Market participants and recent trends indicate limited options for retail tenants are the main factor slowing down leasing activity. In this low availability environment, landlords are wielding considerable pricing power. Salt Lake City was one of the nation's top rent growth markets in the past year and current annual gains are 4.3% versus the national average of 1.7%. The average asking rent has increased by more than 30% in the past five years, ranking among the top 10 nationally.
The Salt Lake City availability rate continues to climb heading into 2025. Since the 2022-low of 4.6%, availability has gradually risen and stands at 9.3%. New construction is not the only driver as sublet space accounts for more than 15% of total availability, well above its historical average of 7%. Roughly 4.0 million square feet delivered in the past 12 months, compared to the five-year average of 6.9 million. Even though deliveries have moderated, the pace of new construction exceeds that of demand. In the past 12 months, net absorption registered 3.5 million square feet, below the five-year average of 5.6 million. The glut of supply coupled with weaker demand has made upward pressure a consistent theme in recent quarters. New construction will become less of a factor in 2025. Less than 3 million square feet were under construction at the start of the year. The moderation of construction starts should help the market stabilize unless demand underperforms. Rent growth is decelerating in industrial assets as vacancies climb. The average rent in the metropolitan area has increased by 3.0% year-over-year compared to 5.8% at the same time last year. Like developers, investors have been more cautious due to the recent rise in the vacancy rate and elevated borrowing costs.