Commerce CRG Year-End 2006 Market
Salt Lake County - Industrial
- An upsurge in industrial activity reflects Utah’s
exceptionally robust economy.
- The abundance of big box construction in 2006
led to a slight uptick in total market vacancy.
- The vast majority of new construction has been
centered in speculative big box facilities.
- The total number of new construction projects in
2006 was evenly split between owner/users and
- A significant rise in lease rates can be traced to
the high cost of new construction.
- The marked increase in lease rates has
contributed to a rise in sales activity.
- Prices for quality developable land continue to
rise. Industrial land values have increased more than
25 percent over the past year.
- The industrial market will remain strong and
steady in 2007.
- Rental rates and sales prices will continue to rise
- A marked slowdown in speculative big box
development will occur in the coming year.
- Utah’s pool of available labor should be sufficient
for industrial users.
Salt Lake County - Retail
- The retail market demonstrated remarkable
growth in 2006.
- Activity levels have maintained an extraordinary
pace, with nearly two million square feet absorbed
over the past 12 months.
- New retail construction is approaching an
- Lease rates are stabilizing after a sustained
- The market exhibits a wide disparity in available
- Utah’s appealing market conditions have
attracted an influx of new retail tenants.
- Regional malls are planning major retrofits to stay
abreast of current development trends.
- Retail construction will slow in 2007.
- Redevelopment of retail centers in older, well-
developed areas will become more commonplace.
- Residential construction will begin to plateau in
the coming year.
- The high cost of land is becoming a deterrent to
new development in some areas.
- The new IKEA store under construction in Draper
will lure additional retail development.
- No significant change in rental rates is expected
in the next 12 months.
Salt Lake County - Office
- The Salt Lake area office market remains strong
- The relocation of tenants from downtown’s Key
Bank Tower fueled a steep decline in Class A direct
vacancy in the CBD and periphery.
- An increasing number of office users with large
space requirements are opting to build their own
- The high cost of new construction contributed to
a sharp increase in lease rates in 2006.
- Utah’s thriving economy is drawing increased
interest from out-of-state office users, as well as
existing in-state expansions.
- A slight increase in total direct market vacancy is
expected in 2007.
- A limited amount of Class A office space will be
available in the downtown area in the coming year.
- Developers will continue retrofitting Class B and C
properties as an antidote to the high cost of new
- Lease rates will continue to rise in 2007.
- In 2006 the Utah County markets have gained
significant strength and momentum.
- Industrial space in Utah County is experiencing
record breaking occupancy.
- Available industrial space in north Utah County is
virtually non existent, with a vacancy rate of less
- The central and south counties are both
encountering the same tight market as the north
- The retail segment of Utah County remains
healthy and vibrant; fueled by the growth in the
- Completion of Costco and Lowe’s is driving even
more retailers to the retail boom area of American
Fork and Lehi.
- Redevelopment is bringing new life to the
Provo/Orem area which has seen lack luster
performance over the past two years.
- Demand for office space in Utah County
continues to outpace the ability for developers to
- The lack of office space in the central county will
be offset in the coming year with the announcement
of new office developments.
- Four new hotels have been announced for
development in the county, two in Pleasant Grove
and two near Thanksgiving Point.
- New construction is the driving force in the office
market in Weber County.
- The Ogden Mall redevelopment project, now
called The Junction, is well underway, bringing a
hotbed of retail activity to the area.
- Industrial space in Weber County continues to be
occupied almost as quickly as it can be constructed.
- Multi-family housing experienced a sharp increase
in rental rates over the past 12 months.
- Ogden will continue its vibrant growth as business
entities move to the fast expanding community,
creating new jobs and business opportunities.
- After several years of exceptional growth, the
Park City market has begun to stabilize.
- Although lease and sales rates on Main Street
have seen little increase over the past year, they
still remain very strong.
- The Prospector Square area continues to absorb
overflow from Main Street, both from the lack of
space available on Main Street, and from businesses
looking for more reasonable lease rates.
- Office vacancy in the Snyderville Basin area has
experienced a slight rise in vacancy; due in part to
the growth and development of the Kimball Junction
- The Silver Creek area is experiencing an increase
in commercial activity due to the residential
expansion beyond the city limits of Park City.
Las Vegas, Clark County, NV
- By the close of 2006, the overall economic
climate continued to press forward with only select
areas of concern.
Strength in population in-migration has held
residential pricing within a relatively tight range
despite rises in inventory levels.
- The Las Vegas office market reported record-
setting completions with 3.7 million square feet
coming on-line during 2006, resulting in a valley-wide
inventory of 41.0 million square feet.
- By year-end,ClassA product continued to report
below-average vacancies of 5.2 percent, while
average asking rates reached $2.64 per square foot
per month (the highest level on record).
- Class B properties represented the lion’s share of
new construction and absorption during 2006,partially
driven by for-sale office condominium product.
- Potential limitations on long-run industrial
development activity remain a concern due to
premium land prices and a lack of availability.
- During 2006, the market demanded 5.1 million
square feet, a figure on par with the year’s
- While existing inventory is 87.9 million square
feet, future supply is dominated by construction of
distribution space (5.3 million square feet),
particularly in the southwest submarket.
- Consistent with historical trends, the retail real
estate market continues to pace residential
development activity in a bold effort to track with
the region’s rate of growth.
- Approximately 1.9 million square feet of space
was completed during 2006 while the market
demanded (absorbed) over 1.8 million square feet.
- The new cost structure has forced developers to
escalate average-asking rents that reached $2.04
per square foot per month by year-end, and
represented a 21-percent premium over the rates
reported at the close of 2005.
Source: Commerce CRG, 2007
- International Survey of Business
- Business confidence is stable and very similar
across the globe. Sentiment has remained largely
unchanged for nearly six months at a level consistent
with growth that is just below the global economy’s
potential. There are some hints of renewed optimism,
including more positive expectations regarding the
outlook six months hence and the winding down of a
modest inventory cycle. The downdraft in confidence
among real estate and transportation companies that
was evident most of last year also appears to be
over. Pricing pressures are abating, with the lowest
percentage of respondents saying they have recently
raised prices for their wares in two years. After a lull
late last year, equipment investment has also picked
up early this year. Sales and hiring remain soft,
- The People's Bank of China (PBOC) wants to
establish a reasonable value for the yuan to help
reduce China's trade surplus and contain economic
growth, according to a fourth-quarter monetary
report released by the PBOC. The yuan has grown
6.7 percent since the Chinese government ended a
fixed peg to the U.S. dollar in July 2005.
- MBA Mortgage Applications Survey
- Mortgage demand decreased 0.2% in the week
ending February 2. Purchase applications decreased
0.8% and refinance applications increased 0.2%. The
market is flat and may coincide with forecasts
inherent in the NAHB traffic of potential buyers
- Senior Loan Officer Opinion Survey
- According to the January Senior Loan Officer
Opinion Survey, loan demand weakened over the
three prior months and lending standards were mixed
across different loan types. The ongoing slowdown in
the housing market was reflected in weaker demand
for residential mortgage loans. Tighter lending
standards on residential mortgages reflect concern
about deteriorating credit quality.
- Chain Store Sales
- Chain store sales grew 3.7% in January, up from
3.3% (revised) in December, according to the ICSC
chain store index. Results were above expectations
in total although a significant number of retailers
surprised on the downside. Colder temperatures, gift
card redemptions, lower gasoline prices, large bonus
payments and the Super Bowl were all supports to
- Oil and Gas Inventories
- Crude oil inventories declined by 0.4 million barrels
for the week ending February 2, according to the
Energy Information Administration, well below
expectations of a 1.4 million barrel build. Distillate
inventories fell by 3.7 million barrels, greater than the
3.2 million barrel draw expected. Gasoline stocks rose
by 2.6 million barrels, which exceeded expectations
of a 1.8 million barrel build. Refinery activity inched
up higher, which supported the drop in crude oil
inventories. The report will provide fuel for the oil
bulls to take energy prices higher.
- Weekly Natural Gas Storage Report
- Underground storage of natural gas decreased by
224 billion cubic feet during the week ending
February 2. This was slightly above expectations of a
218 Bcf draw. Inventories are now 19% above the
five-year average. This report will have a modestly
bullish effect on prices.
- Wholesale Trade (MWTR)
- Wholesale trade inventories dropped a
considerable 0.5% in December, posting their largest
month-to-month decline since May 2003 and bucking
an expected modest increase for the month.
November's gain was revised down slightly to 1.1%.
December sales grew 1.8% and the I/S ratio came in
- Quarterly Household Credit Report
- Credit quality deteriorated further in the fourth
quarter as borrowing remained strong. The aggregate
dollar delinquency rate jumped to its highest level in
over three years. The deterioration in credit quality
last year was widespread, although it is being led by
mortgages and auto loans. Borrowing in the quarter
was led by student and auto loans. Subprime lending
accelerated more than prime lending.
- Consumer Credit (G19)
- Consumer credit increased in December by $6
billion to $2.4 trillion. The details of the report show
that the latest jump in consumer credit was primarily
driven by a sharp gain in nonrevolving credit, which
increased 4.3% at an annual rate. On the other
hand, revolving credit rose a scant 0.8% at an
- Productivity and Costs
- Nonfarm business productivity growth bounced
back in the fourth quarter, coming in at 3.0%
(SAAR). This was well above consensus, and much
better than the 0.1% decline in the third quarter.
Despite the strong fourth quarter number,
productivity growth has slowed in recent quarters.
Nonfarm unit labor costs grew an annualized 1.7% in
the fourth quarter, below consensus. Inflationary
pressures from the labor market have faded a bit, but
remain a concern.
Source: Economy.com, Financial Times
|This Weeks Leads:
- Bloomingdale’s and Macy’s Northwest
- Federated Department Stores trades as
Bloomingdale’s and Macy’s
- Bloomingdale’s operates 38 locations
throughout CA, FL, GA, IL, MA, MD, MN, NJ, NV, PA
- The upscale department stores occupy
spaces of 150,000 sq.ft. to 230,000 sq.ft. in
freestanding locations and malls.
opportunities are sought nationwide in major metro
- Macy’s Northwest operates 70 locations
throughout ID, MT, OR, UT, WA and WY.
department stores occupy spaces of 100,000 sq.ft.
to 150,000 sq.ft. in malls, power, specialty and strip
centers. Growth opportunities are sought throughout
the existing markets during the coming 18
- Typical leases run 20 years.
demographics include a population of 50,000 within
15 miles earning $45,000 as the average household
- For details, contact
- Federated Department Stores,
West 7th Street,
- Cincinnati, OH 45202;
- Fax 513-579-7513;
- Web site:
- Bachrach Clothing, Inc. trades as Bachrach at 34
- The men’s apparel stores
occupy spaces of 4,000 sq.ft. to 5,000 sq.ft. in
- Plans call for five to 10 openings nationwide
during the coming 18 months.
- Typical leases run
- For more information, contact
- Bachrach Clothing, Inc.,
Causeway Road, Vineyard Haven,
- Fax 508-693-
- Web site: www.bachrach.com.
- Bostonian / Clarks Outlet and Clarks
- The Clarks Co. of North America trades as
Bostonian / Clarks Outlet and Clarks Shoes.
company trades as Bostonian / Clarks Outlet at 73
- The shoe stores occupy
spaces of 3,000 sq.ft. in malls, lifestyle, outlet and
- Plans call for five to 10 openings
nationwide in upscale major metro markets during the
coming 18 months.
- Typical leases run 10 years.
Preferred cotenants include Ann Taylor, Chicos and
Coldwater Creek. Competition is cited as Factory
Brands, Naturalizer and Nine West.
- The company
also trades as Clarks Shoes at 86 locations
- The men and women’s shoe stores
occupy spaces of 2,400 sq.ft. to 2,700 sq.ft. in malls
and lifestyle centers.
- Plans call for 25 to 35
openings throughout upscale markets in Gilbert, AZ;
Santa Monica, CA; Orlando, FL; Columbia, MD; MI,
Bloomington, MN; Old Bridge, NJ; Las Vegas, NV and
Lancaster and Philadelphia, PA during the coming 18
- Typical leases run 10 years.
- Preferred cotenants include Ann Taylor, Chicos
and Coldwater Creek.
- Competition is cited as
Factory Brands, Naturalizer and Nine West.
- Criss Nigro,
- The Clarks
Co. of North America,
- 156 Oak Street,
Newton Upper Falls,
- MA 02464;
- Fax 617-243-4210,
- Web site:
|Extra Credit Reading
The Auto Industry: On the Road to Disaster or
Last May, Knowledge@Wharton spoke with John
Paul MacDuffie, a management professor at Wharton
and co-director of the International Motor Vehicle
Program, about the state of the auto industry. It
seems that not much has changed since then,
except maybe for the worse. 2006 was the first year
since 1991 that Detroit's Big Three were all in the
red. Ford's situation seems direr than ever; Chrysler,
which was profitable until mid 2006, is now preparing
a restructuring plan to roll out this month; and
Toyota has claimed the number-two spot in the U.S.
auto market, just behind GM. Knowledge@Wharton
asked MacDuffie whether he expects any surprises,
or new strategies, in 2007.
Law and Public Policy
It's Not Easy Going Green: Environmentalism May
Help Your Corporate Image, but Will It Keep You in
On February 2, a long-awaited report from the
Intergovernmental Panel on Climate Change (IPCC)
was released citing "unequivocal" proof of global
warming. Meanwhile, some of the biggest
corporations in the world, including Wal-Mart, Ford,
General Electric and BP, have adopted highly
visible "green" strategies. But what does "going
green" mean for the bottom line? Whether motivated
by desire to do what is right, or to polish their public
image and fend off government regulation, companies
can profit from environmental initiatives, according to
Wharton faculty and analysts.
Why Software Business Models of the Future
Probably Won't Come in a Box
Microsoft's Vista operating system should give
the company a revenue stream that will run for
years, but experts at Wharton say the January 30
launch of the consumer versions of Microsoft's
flagship software may be among the last of its kind --
a product sold for a flat fee in a shrink-wrapped box.
Indeed, many wonder if the software business model
that has made Microsoft so dominant may begin to
fade as new software business models -- from open
source to advertising supported -- gain increasing
Leadership and Change
The World Economic Forum: A Call to Exercise
Global Leadership, Not Just Self Interest
This year's convening of The World Economic
Forum in Davos, Switzerland, brought together
approximately 2,400 corporate executives, heads of
government and leaders of organizations like the
World Bank and Human Rights Watch to debate
issues ranging from global warming to the rise of the
Internet and the future of the Middle East. Michael
Useem, director of Wharton's Center for Leadership
and Change Management, attended the five-day
event. He offers his report on what he calls
Davos' "culture of transcendent leadership," which he
defines as "a willingness by those with company or
country responsibilities to make decisions that
benefit those far beyond the decision maker's own
organization or nation."
Finance and Investment
Do Americans Save Enough? It Depends on What
Calculator You Use
Every week one financial services firm or another
releases findings of its latest retirement study:
Americans aren't saving enough. Americans are
saving too much. The savings rate is abysmal. People
are borrowing against their homes to pay for luxuries,
and so forth. Who's right? It turns out, not
surprisingly, that the future is hard to predict, and
that many calculators designed to make those
predictions are flawed in their basic assumptions.
Wharton experts try to help navigate the challenges
of planning for retirement.
Sports and Entertainment
Fantasy Sports: The Players, the Platforms and
According to some industry estimates, fantasy
sports is now a $4 billion industry and growing
quickly. What is fantasy sports, who provides
fantasy sports platforms, what are the most popular
fantasy sports, and -- coming off the Indianapolis
Colts' recent Super Bowl win -- can we assume there
will be a Super Bowl for fantasy football, or for
baseball, basketball or hockey? Knowledge@Wharton
asked Kent Smetters, professor of insurance and risk
management, to bring us up to speed on the future
of this industry.
Innovation and Entrepreneurship
Mike McCue's Vision for the Convergence of the
Phone and the Web
When Mike McCue founded Tellme in 1999, its
initial product was a voice-driven information service,
what might be termed a "voice portal." Today, the
company's voice-recognition systems power directory
assistance services from AT&T, Verizon and Cingular
along with automated 800-number customer help
lines at companies like Merrill Lynch and Federal
Express. But McCue still harbors dreams of a broader
voice-driven web, one which will provide consumers
with new ways of using the phone to interact with
the universe of information. He discussed this vision,
and others, during a recent interview with
Knowledge@Wharton in Tellme's Mountain View,
Source: The Wharton School
|BONNEVILLE RESEARCH - People, Passion & Pride
Successful client work requires a superior team of
outstanding people working fluidly together.
Bonneville Research is committed to excellence.
We work to help clients achieve enduring results
and improve the communities in which we live.
Bonneville Research is a Utah-based consulting
firm providing economic, financial, market and policy
research to public and private sector clients
throughout the intermountain west.
Our services include:
- Financial Analysis
- Urban Renewal & Redevelopment
Analysis and Budgets
- Strategy and Policy Analysis
- Economic and Fiscal Impact Analysis
- Statistical and Survey Research
Each of our studies is tailored to address the
unique needs of our clients and their communities.
If we can help, please call or email us at
|Eagle Days at Farmington Bay
Celebrating the annual arrival of the Bald Eagles
and the new site of the Great Salt Lake Learning
- 10:00 a.m.
- Goose Egg Island
- Farmington Bay WMA
- 1325 West Glover Lane
- Farmington, UT
Directions to Farmington Bay
- Drive north on I-15 and take the Centerville Exit.
- Turn left and head north past the McDonalds on
the frontage road.
- Turn left on the Glover Lane bridge and drive
West until you come to the power lines.
- Turn left and drive into the Farmington Bay
Wildlife Management Area.
- Proceed past the shops until you see the
Enjoy the greatest concentration of Bald Eagles
in the "lower 48".
Bring the kids!