APARTMENT MARKET REPORT

Summer 2016

APARTMENTMARKET REPORTGREATERSALT LAKE AREA

A Cushman & Wakefield/Commerce Research Publication

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EXECUTIVE SUMMARY

On behalf of all our Cushman & Wakefield/Commerce Investment Group brokers, I am privileged to present our annual Apartment Market Report for 2016. The study was conducted and authored by James Wood, Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute, University of Utah. Mr. Wood’s objectivity, methodology, and depth of experience combine to produce the most accurate apartment statistics in the Salt Lake County market.

The Apartment Market in Salt Lake County continues its robust growth.

THE HIGHLIGHTS OF THIS YEAR’S STUDY INCLUDE:

• 2.9% vacancy rate valley-wide, the second lowest vacancy rate of the past fifteen years

• Fifth consecutive year with vacancy below four percent

• Rent growth of 4.6% over prior year

• 2,900 new apartment units received permits during 2015, the most in thirty years

• The near-record level of construction (7,152 units) does not pose a major threat to the market

• On average, recently completed projects were fully occupied within five months

• Rental inventory grew by approximately five percent

• Average rental rate reached $1.09 per square foot

• Salt Lake County’s job growth reached its highest mark in nine years

• Fifty-four percent of all proposed units are located in Salt Lake City and Draper

• Transaction volume set a new record in 2015

THE FORECAST FOR THE UPCOMING YEAR INCLUDES:

• Market conditions prove favorable for apartment owners despite concerns of overbuilding

• Unprecedented development may cause vacancy to rise to six percent by year-end 2017, but only temporarily

• Rental inventory is predicted to increase by 12,550 units, or ten percent, over the next four years

• Rental rate increases will dip below three percent by year-end 2017

• Favorable market conditions make destabilization unlikely

• Demand remains strong as ever for quality multi-family product

Thank you to our clients and partners for making Salt Lake County such a wonderful market in which to invest in commercial real estate.

Sincerely,

Kip Paul

Executive Director, Investment Sales

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SUMMARY OF RENTAL RATE AND VACANCY SURVEY

Once again apartment communities in Salt Lake County are essentially “fully occupied.” For the second consecutive year the vacancy rate in Salt Lake County is below three percent. The July 2016 vacancy rate is 2.9 percent, slightly above the record low of 2.7 percent reported in July 2015. This year also marks the fifth consecutive year with vacancy rates below four percent. Many housing analysts assume a five percent vacancy rate is the “natural rate” or equilibrium vacancy rate for a healthy market. Without a doubt, the Salt Lake County rental market continues to be a “very tight” market.

In the past year, rental rates have increased by 4.6 percent. The combined average for all types of units is $949. The average for a two-bedroom, two-bath unit is $1,085; and $1,244 for a three-bedroom unit.

Large apartment communities have the highest rents on a square foot basis. Communities of 250 units or more have an average rate per square foot of $1.12 and a vacancy rate of 3.3 percent.

Due to several new, high quality apartment communities in South Jordan and West Jordan, rental properties on the west side in 2016 have higher rental rates than east side apartment communities. Currently, the average rent per square foot for a west side property is $1.11, compared to $1.06 for an east side property.

For those apartment communities built since 2000, overall rent per square foot is $1.14, while the average monthly rental rate is $1,088.

In 2015, approximately 2,900 new apartment units received building permits in Salt Lake County, the highest level in thirty years. These new units increased the rental inventory in the county by 2.2 percent. To date, the market has had no trouble absorbing new units. Presently, there are 7,152 new apartment units under construction in the county. This near-historic level of construction activity will push vacancy rates higher, but given the current very low vacancy rate and strong economic growth, it is likely overall market conditions by year-end 2016 should remain favorable.

Summer 2016 Apartment Market Report 3

West Station Apartments

SUMMER 2016

SURVEY RESULTSAs noted, Salt Lake County’s rental inventory is “fully occupied.” The 2.9 percent vacancy rate in July 2016 is the second lowest reported in fifteen years of annual surveys, exceeded only by the 2.7 percent rate of 2015, Table 1. Despite the new construction of 5,700 units in the past two years, the vacancy rate remains below three percent. Over the past seven years, the market has seen a steady drop in the vacancy rate from 7.2 percent to less than three percent. The number of vacant units in the county’s rental inventory has dropped from 7,700 units to around 3,600 units.

All types of apartment units experienced increases in average rental rates. The combined average monthly rental rate for all types of units is $949, an increase of 4.6 percent from the average rate of $907 in 2015, Table 2. Rental rates, on a square foot basis, increased from $1.04 in 2015 to $1.09 in 2016, an increase of almost five percent. Studio and three-bedroom, two-bath units had year-over-year price increases of around ten percent. A summary of rental market characteristics, including average rent, size of unit, rent per square foot and vacancy rate is given in Table 3.

Apartment Vacancy Rates

0%

3%

6%

9%

2014 20162015201320122011201020092008200720062005200420032002

Studio One Bedroom Two Bedroom, One Bath Two Bedroom, Two Bath Three Bedroom, Two Bath Overall

TABLE 1 Apartment Vacancy Rates

StudioOne

BedroomTwo Bedroom

One BathTwo Bedroom

Two BathThree Bedroom

Two Bath Overall

2002 5.7% 5.6% 4.3% 6.0% 4.5% 5.4%

2003 7.4% 8.5% 8.0% 5.7% 3.9% 7.6%

2004 6.3% 6.7% 7.6% 7.7% 7.4% 7.2%

2005 6.6% 5.3% 7.7% 5.5% 7.0% 6.1%

2006 6.0% 3.2% 4.6% 3.2% 3.4% 4.0%

2007 4.2% 2.9% 3.1% 3.4% 3.8% 3.2%

2008 5.7% 4.3% 4.1% 5.2% 4.8% 4.6%

2009 4.9% 6.6% 7.7% 8.0% 6.6% 7.2%

2010 6.6% 5.2% 6.5% 5.5% 6.3% 5.7%

2011 7.2% 5.1% 6.2% 4.4% 3.6% 5.2%

2012 3.4% 3.8% 4.0% 3.6% 3.7% 3.8%

2013 2.0% 3.2% 3.7% 5.1% 4.1% 3.9%

2014 <2.0% 2.5% 2.8% 3.9% 2.8% 3.0%

2015 <2.0% 2.5% 3.8% 2.5% 2.0% 2.7%

2016 <2.0% 3.4% 2.2% 2.4% 2.4% 2.9%

Cushman & Wakefield/Commerce4

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Change in Average Rental Rates by Type of Unit Overall Rates and Size by Type of Unit

$400

$500

$600

$700

$800

$900

$1,000

$1,100

$1,300

$1,200

20142013 20162015201220112010200920082007

Studio One Bedroom Two Bedroom, One Bath

Two Bedroom, Two Bath Three Bedroom, Two Bath Overall Rents ($) Square Footage

0

300

600

900

1,200

1,500

OverallThree BedroomTwo Bath

Two Bedroom Two Bath

Two Bedroom One Bath

One Bedroom

Studio

TABLE 2Change in Average Rental Rates by Type of Unit

Type of Unit 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016% Change 2015-2016

Studio $496 $558 $504 $480 $515 $538 $586 $603 $638 $705 10.5%

One Bedroom $644 $703 $654 $629 $659 $709 $745 $757 $804 $833 3.6%

Two Bedroom, One Bath $695 $760 $723 $706 $725 $759 $792 $809 $833 $879 5.5%

Two Bedroom, Two Bath $842 $915 $834 $816 $862 $943 $969 $983 $1,050 $1,085 3.3%

Three Bedroom, Two Bath $950 $1,066 $1,000 $956 $1,025 $1,051 $1,075 $1,085 $1,132 $1,244 9.9%

Overall $728 $793 $740 $720 $754 $814 $850 $865 $907 $949 4.6%

TABLE 3Overall Rental and Vacancy Rates in 2016 by Type of Apartment Unit

Type of Unit RentsSquare

Feet Rent/S.F. Vacancy

Studio $705 421 $1.68 <2.0%

One Bedroom $833 681 $1.22 3.4%

Two Bedroom, One Bath $879 914 $0.96 2.2%

Two Bedroom, Two Bath $1,085 1,014 $1.07 2.4%

Three Bedroom, Two Bath $1,249 1,244 $1.00 2.4%

Overall $949 870 $1.09 2.9%

2.9% overall vacancy rate - second lowest in 15 years


SUMMER 2016

Rental and Vacancy Rates by Size of Apartment Community

Vacancy and rental rates vary depending on the size of the apartment community. In 2016, the overall average rental rate for apartment communities of 100 to 250 units was $990, higher than the overall rental rate of $939 for communities with more than 250 units, Table 4. However, on a per square foot basis, the large properties (250 units+) had the highest rents at $1.12 per square

foot. Vacancy rates are lowest for the small-size properties. The vacancy rate for properties with less than 100 units is 2.1 percent, compared to 3.0 percent for mid-size and 3.3 percent for large properties.

2.1% vacancy rate for properties with less than 100 units

TABLE 4Rental and Vacancy Rates by Size of Apartment Community

Type of UnitLess than 100 Units 100 to 250 Units More than 250 Units

Monthly Rent / SF Monthly Rent / SF Monthly Rent / SF

Studio $575 $1.28 $848 $1.97 $699 $1.65

One Bedroom $774 $1.12 $918 $1.28 $802 $1.21

Two Bedroom, One Bath $807 $0.89 $857 $0.90 $961 $1.08

Two Bedroom, Two Bath $932 $0.88 $1,160 $1.15 $1,063 $1.05

Three Bedroom, Two Bath $1,020 $0.83 $1,215 $0.95 $1,281 $1.05

Overall Vacancy Rate 2.1% 3.0% 3.3%

Overall Rental Rate $864 $990 $939

Overall Rent / SF $0.90 $1.11 $1.12

<100 units 100-200 units >250 units

$0

$200

$400

$600

$800

$1,000

$1,200




One Bedroom

Studio

Rental Rates by Size of Community


Cottonwood Creek Estates

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Rental and Vacancy Rates by Location

Rental and vacancy rates were determined for two broad locations: west of I-15 and east of I-15. Typically, vacancy rates are lower on the west side–but that is not the case in 2016. Fewer new, high-quality projects are being built on the east side due to land cost and zoning restrictions. The “hot spots” for new rental communities are just west of I-15 in Midvale, South Jordan and west Draper. The vacancy rate for west side properties is 2.8 percent, compared to 3.1 percent for east side properties. Monthly rental rates are higher on the west side, again due to a greater number of new units. Average east side rent per square foot for all types of units is $1.06, compared to $1.11 for west side properties, Table 5.

3.1% overall vacancy rate for apartment communities east of I-15

2.8% overall vacancy rate for apartment communities west of I-15

TABLE 5Rental and Vacancy Rates by Location of Apartment Community

Type of UnitEast of I-15 West of I-15

Monthly Rent / SF Monthly Rent / SF

Studio $744 $1.44 $691 $1.80

One Bedroom $786 $1.17 $871 $1.27

Two Bedroom, One Bath $867 $0.94 $889 $0.98

Two Bedroom, Two Bath $1,041 $1.06 $1,127 $1.08

Three Bedroom, Two Bath $1,158 $0.94 $1,204 $0.98

Overall Vacancy Rate 3.1% 2.8%

Overall Rental Rate $909 $973

Overall Rent / SF $1.06 $1.11

Rental Rates by Location of Community

East of I-15 West of I-15

$0

$200

$400

$600

$800

$1,000

$1,200

OverallThree Bedroom



One Bedroom

Studio


Alta Pines Apartments

SUMMER 2016

Rental and Vacancy Rates by Age of Apartment Community

The apartment communities surveyed were divided into three age categories: (1) built before 1980, (2) built from 1980 to 1999, and (3) built from 2000 to the present. The survey results show that the overall rental rate for apartment communities built since 2000 is twenty percent higher than for those built between 1980 and 1999, and thirty percent higher than communities built prior to 1980. The rental rate of $1.14 per square foot for

more recently developed apartment communities is five percent higher than the $1.09 per square foot for communities built between 1980 and 1999, Table 6.

4.2% vacancy rate for apartment communities built since 2000

TABLE 6Rental and Vacancy Rates by Age of Apartment Community

Type of UnitPre-1980 1980 to 1999 2000 to Present

Monthly Rent / SF Monthly Rent / SF Monthly Rent / SF

Studio $544 $1.30 $693 $1.65 $1,040 $2.32

One Bedroom $760 $1.23 $784 $1.21 $1,002 $1.33

Two Bedroom, One Bath $800 $0.85 $904 $1.02 $921 $0.96

Two Bedroom, Two Bath $1,057 $1.05 $1,037 $1.04 $1,158 $1.11

Three Bedroom, Two Bath $937 $0.76 $1,201 $0.97 $1,255 $1.01

Overall Vacancy Rate 4.2% 2.3% 4.2%

Overall Rental Rate $836 $905 $1,088

Overall Rent / SF $0.94 $1.09 $1.14

Pre-1980 1980 to 1999 2000 to Present

$0

$200

$400

$600

$800

$1,000

$1,200




One Bedroom

Studio

Rental Rates by Age of Community


Promenade at The District

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Concessions Offered by Apartment Communities

Each apartment community was surveyed regarding move-in specials or concessions offered to new renters. Concessions are comprised generally of reductions in one or more of the following: rental deposit, rental rate, and/or application fee. In 2016, only fifteen of eighty-two apartment communities offered move-in specials.

While still very impressive, that number is up from the eleven in 2015. Of the fifteen apartment communities offering move-in specials, eight offered discounted rent, usually the first month’s rent, and most of the other concessions were for reductions in the deposit.

Methodology for Rental Survey

The data in this report provides rental and vacancy information on small to large apartment communities in Salt Lake County. This segment of the Salt Lake County rental market is comprised of approximately 380 apartment communities, ranging from 25 to 588 units. In July 2016, 82 of the 380 apartment communities were randomly sampled and surveyed for rental and vacancy information. The 82 apartment communities were comprised of 371 studio units; 6,344 one-bedroom units; 3,379 two-bedroom, one-bath units; 4,569 two-bedroom, two-bath units; and 1,562 three-

bedroom, two-bath units. The oldest community was built in 1909; the newest built in 2014. The smallest had 25 units, and the largest had 588 units. The apartment communities surveyed were spread throughout the residential areas of Salt Lake County. The northernmost property surveyed was at 1200 North, and the southernmost property was at 14900 South. Each year, a few recently completed communities are added to the sample to make certain it is representative of the expanding rental inventory.


Wasatch Commons Apartments

SUMMER 2016

RENTAL INVENTORY AND APARTMENT CONSTRUCTION TRENDS IN SALT LAKE COUNTYIn 2014, the American Community Survey, conducted by the U.S. Census Bureau, reported 116,355 renter-occupied units in Salt Lake County, Table 7. This estimate is a five-year average for the 2009-2014 period. One third of all renter-occupied units were located in Salt Lake City. The number of rental units increased in Salt Lake City by 3,617 units in the 2000-2014 period. West Jordan ranked first in rental inventory increase, with an additional 3,938 units over the 2000-2014 period. Due primarily to annexations, the rental inventory in unincorporated Salt Lake County has declined by 255 units.

In 2015, permits were issued for 2,900 new units, Table 8. This is a modest increase in the inventory, given the extremely low vacancy rate. The apartment construction trends show that there have been three periods of apartment construction booms; mid-1980s, mid-1990s, and 2014-2015. The current boom will certainly be extended another two years given, the number of units under construction and proposed.

TABLE 8Permits Issued for New Apartments

Year Units Year Units

1980 1,402 1998 1,473

1981 1,197 1999 1,185

1982 861 2000 1,024

1983 2,667 2001 1,098

1984 7,691 2002 733

1985 3,374 2003 1,084

1986 2,529 2004 1,388

1987 109 2005 1,302

1988 98 2006 338

1989 61 2007 916

1990 218 2008 1,521

1991 117 2009 2,442

1992 115 2010 541

1993 1,524 2011 1,581

1994 1,231 2012 1,695

1995 2,318 2013 1,685

1996 2,673 2014 2,788

1997 727 2015 2,911

Source: Bureau of Economic and Business Research, University of Utah and Construction Monitor

TABLE 7 Renter Occupied Dwelling Units by City (represents a 5 year average (2009-2014)

City 20002009-2014

Average Change

Salt Lake City 34,869 38,486 3,617

Unincorporated SL County 17,421 17,166 -255

West Valley 8,835 11,541 2,706

West Jordan 3,419 7,357 3,938

Midvale 5,241 6,261 1,020

Murray 4,225 6,740 2,515

Sandy 4,029 6,549 2,520

Taylorsville 5,328 6,066 738

South Salt Lake 4,972 5,055 83

Holladay 922 2,528 1,606

South Jordan 773 2,944 2,171

Draper 1,020 2,579 1,559

Riverton 382 1,218 836

Herriman 27 1,482 1,455

Bluffdale 81 383 302

Salt Lake County 91,544 116,355 24,811

Source: U.S. Census Bureau.


Solameer Townhomes

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TABLE 9Major Market Rate Apartment Projects Built in Salt Lake County Since 2000

Project NameYear

Completed Units Address City

Independence at the Point 2014 144 15110 South Beacon BluffdaleAllegro 2002 258 13300 South Pony Express DraperLiberty Hills 2004 246 65 East Highland Drive DraperParc at Day Dairy 2012 228 12100 South 400 East DraperTriton Terrace 2015 177 Bangerter Parkway & Vestry DraperRosegate 2015 277 14075 South Bangerter DraperFarm Gate 2010 496 5675 West 11800 South HerrimanSolameer at Herriman 2012 134 13400 South Herriman HerrimanTerrameer 2012 174 5223 West 12600 South HerrimanSan Moritz 2009 390 966 West Powder Hill Road MidvaleMeadows at Riverwalk 2009 256 6840 South 70 West MidvaleTuscany Villas 2011 75 7500 South 1000 West MidvaleLofts at 7800 2014 192 7650 South Euro Drive MidvaleTalavera at the Junction 2013 252 1004 West Tuscany View MidvaleFrontgate 2009 128 4716 South Commerce Dr. MurrayFireclay Villages 2010 363 120 West Fireclay Ave. MurrayLegacy Spring 2003 204 12600 South 4800 West RivertonMonarch Meadows 2004 248 4800 West 13400 South RivertonNorth Gate Apartments 2001 330 500 West South Temple Salt Lake CityCity Front Apartments 2003 155 641 West North Temple Salt Lake CityEmigration Court 2004 238 335 South 500 East Salt Lake CitySeasons at City Creek 2011 176 225 West North Temple Salt Lake CityCity Creek Landing 2011 111 50 South Main Street Salt Lake CityEastside Apartments 2011 180 350 South 600 East Salt Lake CityBrickyard Apartments 2012 231 1245 East Brickyard Rd. Salt Lake CityWasatch Advantage 2012 160 144 South 400 East Salt Lake CityLiberty Gateway 2012 160 50 South 500 West Salt Lake CityCitifront II 2012 91 650 West South Temple Salt Lake City644 City Station 2012 132 644 West North Temple Salt Lake CityThe Lotus 2012 84 338 East South Temple Salt Lake CitySugarhouse Apts. 2012 70 2057 South 1200 East Salt Lake CityBroadway Place 2013 73 550 East 300 South Salt Lake City21st View 2013 29 2100 South View Street Salt Lake CityCityscape 2013 122 150 South 400 East Salt Lake CityLiberty Gateway 2013 160 10 South 500 West Salt Lake CityThe Vue 2014 212 2130 South 1100 East Salt Lake CityLiberty Village 2014 171 2124 McClelland Salt Lake CityNewhouse 2015 61 550 East 500 South Salt Lake CityWilmington Gardner 2015 148 1235 East Wilmington Ave. Salt Lake CityWest Station 2015 145 1750 West Gertie Avenue Salt Lake CityEncore 2015 220 400 South 500 East Salt Lake CitySeasons at Library Square 2015 119 306 East 500 South Salt Lake CitySeasons on the Boulevard 2015 92 400 South Denver Street Salt Lake CityThe Element at Brickyard 2016 208 3130 South 1243 East Salt Lake CityMeadowbrook Station 2009 237 4010 Howick Street Salt Lake County

Major Market Rate Apartment Projects Built Since 2000

Since 2000, there have been 77 large, market rate apartment communities totaling 15,629 units, Table 9. About 25 percent of the units developed are in Salt Lake City. The downtown and the Sugar House markets are the two locations in the city

with high concentrations of new apartment development. In addition to Salt Lake City, the other cities with at least a ten percent share of new apartment development are West Jordan and South Jordan, Figure 1.


SUMMER 2016

TABLE 9Major Market Rate Apartment Projects Built in Salt Lake County Since 2000

Project NameYear

Completed Units Address City

Flangus Apartments 2016 288 2700 South 8400 West Salt Lake CountyLegends at River Oaks 2000 448 9425 South Riverside Drive Sandy Liberty Bend 2009 93 9400 South 1300 East SandyRosegate 2011 159 9200 South 700 East SandyHills at Sandy 2012 55 120 East Sego Lily Drive SandyCobblegate 2016 416 900 East 9000 South SandyDry Creek at East Village 2015 275 124 East Dry Creek Ridge SandyPinnacle Southtowne 2009 276 420 Cadbury Lane South JordanSan Marino 2010 330 700 West 10000 South South JordanCrossing at Daybreak 2011 315 4950 West Frogs Leap Dr. South JordanSan Tropez 2009 250 3740 West 11800 South South Jordan District Heights 2012 260 11100 River Heights South JordanPromenade at the District 2013 170 11239 South River Heights South JordanLegacy Cottages 2015 186 1890 West Jordan Parkway South JordanJordan Station 2015 302 10426 South Jordan Gateway South JordanBrick Stone Apts 2011 100 220 East 3300 South South Salt LakeSilvercrest 2012 186 4500 South 2200 West TaylorsvilleLiberty Landing 2009 216 7000 South Campus View Dr. West JordanBoulder Canyon 2009 280 7800 South 5600 West West JordanSerengeti Springs 2010 296 7800 South 6500 West West JordanWilshire Apartments 2010 278 6400 West New Bingham West JordanCascade Springs 2000 192 2812 West 8580 South West Jordan Willow Cove VI 2000 128 9300 South Redwood Rd West Jordan Willow Cove VII 2012 72 9300 South Redwood Rd. West JordanWest Village 2012 72 7850 South 3200 West West JordanWoodgate 2002 288 3850 West 7000 South West Jordan E-Gate 2010 304 2264 West Ruddy Rd. West ValleyVillage at River’s Edge 2004 244 1225 West 3300 South West Valley Fairbourne Station 2012 225 2900 Lehman Avenue West ValleyPinnacle Highbury 2013 290 2800 South 5600 West West ValleySagegate at Haynes 2015 278 5600 West 2600 South West Valley Total 15,629Source: Cushman & Wakefield/Commerce

Blu�dale - 144 units, 0.9%

Draper - 1,186 units, 7.6%

Herriman - 804 units, 5.1%

Salt Lake City - 3,878 units, 24.8%

Riverton - 452 units, 2.9%

Murray - 491 units, 3.1%

Midvale - 1,168 units, 7.5%

Salt Lake County - 525 units, 3.4%

Sandy - 1,446 units, 9.3%

West Valley City - 1,341 units, 8.6%

West Jordan - 1,822 units, 11.7%

Taylorsville - 186 units, 1.2%

South Salt Lake - 100 units, 0.6%

South Jordan -2,089 units, 13.4%

FIGURE 1 Number and Percent Share of New Market Rate Apartment Units by City, 2000 - July 2016 25%

of all new apartment units built since 2000 are located in Salt Lake City


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SALT LAKE COUNTY: DEMOGRAPHICS AND EMPLOYMENT TRENDSThe demand for housing, both owner and renter-occupied, is driven by demographics and employment change. Recent levels of in-migration, job growth and unemployment are all very positive for the housing market.

The population of Salt Lake County was 1,094,289 in 2015, Table 10. The county’s population has been increasing at an average annual growth rate of about 1.3 percent since 2000. In 2015, population growth was slightly lower at 1.2 percent. During the recent past, net out-migration has reduced the population growth rate of the county. But with the county’s strong job growth, net in-migration returned to higher levels in 2015 with a net in-migration of 2,500. Net in-migration boosts the demand for housing for both owner and renter-occupied units.

In 2015, the job growth in Salt Lake County was the highest in nine years. Nearly 22,000 new jobs were added to the local labor market, an increase of 3.4 percent. The total number of jobs in the county in 2015 was 661,297, Table 11. After the severe decline in employment in 2009 and mild decline in 2010, the county’s labor market has more than fully recovered from the Great Recession. Employment in the county is now 6.5 percent higher than the pre-recession peak of 603,000 jobs, and the unemployment rate is at a seven-year low.

Table 10 Demographic Trends for Salt Lake County

Year Population ChangeNet

Migration

2000 902,843 17,627 4,451

2001 913,716 10,873 -2,361

2002 920,198 6,481 -6,391

2003 928,532 8,334 -5,046

2004 943,247 14,716 1,519

2005 967,017 23,770 10,065

2006 985,362 18,344 4,763

2007 995,648 10,286 -3,717

2008 1,007,205 11,558 -2,673

2009 1,018,737 11,531 -2,257

2010 1,031,697 12,124 -1,335

2011 1,046,461 14,765 2,448

2012 1,060,336 13,875 2,119

2013 1,070,799 10,464 -1,619

2014 1,080,929 10,130 -1,573

2015 1,094,289 13,360 2,459

Source: Governor’s Office of Planning and Budget.

TABLE 11 Employment Trends in Salt Lake County

YearNonfarm

Jobs ChangeUnemployment

Rate

2000 545,153 13,824 3.2%

2001 544,727 -426 4.4%

2002 533,715 -11,012 5.9%

2003 527,956 -5,759 5.8%

2004 535,274 7,318 5.1%

2005 554,983 19,709 4.1%

2006 579,780 24,797 2.9%

2007 601,224 21,444 2.5%

2008 602,927 1,703 3.3%

2009 573,449 -29,478 7.4%

2010 571,259 -2,190 7.8%

2011 583,122 11,863 6.5%

2012 603,934 20,812 5.2%

2013 624,370 20,436 4.2%

2014 639,466 15,096 3.7%

2015 661,297 21,831 3.3%

Source: Utah Department of Workforce Services


Woodside at Holladay Apartments

SUMMER 2016

TABLE 12Apartment Projects Under Construction in Salt Lake County

Project Units Address City

Draper Village 181 303 East 12100 South Draper

461 Lofts 249 461 West 13490 South Draper

Rosegate Herriman 298 11865 Freedom Park Dr. Herriman

Sagegate at Anthem 422 Anthem Park Boulevard Herriman

Garn/Thackeray 288 2700 South 8400 West Magna

Station at Midvale 102 7682 Center Street Midvale

Kimpton Square 97 7720 South Holden St. Midvale

Metro at Fireclay 175 57 West Fireclay Avenue Murray

Artesian Springs Phase II 126 4205 South Main Street Murray

Meadows at Park Avenue 121 1925 West 12600 South Riverton

4th West Apartments Phase I 493 400 West 300 North Salt Lake City

4th West Apartments Phase II 420 400 West North Temple Salt Lake City

Liberty Crest 177 150 South 200 East Salt Lake City

TBD (tax credit) 180 237 South State Street Salt Lake City

360 Apartments 151 360 South 400 West Salt Lake City

Ball Park Apartments 61 1370 South West Temple Salt Lake City

Element 31 at Brickyard 208 3130 South 1243 East Salt Lake City

Boulevard Gardens 112 1800 South West Temple Salt Lake City

Alta Gateway 264 200 South 500 West Salt Lake City

Legacy Village 268 1200 East Wilmington Salt Lake City

The Bonneville 158 267 South 500 East Salt Lake City

Ninth East Lofts 74 900 East 420 South Salt Lake City

616 Apartments 273 616 South State Salt Lake City

Liberty Boulevard 266 750 East 400 South Salt Lake City

The East Village 271 115 East Sego Lily Drive Sandy

Park at City Center 330 150 West Civic Drive Sandy

Pinnacle Sandy 331 8350 South State Street Sandy

Hills at Sandy Station 151 234 East Sego Lily Drive Sandy

The Ridge 262 7633 South Union Park Sandy

Meadowbrook Lofts 80 3808 South West Temple South Salt Lake

Riverfront 288 3750 South 700 West South Salt Lake

Jordan Valley Transit Village 275 8600 South 3400 West West Jordan

Total 7,152

APARTMENT PIPELINE: NEW CONSTRUCTION AND PROPOSED PROJECTS

Apartment Projects Under Construction

Thirty-two apartment communities are under construction in Salt Lake County. These communities will have a total of 7,152 units, representing an increase in the rental inventory of about five percent, Table 12. Salt Lake City and Sandy City dominate as locations for new development. Forty-three percent of the units

under construction in the county (3,105 units) are located in Salt Lake City and eighteen percent (1,345 units) are located in Sandy City, Table 13 and Figure 2. Ten of the fifteen cities in the county have apartment construction under way. Two major cities, West Valley City and Taylorsville, do not presently have any new apartment construction.


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TABLE 13 Apartment Units Under Construction by City, Summer 2016

City Units

Draper 430

Herriman 720

Magna 288

Midvale 199

Murray 301

Riverton 121

Salt Lake City 3,105

Sandy 1,345

South Salt Lake 368

West Jordan 275

Total 7,152

Source: Cushman & Wakefield/Commerce

Draper - 6.0%

Herriman - 10.1%

Magna - 4.0%

Midvale - 2.8%

Murray - 4.2%

Riverton - 1.7%

Salt Lake City - 43.4%

Sandy - 18.8%

South Salt Lake - 5.1%West Jordan - 3.8%

FIGURE 2 Percent Share of Apartment Units Under Construction by City5%

approximate increase in rental inventory

Absorption of Recently Completed Apartment Communities

Ten apartment communities, totaling 1,623 units, were surveyed regarding their absorption following construction completion. On average, these recently completed projects were fully occupied within five months of construction completion, Table 14. The slowest absorption project is Cobblegate. However, the project is still under construction and, with 416 units, is the largest project surveyed. Leasing began in November 2015

and is proceeding at an average of seventeen units a month, with 137 units leased as of July 2016. The most rapid absorption was for The Seasons at the Boulevard and South Ridge. Both projects were nearly fully occupied at completion of construction. The absorption experience of recently completed projects points to a strong demand for new apartment units.


Alta Gateway Station Apartments

SUMMER 2016

Proposed Apartment Projects

Forty-one apartment projects, totaling 7,756 units, are proposed throughout Salt Lake County, Table 15. These projects are in various stages of the approval process. Some are well into the entitlement phase, while others are simply in the initial stages of discussions between the planning office and developer. Thirty-two of the projects are 100 percent market rate apartment communities, while nine are tax credit communities with a mix of tax credit and market rate units. Salt Lake City and Draper dominate as the locations of proposed development. Combined, proposed projects in these two cities account for nearly 54 percent of all proposed units county wide. Salt Lake City represents the largest share with 36 percent or 2,828 of the proposed units, Table 16 and Figure 3.

TABLE 14Absorption Rates of Recently Completed Apartment Projects

Project City UnitsCompletion of Construction Leasing Status Absorption

Triton Terrace Draper 177 March 2016 79 percent leased as of July 2016

Three months from completion 79 percent absorbed

Meadows at Park Station

Riverton 135 Construction underway on townhomes; 75 apartments completed March 2016

75 apartments occupied as of July 2016

Four months 100% of 75 apartments occupied.

Encore Salt Lake City 189 October 2015 Fully occupied as of June 2016

Eight months after completion fully occupied.

Enclave Salt Lake City 210 September 2015 Fully occupied within six months as of March 2016

Six months after completion fully occupied.

Cobblegate Sandy 416 Under construction, will finish in November

Began leasing in November 2015, 137 units leased as of July 2016

Still under construction and lease-up

Jordan Station South Jordan 302 July 2016 73 percent leased as of July 2016

At completion in July 2016 73 percent occupied.

West Station Salt Lake 145 September 2015 98 percent occupied as of April 2016

Seven months after completion fully occupied.

Sandalwood Apt West Valley 278 November 2015 87 percent leased as of July 2016

Eight months after completion 87% leased

Seasons at the Boulevard

Salt Lake City 99 May 2015 Fully occupied as of June 2015

One month after completion fully occupied.

South Ridge South Jordan 145 August 2015 Fully occupied as of August 2015

Fully occupied at completion.



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TABLE 15Proposed Apartment Projects in Salt Lake County

Market Rate Project Units Address City Developer

Independence 304 15200 South 855 West Bluffdale M&C Properties

Edge at the Connection 176 15500 South Redwood Road Bluffdale Ken Olson

Canyon Centre 123 7358 South Canyon Centre Dr. Cottonwood Hts Sussex Group

Liberty Pointe 100 Draper Pkwy & Draper Gate Dr. Draper Cowboy Partners

Lone Peak 420 12700 South Pony Express Draper Miller Development

Draper Vista Station North Ph. I 308 12600 South FrontRunner Blvd. Draper ICO

Draper Vista Station Ph. II 250 12600 South FrontRunner Blvd. Draper ICO

Spring Run 54 965 East Murray Holladay Bvld. Millcreek JF Capital

Murray Crossing 280 314 Vine Street Murray Kimball

Thackeray/Garn 350 140 North 600 West Salt Lake City Thackeray/Garn

Northwest Pipeline 248 225 East 200 South Salt Lake City Salt Lake City Corp.

Morton Apartments 136 245 South 200 East Salt Lake City Timberline

Liberty Square 138 500 South 600 East Salt Lake City Cowboy Partners

Zellerbach 175 2255 South 300 East Salt Lake City Zellerbach Property

Marmalade Flats 300 550 North 300 West Salt Lake City Clearwater Homes

Micro Apartments 40 320 East 400 South Salt Lake City Salt Lake City Corp.

Sugarmont Apartments 492 2100 South McClelland Salt Lake City Boulder Ventures

Central 9th Studios 45 928 South Washington Salt Lake City Farnsworth

Rockhouse Lofts 21 700 South 349 West Salt Lake City Lotus

TenFifteen 54 1015 South 200 West Salt Lake City Pointe Blank Partners

TBD 110 400 South 400 East Salt Lake City Steve Black

West Station Phase II 148 165 North Redwood Road Salt Lake City Henderson Development

Hardison Apartments 77 500 East South Temple Salt Lake City Garbett Homes

East Village Ph. II 90 Sego Lilly Drive 10200 South Sandy Hamilton Partners

Little Cottonwood Apartments 264 9800 South 1881 East Sandy Magna Investments

The Prestige 350 10012 Centennial Parkway Sandy Simons Platt

The Cliffs at Jordan Station 237 10448 South Jordan Gateway South Jordan SJ Utah LLC

Ritz Bowling site 300 2265 South State Street South Salt Lake Weidner

Liberty Place 200 700 East Wilmington South Salt Lake Cowboy Partners

The View at 5600 192 8000 South 5600 West West Jordan Uintah Land Company

The Station at Gardner Mill 272 7800 South 1300 West West Jordan Colosimo

Jordan Hills 300 7800 South U111 West Jordan Raddon Development

Approved Tax Credit ProjectsTC/MarketRate Ratio

Veranda 239/0 Draper Wasatch Group

Artesian Springs Phase III 134/0 4205 South Main Street Murray Paladin

North Temple Flats 97/71 1999 West North Temple Salt Lake City NTF Development LLC

Granary Place 134/0 258 West 700 South Salt Lake City JF Capital

Bodhi Salt Lake City 60/20 750 West South Temple Salt Lake City HA of Salt Lake County

North 4th Apartments 81/31 375 North 500 West Salt Lake City North 4th LLC

Sharon Gardens 44/14 3354 South Sue Street South Salt Lake Utah Nonprofit Housing

Liberty on Main 60/60 Main Street and 2200 South South Salt Lake Cowboy Partners

Liberty Crossing 32/125 Main Street and 2265 South South Salt Lake Cowboy Partners

Total Market Rate Units 6,875

Total Tax Credit Units 881

Total Market Rate & Tax Credit 7,756Source: Cushman & Wakefield/Commerce


SUMMER 2016

TABLE 16 Proposed Apartment Units by City

City Units

Bluffdale 480

Cottonwood Heights 123

Draper 1,317

Millcreek 54

Murray 414

Salt Lake City 2,828

Sandy 704

South Jordan 237

South Salt Lake 835

West Jordan 764

Total 7,756


Blu�dale - 6.2%Cottonwood Heights - 1.6%

Draper - 17.0%

Millcreek - 0.7%

Murray - 5.3%

Salt Lake City - 36.5%

Sandy - 9.1%

South Jordan - 3.1%

South Salt Lake - 10.8%

West Jordan - 9.9%

FIGURE 3 Share of Proposed Apartments Units by City 54%

of all proposed apartment units are located in Salt Lake City and Draper

PROJECTED RENTAL DEMAND COMPARED TO PROJECTED INCREASE IN RENTAL SUPPLYWhat is the likelihood of over-building in the Salt Lake County apartment market, given the historic level of units under construction and proposed? As noted in the pipeline section, the number of apartment units under construction is about 7,152 units. These units will reach the market over the next eighteen months. Some of these under-construction units have been leased. Additionally, there are another 7,756 proposed units in 41

projects throughout Salt Lake County. It is very doubtful all 9,086 proposed units will get approvals and/or financing. Probably no more than seventy percent will be built, as projects drop out for various reasons, leaving around 5,400 of the 7,756 proposed units likely to be developed over the next four years. Combining under-construction units and estimates of proposed units likely to be built yields a total of 12,550 additional units in


The Ridge Apartments, Sandy, Utah - rendering

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potential supply over the next four years, a ten percent increase in the rental inventory—a substantial increase. Will positive market conditions be sufficient to successfully absorb this level of new apartment construction?

The increase of as many as 12,550 units over the next four years will not seriously destabilize the Salt Lake County rental market for the following reasons:

• Market indicators show no sign of oversupply in July 2016

• Employment growth has been strong, with the rate of increase above three percent in 2015. Job growth is expected to continue over the next 36 months at 2.5 percent annually. The strong job market will continue to release some of the pent-up demand for housing trapped by households doubling-up.

• Net in-migration is increasing, which is an important component of housing demand

• Housing prices have rebounded, with an increase in the median sales price of forty-five percent since 2011, which has priced many households out of the ownership market, to the benefit of the rental market

• The diminished role of the shadow market in providing a supply of rental units

• The supposed growing preference of the younger generation (20 to 30–year–olds) for apartment living

• Rapid absorption experience of new apartments in Salt Lake City’s Central Business District and the suburban markets

• The very low vacancy rates at present give the market significant “headroom,” which protects against serious destabilization of the market

RENTAL MARKET OUTLOOKProjected demand for additional rental housing in Salt Lake County over the next four years is 10,200 units or 2,550 units annually (2016 through 2019). This projection reflects a continuation of the two percent annual growth rate for rental housing experienced by the rental market from 2000 to 2014.

On the supply side, over the next 48 months, the number of rental units added to the market is expected to be 12,550 units, based on the number of units under construction and proposed projects likely to be completed. The addition of 12,550 units to the rental inventory over four years amounts to an annual increase of 2.4 percent, a rate higher than the likely and historic rate of growth in demand of 2.0 percent.

Consequently, the supply of new rental units could exceed demand by as much as 2,350 units by 2019, leading to higher vacancy rates over the four-year period. It is important to note that an

unusually large number of new units could reach the market in the next eighteen months. The timing for completion of the units under construction is a bit “front-loaded,” which could result in a vacancy rate of six percent by year-end 2017. Development

in 2018-2019 will be more orderly as market conditions discourage serious over-building and vacancy rates—barring a recession and a serious slowdown in job and household growth—should return to around five percent.

Over the next few years, smaller projects (25 to 200 units) will have lower vacancy rates than the higher-priced large projects, due to an affordability advantage. Rental rate

increases will settle below three percent by year-end 2017 for all ages, sizes, and types of units. Finally, absorption rates for new, large projects will extend, for most projects, to at least nine months beyond completion of construction.

An unusually large number of new units

could reach the market in the next eighteen

months


SALT LAKE CITY INVESTMENT SPECIALISTS

Kip Paul801.303.5555

[email protected]

Mike Carroll801.303.5556

[email protected]

Diane Taylor801.303.5564

[email protected]

James Bekker 801.303.5549

[email protected]

Ralph Riedel, CCIM 801.303.5466

[email protected]

Concept / Layout / Design / Data: COMMERCE REAL ESTATE SOLUTIONS Information Services GroupResearch Manager: Steven Lawson

© Copyright 2016 COMMERCE REAL ESTATE SOLUTIONS - All Rights ReservedThe enclosed information, while not guaranteed, has been secured from sources we believe to be reliable.

Cover: The West Station Apartments, Salt Lake City, Utah

About Cushman & Wakefield/Commerce

Cushman & Wakefield/Commerce operates the Cushman & Wakefield business in Idaho, Nevada, Utah and Washington. As part of the Cushman & Wakefield global platform, the firm offers innovative commercial real estate solutions to occupier and investor clients, offering transaction services, capital markets services, occupier and investor services, and real estate advisory. With nearly 300 employees, 9 million sq. ft. of property management and transaction value of more than $2.8 billion, the firm is a leading commercial real estate resource in the Intermountain West region and Pacific Northwest. Learn more at www.comre.com.

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