APARTMENT MARKET REPORT

Transcription

1 Summer 2017 APARTMENT MARKET REPORT GREATER SALT LAKE AREA A Cushman & Wakefield Research Publication

2 EXECUTIVE SUMMARY On behalf of all our Cushman & Wakefield Investment Group brokers, I am privileged to present our annual Apartment Market Report for The Apartment Market in Salt Lake County continues its unprecedented growth. THE HIGHLIGHTS OF THIS YEAR S STUDY INCLUDE: Vacancy rate of 2.6%, the lowest ever reported Sixth consecutive year with vacancy below 4% 4,500 new apartment units received permits during 2016, the most in over 30 years The near-record level of construction (6,546 units) does not pose a major threat to the market Rental inventory grew by 5.2% Rental rates increased by 6.5% to an average of $1.18 per square foot Salt Lake County s employment growth reached its highest mark in 10 years Net in-migration nearly doubled in 2017 Salt Lake City dominates new development, accounting for over half of all units under construction THE FORECAST FOR THE UPCOMING YEAR INCLUDES: Market indicators show no sign of oversupply Robust development may cause vacancy to rise in some submarkets to 6% by yearend 2018, but only temporarily Record-high levels of construction (11,000 units by 2020) do not pose a major threat to the market 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

3 SUMMARY OF RENTAL RATE AND VACANCY SURVEY Encore Apartments, Salt Lake City The Salt Lake County apartment market continues to set historic records. For the third consecutive year, apartment communities in Salt Lake County are essentially fully occupied with vacancy rates below 3%. The July 2017 vacancy rate is 2.6%, a record low for the market. This year also marks the sixth consecutive year with vacancy rates below 4%. Many housing analysts assume a 5% vacancy rate to be the natural rate or equilibrium vacancy rate for a healthy market. Undeniably, the Salt Lake County apartment market continues to be a very tight market, even with the completion of several new, large projects in In the past year, rental rates have increased by 6.5%. The combined average for all types of units is $1,011. The average for a two-bedroom, two-bath unit is $1,158; and $1,278 for a three-bedroom, two-bath unit. Midsize apartment communities have the highest rents on a square foot basis and lowest vacancies. Communities of units have an average rate per square foot of $1.25 and a vacancy rate of 2.2%. Due to several new, high-quality apartment communities in downtown and Sugar House, rental properties on the east side in 2017 have higher rents and lower vacancy rates than west-side apartments. Currently, the average rent per square foot for an east-side property is $1.20 with a 2.3% vacancy rate, compared to $1.14 for a west-side property with a 2.7% vacancy rate. For those apartment communities built since 2000, overall rent per square foot is $1.17, while the average monthly rental rate is $1,116. In 2016, nearly 4,500 new apartment units received building permits in Salt Lake County, the highest level in more than 30 years. These new units increased the rental inventory in the county by 3.6%. To date, the market has had no trouble absorbing new units. Presently, there are 6,546 apartment units under construction in the county. This near-historic level of construction activity will push vacancy rates higher, but given the current low vacancy rate and strong economic growth, it is likely overall market conditions by mid-year 2018 should remain favorable. Beyond the Numbers The demand from tenants for top-quality multifamily product is stronger than ever, and Salt Lake County is no longer a market driven by cheap. Vacancies are at historic lows, while rental rates continue to grow year over year. The construction pipeline is remarkably well balanced. However, there could be a temporary softness in downtown Salt Lake City and Sugar House as projects reach the market simultaneously throughout the year. Summer 2017 Apartment Market Report / 3

4 SUMMER 2017 SURVEY RESULTS Salt Lake County s 2.6% vacancy rate is the lowest ever reported in the 16 years of annual surveys, Table 1. Despite the completion of 8,000 units in the past three years, the vacancy rate remains below 3%. It is clear that the market needs higher levels of new apartment construction to ease tight market conditions. All types of apartment units have experienced increases in average rental rates. The combined average monthly rental rate for all types of units is $1,011, a 6.5% increase from the average rate of $949 in 2016, Table 2. Rental rates, on a square foot basis, increased from $1.09 in 2016 to $1.18 in One-bedroom units had the largest increase in rents over the past year, as the average rent increased 8.8%, from $833 to $906. 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 9% 6% 3% 0% Studio One Two, One Bath Two, Two Bath Three, Two Bath Overall TABLE 1 Apartment Vacancy Rates Studio One Two One Bath Two Two Bath Three Two Bath % 5.6% 4.3% 6.0% 4.5% 5.4% % 8.5% 8.0% 5.7% 3.9% 7.6% % 6.7% 7.6% 7.7% 7.4% 7.2% % 5.3% 7.7% 5.5% 7.0% 6.1% % 3.2% 4.6% 3.2% 3.4% 4.0% % 2.9% 3.1% 3.4% 3.8% 3.2% % 4.3% 4.1% 5.2% 4.8% 4.6% % 6.6% 7.7% 8.0% 6.6% 7.2% % 5.2% 6.5% 5.5% 6.3% 5.7% % 5.1% 6.2% 4.4% 3.6% 5.2% % 3.8% 4.0% 3.6% 3.7% 3.8% % 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% % 2.5% 2.8% 2.6% 2.1% 2.6% Overall 4 / Cushman & Wakefield

5 Change in Average Rental Rates by Type of Unit Overall Rates and Size by Type of Unit $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 1,500 1, Two One Bath Studio One Studio One Two, One Bath Two, Two Bath Three, Two Bath Overall Rents ($) Square Footage Two Two Bath Three Two Bath Overall 2.6% overall vacancy rate - lowest in 16 years 6.5% overall rental rate increase since 2016 Beyond the Numbers New multi-family projects in Salt Lake County are not being built fast enough to keep up with demand. It is clear that slightly higher levels of development are needed to ease tight market conditions. TABLE 2 Change in Average Rental Rates by Type of Unit Type of Unit % Change Studio $504 $480 $515 $538 $586 $603 $638 $705 $ % One $654 $629 $659 $709 $745 $757 $804 $833 $ % Two, One Bath $723 $706 $725 $759 $792 $809 $833 $879 $ % Two, Two Bath $834 $816 $862 $943 $969 $983 $1,050 $1,085 $1, % Three, Two Bath $1,000 $956 $1,025 $1,051 $1,075 $1,085 $1,132 $1,244 $1, % Overall $740 $720 $754 $814 $850 $865 $907 $949 $1, % TABLE 3 Overall Rental and Vacancy Rates in 2017 by Type of Unit Type of Unit Rents Square Feet Rent/ S.F. Vacancy Studio $ $ % One $ $ % Two, One Bath $ $ % Two, Two Bath $1,158 1,014 $ % Three, Two Bath $1,278 1,243 $ % Overall $1, $ % 4th West Apartments, Salt Lake City Summer 2017 Apartment Market Report / 5

6 SUMMER 2017 Rental and Vacancy Rates by Size of Apartment Community Vacancy and rental rates vary depending on the size of the apartment community. The overall average rental rate for apartment communities of 100 to 250 units is $1,024, higher than the average rental rate of $1,008 for communities with more than 250 units, Table 4. Small-size properties under 100 units have the lowest average rental rate of $909, more than $100 lower than the average rent at larger properties. 2.2% vacancy rate for properties with 100 to 250 units In the past, vacancy rates have often been lower for small apartment communities. But in 2017, the midsize apartment communities (100 to 250 units) have the lowest vacancy rate of 2.2%, compared to 2.5% for communities with fewer than 100 units. Beyond the Numbers Midsize apartment communities ( units), for the first time in recent history, are driving the most favorable market conditions in the county. Investment focus on midsize projects will be critical over the upcoming year, as they have lowest vacancies and highest rents on a square foot basis. TABLE 4 Rental and Vacancy Rates by Size of Apartment Community Type of Unit Less than 100 Units 100 to 250 Units More than 250 Units Monthly Rent / SF Monthly Rent / SF Monthly Rent / SF Studio NA NA NA NA $724 $1.73 One $793 $1.16 $932 $1.34 $897 $1.35 Two, One Bath $851 $0.94 $873 $1.02 $1,009 $1.14 Two, Two Bath $968 $0.92 $1,229 $1.40 $1,138 $1.12 Three, Two Bath $1,122 $0.89 $1,275 $1.14 $1,215 $1.00 Overall Vacancy Rate 2.5% 2.2% 2.7% Overall Rental Rate $909 $1,024 $1,008 Overall Rent / SF $0.95 $1.25 $1.20 Rental Rates by Size of Community $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 NA NA Studio NA NA One Two One Bath Two Two Bath Three Two Bath Overall <100 units units >250 units 9th East Lofts, Salt Lake City 6 / Cushman & Wakefield

7 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 has not been the case over the past few years. This break from the past is due, in part, to lower levels of new apartment construction on the east side, as well as the emergence of hot eastside markets of Sugar House and downtown Salt Lake City, where occupancy levels for many projects are consistently near 100%. The average vacancy for east-side properties is 2.3% compared to 2.7% for west-side properties. Monthly rental rates are also higher on the east side. Average east-side rent per square foot for all types of units is $1.20 compared to $1.14 for the west-side properties, Table % overall vacancy rate for apartment communities east of I % overall vacancy rate for apartment communities west of I-15 Beyond the Numbers Salt Lake County s east side is essentially fully occupied. Continued attention to downtown Salt Lake City and Sugar House is necessary for bestin-class development and investment opportunities. TABLE 5 Rental and Vacancy Rates by Location of Apartment Community Type of Unit East of I-15 West of I-15 Monthly Rent / SF Monthly Rent / SF Studio $829 $1.60 $707 $1.86 One $921 $1.35 $891 $1.32 Two, One Bath $926 $1.20 $938 $1.03 Two, Two Bath $1,201 $1.04 $1,114 $1.08 Three, Two Bath $1,297 $1.20 $1,280 $1.03 Overall Vacancy Rate 2.3% 2.7% Overall Rental Rate $1,031 $999 Overall Rent / SF $1.20 $1.14 Rental Rates by Location of Community $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Studio One East of I-15 West of I-15 Two One Bath Two Two Bath Three Overall Liberty Crest Apartments, Salt Lake City Summer 2017 Apartment Market Report / 7

8 SUMMER 2017 Rental and Vacancy Rates by Age of Apartment Community The apartment communities surveyed were divided into three age categories: Built before 1980 Built from 1980 to 1999 Built from 2000 to the present The survey results show that the overall rental rate for apartment communities built since 2000 is 13% higher than communities built between 1980 and 1999, and 25% higher than communities built prior to 1980, Table % vacancy rate for apartment communities built since 2000 Beyond the Numbers As new projects reach the market, tenants continue to demonstrate their willingness to pay higher rates for more modern communities, with high-level amenities. Renters will continue to expect newer housing options that are in line with their desire for quality environments and the ability to advance with the growth of the county. TABLE 6 Rental and Vacancy Rates by Age of Apartment Community Type of Unit Pre to to Present Monthly Rent / SF Monthly Rent / SF Monthly Rent / SF Studio $660 $1.58 $724 $1.73 $1,136 $2.30 One $812 $1.15 $873 $1.35 $1,028 $1.37 Two, One Bath $846 $0.90 $969 $1.09 $946 $0.98 Two, Two Bath $1,091 $1.08 $1,131 $1.13 $1,201 $1.16 Three, Two Bath $1,216 $1.00 $1,254 $1.01 $1,237 $1.02 Overall Vacancy Rate 2.7% 2.5% 2.4% Overall Rental Rate $896 $980 $1,116 Overall Rent / SF $1.02 $1.20 $1.17 Rental Rates by Age of Community $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Studio One Two One Bath Two Two Bath Pre to to Present Three Two Bath Overall Moda Bonneville, Salt Lake City 8 / Cushman & Wakefield

9 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. Only 18 of 82 apartment communities surveyed offer concessions. While still impressive, that number is up from the 15 in Of the 18 apartment communities offering concessions, 14 offer discounted rent usually a portion of first month s rent, typically between $200 and $300. The remaining four communities offered a reduced deposit fee. Beyond the Numbers Only 22% of apartment communities offered concessions in 2017, indicating quick turn rates and strong occupancy levels. Methodology for Rental Survey The data in this report provide 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 390 apartment communities ranging from 25 units to 588 units. In July 2017, 82 of the 390 apartment communities were randomly sampled and surveyed for rental and vacancy information. The 82 apartment communities surveyed were comprised of 371 studio units; 6,502 one-bedroom units; 3,379 two-bedroom, one-bath units; 4,550 two-bedroom, two-bath units; and 1,562 three-bedroom, two-bath units. The oldest community was built in 1909; the newest built in 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 and downtown Salt Lake City. The northernmost property surveyed was at 1200 North, and the southernmost property was at South. Each year, a few recently-completed communities are added to the sample to make certain it is representative of the expanding rental inventory. Jordan Valley Station, West Jordan Summer 2017 Apartment Market Report / 9

10 SUMMER 2017 RENTAL INVENTORY AND APARTMENT CONSTRUCTION TRENDS IN SALT LAKE COUNTY In 2015, the American Community Survey, conducted by the U.S. Census Bureau, reported 118,800 renter occupied units in Salt Lake County, Table 7. This estimate is a five-year average for the period. One third of all renteroccupied units were located in Salt Lake City, which barely edged out West Jordan in terms of largest absolute increase in renter-occupied units. The rental inventory of Salt Lake City has increased by 4,288 units since 2000, compared to West Jordan s increase of 4,258. In 2016, permits were issued for nearly 4,500 new apartment units, Table 8. This is the highest level of apartment construction activity since For many years, apartment construction bounced around in a narrow range of 1,000 to 1,500 units. But in the past three years, construction activity has dramatically expanded. In both 2014 and 2015, nearly 3,000 permits were issued each year for new apartment construction, and in 2016, the number of permits issued jumped to 4,461 units. The three-year-old construction boom will certainly be extended another two years given the number of units proposed. Beyond the Numbers The three-year-old construction boom will continue for the next two years. Despite overbuilding concerns, favorable market conditions make destabilization unlikely. 4th West Apartments, Salt Lake City TABLE 7 Renter Occupied Dwelling Units by City (represents a five-year average, ) City 2000 TABLE 8 Permits Issued for New Apartments Year Units Year Units , , , , , , , , , , , , , , , , , , , , , , , , , Average Change Salt Lake City 34,869 39,157 4,288 Unincorporated SL County 17,421 17, West Valley 8,835 11,559 2,724 West Jordan 3,419 7,677 4,258 Midvale 5,241 6,536 1,295 Murray 4,225 6,713 2,488 Sandy 4,029 6,726 2,697 Taylorsville 5,328 6, South Salt Lake 4,972 5, Holladay 922 2,874 1,952 South Jordan 773 3,343 2,570 Draper 1,020 2,561 1,541 Riverton 382 1, Herriman 27 1,477 1,450 Bluffdale Salt Lake County 91, ,800 27,256 Source: U.S. Census Bureau Source: Bureau of Economic and Business Research, University of Utah and Construction Monitor 10 / Cushman & Wakefield

11 Major Market Rate Apartment Projects Built Since 2000 Since 2000, there have been 105 market rate apartment communities (excludes tax credit projects) developed throughout Salt Lake County, Table 9. These projects have a total of 19,008 units. About 25% of the units developed are in Salt Lake City. The downtown and 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 10% share of new apartment development are Sandy and South Jordan, Figure 1. TABLE 9 Major Market Rate Apartment Projects Built in Salt Lake County Since 2000* Project Name Year Completed Units Address City Independence at the Point South Beacon Bluffdale Rockwell Village South Marksman Wy. Bluffdale Allegro South Pony Express Draper Liberty Hills East Highland Drive Draper Parc at Day Dairy South 400 East Draper Triton Terrace Bangerter Parkway & Vestry Draper Rosegate South Bangerter Draper Draper Village South Draper Crest Ln. Draper Parc West West South Draper Farm Gate West South Herriman Solameer at Herriman South Herriman Herriman Terrameer West South Herriman Herriman Town Center South Brundisi Way Herriman San Moritz West Powder Hill Road Midvale Meadows at Riverwalk South 70 West Midvale Tuscany Villas South 1000 West Midvale Lofts at South Euro Drive Midvale Talavera at the Junction West Tuscany View Midvale Station at Midvale Center Street Midvale Villas at Fern Circle NA South Fern Circle Midvale Millcreek 9 NA South 900 East Millcreek Millcreek Towers NA South 900 East Millcreek Lions Gate West Fireclay Ave Murray Frontgate South Commerce Dr. Murray Artesian Springs South Main St. Murray Legacy Spring South 4800 West Riverton Monarch Meadows West South Riverton Meadows at Park Avenue South Sienna Meadow Riverton North Gate Apartments West South Temple Salt Lake City City Front Apartments West North Temple Salt Lake City Emigration Court South 500 East Salt Lake City Seasons at City Creek West North Temple Salt Lake City City Creek Landing South Main Street Salt Lake City Eastside Apartments South 600 East Salt Lake City Brickyard Apartments East Brickyard Rd. Salt Lake City Wasatch Advantage South 400 East Salt Lake City Liberty Gateway South 500 West Salt Lake City Citifront II West South Temple Salt Lake City 644 City Station West North Temple Salt Lake City The Lotus East South Temple Salt Lake City Sugarhouse Apts South 1200 East Salt Lake City Broadway Place East 300 South Salt Lake City 21st View South View Street Salt Lake City Cityscape South 400 East Salt Lake City Liberty Gateway South 500 West Salt Lake City West Station West Gertie Avenue Salt Lake City Encore South 500 East Salt Lake City Seasons at Library Square East 500 South Salt Lake City Seasons on the Boulevard South Denver Street Salt Lake City Element31 at Brickyard South 1243 East Salt Lake City Liberty Crest South 200 East Salt Lake City 360 Apartments South 400 West Salt Lake City Ball Park Apartments West Temple Salt Lake City Taylor Gardens South West Temple Salt Lake City Ninth East Lofts East 444 South Salt Lake City Moda-Bonneville South 500 East Salt Lake City Artspace Macaroni Flats South 500 West Salt Lake City Paragon Station Lofts NA South 300 West Salt Lake City Sego 28 NA East 700 South Salt Lake City Prana Townhomes West 800 South Salt Lake City Summer 2017 Apartment Market Report / 11

12 SUMMER 2017 TABLE 9 Major Market Rate Apartment Projects Built in Salt Lake County Since 2000* Project Name Year Completed Units Address City Aire Condos (rental) NA South 200 East Salt Lake City BlueKoi South 900 East Salt Lake City Meadowbrook Station Howick Street Salt Lake County Oquirrh Hills South 8400 West Salt Lake County Legends at River Oaks South Riverside Drive Sandy Liberty Bend South 1300 East Sandy Rosegate South 700 East Sandy Hills at Sandy East Sego Lily Drive Sandy Cobblegate East 9000 South Sandy Dry Creek at East Village East Dry Creek Ridge Sandy The East Village East Midvillage Blvd. Sandy Parc at City Center West Civic Center Dr. Sandy Pinnacle Southtowne Cadbury Lane South Jordan San Marino West South South Jordan Crossing at Daybreak West Frogs Leap Dr. South Jordan San Tropez West South South Jordan District Heights River Heights South Jordan Promenade at the District South River Heights South Jordan Legacy Cottages West Jordan Parkway South Jordan Jordan Station South Jordan Gateway South Jordan South Ridge South Jordan Gateway South Jordan Brick Stone Apts East 3300 South South Salt Lake Meadow Brook Lofts South West Temple South Salt Lake Riverfront West Fine Street South Salt Lake South Main NA South Main South Salt Lake Silvercrest South 2200 West Taylorsville Madrona NA South 700 East Taylorsville Liberty Landing South Campus View Dr. West Jordan Boulder Canyon South 5600 West West Jordan Serengeti Springs South 6500 West West Jordan Wilshire Apartments West New Bingham West Jordan Cascade Springs West 8580 South West Jordan Willow Cove VI South Redwood Rd West Jordan Willow Cove VII South Redwood Rd. West Jordan West Village South 3200 West West Jordan Woodgate West 7000 South West Jordan E-Gate West Ruddy Rd. West Valley City Village at River s Edge West 3300 South West Valley City Fairbourne Station Lehman Avenue West Valley City Pinnacle Highbury South 5600 West West Valley City Sagegate at Haynes West 2600 South West Valley City Total 19,008 *through July 2017 Source: Cushman & Wakefield West Valley City - 1,341 units, 7.1% West Jordan - 1,822 units, 9.6% Taylorsville units, 1.2% South Salt Lake units, 3.1% South Jordan - 2,234 units, 11.8% Sandy - 2,047 units, 10.8% Salt Lake County units, 2.8% (continued) FIGURE 1 Number and Percent Share of New Market Rate Apartment Units by City, July % Bluffdale units, 1.1% Draper - 1,616 units, 8.5% Herriman - 1,108 units, 5.8% Midvale - 1,279 units, 6.7% Millcreek - 65 units, 0.3% Murray units, 3.2% Riverton units, 3.1% Salt Lake City - 4,765 units, 25.1% of all new apartment units built since 2000 are located in Salt Lake City, Sandy, and South Jordan Beyond the Numbers About 25% of all new apartment units built since 2000 are located in Salt Lake City, reinforcing renters strong desire to be in hot emerging neighborhoods. 12 / Cushman & Wakefield

13 SALT LAKE COUNTY: DEMOGRAPHICS AND EMPLOYMENT TRENDS The demand for housing, both owner and renter-occupied, is driven by demographic and employment change. Recent levels of net in-migration, job growth, and unemployment are all positive for the housing market. The population of Salt Lake County was 1,127,117 in 2017, Table 10. The county s population has been increasing at an average annual growth rate of about 1.3% since From 2016 to 2017, population growth was higher at 1.7%. The higher rate of growth is due to increasing levels of net in-migration. Net in-migration nearly doubled in Salt Lake County in 2017, increasing to almost 6,300 individuals. The spike in net inmigration reflects strong job growth in Utah and Salt Lake County over the past 24 months. During this period of rapid growth, Utah has, at times, led the nation in the year-over-year percentage increase in jobs. The most recent population projections, published by the Kem Gardner Policy Institute, show that over the next 12 months, demographic growth will put additional pressure on the housing market in terms of demand and prices. Population will increase by 18,000 in Salt Lake County, and net in-migration will jump to almost 7,000, the highest level since TABLE 11 Employment Trends in Salt Lake County Year Nonfarm Jobs Change Unemployment Rate ,153 13, % , % ,715-11, % ,956-5, % ,274 7, % ,983 19, % ,780 24, % ,224 21, % ,927 1, % ,449-29, % ,259-2, % ,122 11, % ,934 20, % ,370 20, % ,466 15, % ,297 21, % ,762 22, % 2017* 705,437 21,675 NA 2018* 725,515 20,078 NA Source: Utah Department of Workforce Services *Projected Table 10 Demographic Trends for Salt Lake County Year Population Change Net Migration ,843 17,627 4, ,716 10,873-2, ,198 6,481-6, ,532 8,334-5, ,247 14,716 1, ,017 23,770 10, ,362 18,344 4, ,648 10,286-3, ,007,205 11,558-2, ,018,737 11,531-2, ,031,697 12,124-1, ,046,461 14,765 2, ,060,336 13,875 2, ,070,799 10,464-1, ,080,929 10,130-1, ,094,289 13,360 2, ,108,872 14,583 3, ,127,117 18,245 6, * 1,145,846 18,729 6,871 Source: Governor s Office of Planning and Budget *Projected In 2016, the job growth in Salt Lake County was the highest in 10 years. Nearly 22,500 new jobs were added to the local labor market, a 3.4% increase. The total number of jobs in the county in 2016 was 683,762, 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 13% higher than the pre-recession peak of 603,000 jobs, and the unemployment rate is at a 3.2%, the lowest rate since Beyond the Numbers People are catching wind of what makes Salt Lake County such a unique place to live and work. Net in-migration nearly doubled in 2017 and job growth is at its highest mark in 10 years. This demographic growth will put additional pressure on the housing market in terms of demand and prices, and Utah will continue to lead as one of the nation s best places for business. Summer 2017 Apartment Market Report / 13

14 SUMMER 2017 APARTMENT PIPELINE: NEW CONSTRUCTION AND PROPOSED PROJECTS Apartment Projects Under Construction There are 35 apartment communities under construction in Salt Lake County. These communities will have a total of 6,564 units, representing an increase in the rental inventory of 5.2%, Table 12. Salt Lake City dominates new development with over half of all units under construction, Table 13. There are 3,520 apartment units under construction in Salt Lake City in 19 projects, Figure 2. Sandy ranks second in construction activity with 1,000 units. Three major cities, West Valley City, Taylorsville, and South Jordan do not presently have any new apartment construction. TABLE 12 Apartment Projects Under Construction in Salt Lake County Project Units Address City Type Veranda West South Draper Tax Credit Rosegate in Herriman Freedom Park Dr. Herriman Market Rate Park East East Murray Holladay Rd. Holladay Market Rate The Station at Midvale II South Center Square Midvale Tax Credit Metro at Fireclay Phase II South Main Street Murray Market Rate Metro at Fireclay Phase I West Fireclay Avenue Murray Market Rate Murray Crossing Vine Street Murray Market Rate 21 by Urbana East 2100 South Salt Lake City Market Rate 4th West Apartments North 400 West Salt Lake City Market Rate 616 Lofts South State Street Salt Lake City Tax Credit 900 East Apartments South 900 East Salt Lake City Market Rate 965 Central South 200 West Salt Lake City Market Rate Alta Gateway South 500 West Salt Lake City Market Rate Bodhi Salt Lake West South Temple Salt Lake City Tax Credit Fourth & Fourth East and 400 South Salt Lake City Market Rate Granary Place West 700 South Salt Lake City Tax Credit Greenprint South 200 West Salt Lake City Market Rate Hardware Station North 400 West Salt Lake City Market Rate Highland Townhomes South Highland Drive Salt Lake City Market Rate Liberty Boulevard East 400 South Salt Lake City Market Rate Milagro Apartments West 200 South Salt Lake City Market Rate North 4th Apartments North 500 West Salt Lake City Tax Credit North Temple Flats West North Temple Salt Lake City Tax Credit Orange Street Apartments 263 North Temple and Orange St. Salt Lake City Market Rate Sugarmont 352 Sugarmont Drive and McCelland Salt Lake City Market Rate West Station Phase West Gertie Avenue Salt Lake City Market Rate Little Cottonwood East 9800 South Sandy Market Rate Hills at Sandy Station East Sego Lilly Drive Sandy Market Rate The Ridge South Union Park Sandy Market Rate Pinnacle Sandy South State Street Sandy Market Rate Sharon Gardens South Sue Street South Salt Lake Tax Credit Townhomes Sugarhouse South 400 East South Salt Lake Market Rate Via Phase South West Temple South Salt Lake Market Rate Zellerbach South 300 East South Salt Lake Market Rate Jordan Valley Station South 3400 West West Jordan Market Rate Total 6, / Cushman & Wakefield

15 TABLE 13 Apartment Units Under Construction by City, Summer 2017 City Units Draper 239 Herriman 298 Holladay 70 Midvale 84 Murray 643 Salt Lake City 3,520 Sandy 1,003 South Salt Lake 440 West Jordan 267 Total 6,564 Source: Cushman & Wakefield North Fourth, Salt Lake City 5.2% increase in rental inventory Beyond the Numbers Similar to 2016, rental inventory increased over 5% in Salt Lake City continues to dominate the market with over half of all units under construction, while Sandy follows in second place. FIGURE 2 Percent Share of Apartment Units Under Construction by City West Jordan - 4.1% South Salt Lake - 6.7% Sandy % Draper - 3.6% Herriman - 4.5% Holladay - 1.1% Midvale - 1.3% Murray - 9.8% Salt Lake City % The Ridge, Sandy Summer 2017 Apartment Market Report / 15

16 SUMMER 2017 Absorption of Recently Completed Apartment Communities Fourteen apartment communities, totaling 3,017 units, were surveyed regarding their absorption following construction completion. On average, the absorption rate was 19 units monthly. Pre-leasing begins at various points in the construction process depending on the project and management. Consequently, a few projects have been nearly fully leased when construction is completed. The tax credit projects have higher rates of absorption, usually between 20 and 30 units monthly. A significant number of new projects in Salt Lake City are achieving absorption of 20 to 25 units monthly, but are offering discounted rent, Table 14. Beyond the Numbers The absorption rates of recently completed projects point to a strong demand for new apartment units, with new projects achieving absorption of 20 to 25 units monthly. TABLE 14 Absorption Rates of Recently Completed Apartment Projects Project City Units Proposed Apartment Projects Fifty apartment projects, totaling 6,436 units, are proposed in 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 the developer. Forty-three of the projects are market rate communities, while seven are tax credit communities with a mix of tax credit and market rate units. Salt Lake City has the largest share of proposed units at 27% and 1,779 units, but three other cities will have significant levels of new apartment construction in : Draper, South Salt Lake, and West Jordan, Table 16 and Figure 3. Absorption Rate Per Month Jordan Station South Jordan Dry Creek at East Village Sandy Element31 at Brickyard Salt Lake City The East Village Sandy Liberty Crest Salt Lake City th East Lofts (Tax Credit) Salt Lake City Riverfront South Salt Lake The Station at Midvale (Tax Credit) Midvale Villas at Founder's Point (Tax Credit) Midvale City Center Sandy Herriman Town Center Herriman Draper Village Draper Parc West Draper Moda-Bonneville Salt Lake City Source: Cushman & Wakefield Total: 3,017 Average: Lofts, Salt Lake City 16 / Cushman & Wakefield

17 TABLE 15 Proposed Apartment Projects in Salt Lake County Name Units Address City Type Independence South 855 West Bluffdale Market Rate Canyon Centre South Canyon Centre Dr. Cottonwood Hts Market Rate Diamond Ridge South 1000 East Draper Market Rate Draper South Point East Highland Drive Draper Market Rate Liberty Pointe 100 Draper Parkway and Draper Gate Draper Market Rate Residences at Vista Station N 308 Draper FrontRunner Station Draper Market Rate Triton Point of View 320 Bangerter Parkway Vestry Rd. Draper Market Rate Peytons Quarry of Herriman 124 Abbey Ben Lane Herriman Market Rate Locust Lane 10 Locust Lane Holladay Market Rate Artesian Springs Phase II South Main Street Millcreek Tax Credit Atresian Springs Phase III East Columbia Avenue Millcreek Tax Credit Lotus Calla South 900 East Millcreek Market Rate Lotus Tapestry East 3900 South Millcreek Market Rate Meadowbrook Apartments West 3900 South Millcreek Tax Credit Spring Run Townhomes East Murray Holladay Blvd. Millcreek Market Rate Central Station Senior Apts South Box Elder Street Murray Tax Credit Central 9th Studios South Washington Street Salt Lake City Market Rate Central Ninth South Washington Street Salt Lake City Market Rate Flats on Richards West 1700 South Salt Lake City Market Rate Hardison Apartments East South Temple Salt Lake City Market Rate Hardware Station North 400 West Salt Lake City Market Rate Liberty Place East Wilmington Avenue Salt Lake City Market Rate Liberty Square East 500 South Salt Lake City Market Rate Liberty Square Townhomes East 500 South Salt Lake City Market Rate Liberty Uptown East 200 South Salt Lake City Market Rate Little Diamond North Cornell Street Salt Lake City Tax Credit Magnolia East 200 South Salt Lake City Market Rate Marmalade Flats North 300 West Salt Lake City Market Rate Metropolitan East 200 South Salt Lake City Market Rate Paxton West Paxton Avenue Salt Lake City Market Rate Pierpont Apartments 85 Pierpont Ave and 300 West Salt Lake City Market Rate Rockwell Lofts South 349 West Salt Lake City Market Rate Salt Lake Costume South 1100 East Salt Lake City Market Rate The Morton South 200 East Salt Lake City Market Rate West Gateway Commons South 600 West Salt Lake City Market Rate The Arcadia South 300 West Sandy Tax Credit The East Village Phase II Midvillage Boulevard Sandy Market Rate Cliffs at Jordan Station South Jordan Gateway South Jordan Market Rate Daybreak Condos 180 Daybreak Parkway South Jordan Market Rate Flats at the District South District View Dr. South Jordan Market Rate Liberty Crossing South State Street South Salt Lake Market Rate Liberty on Main South Main Street South Salt Lake Market Rate Ritz Bowling South State Street South Salt Lake Market Rate The Hub of Opportunity South West Temple South Salt Lake Tax Credit West Temple Apartments South West Temple South Salt Lake Market Rate Gladstone Place South Mountain View West Jordan Market Rate Novi at Jordan Valley Station II South 3400 West West Jordan Market Rate Oquirrh Flats West 8756 South West Jordan Tax Credit Station at Gardner Mill West 7800 South West Jordan Market Rate The View at Oquirrh Flats South 5600 West West Jordan Market Rate Total 6,436 Source: Cushman & Wakefield Summer 2017 Apartment Market Report / 17

18 SUMMER 2017 Ritz Classic Apartments, Salt Lake City - rendering FIGURE 3 Share of Proposed Apartments Units by City 55% West Jordan % TABLE 16 Proposed Apartment Units by City City Units Bluffdale 255 Cottonwood Heights 123 Draper 901 Herriman 124 Holladay 10 Millcreek 538 Murray 84 Salt Lake City 1,779 Sandy 276 South Jordan 537 South Salt Lake 881 West Jordan 928 Total 6,436 Source: Cushman & Wakefield Bluffdale - 4.0% Cottonwood Heights - 1.9% Draper % of all proposed apartment units are located in Salt Lake City, Draper, and South Salt Lake South Salt Lake % South Jordan - 8.3% Sandy - 4.3% Herriman - 1.9% Holladay - 0.2% Millcreek - 8.4% Murray - 1.3% Salt Lake City % Beyond the Numbers Tax credit communities comprise 16% of all proposed multi-family project. This diversification allows the Greater Salt Lake rental market to become more accessible and affordable to a wider variety of people, and maintain a well-balanced development. PROJECTED RENTAL DEMAND COMPARED TO PROJECTED INCREASE IN RENTAL SUPPLY What is the likelihood of overbuilding in the Salt Lake County apartment market, given the historic level of units under construction and proposed? As noted in the pipeline section, 6,564 apartment units are currently under construction. These units will reach the market over the next 18 months. Some of these under-construction units have been leased. Additionally, there are another 6,436 proposed units in 50 projects throughout Salt Lake County. It is doubtful all 50 projects will get approvals and/or financing. Probably no more than 70% of the 6,436 units will be built, as projects drop out for various reasons, leaving around 4,500 of the 6,436 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 11,000 additional units in potential supply by 18 / Cushman & Wakefield

19 a substantial 9.26% increase in rental inventory since Will positive market conditions be sufficient to successfully absorb this level of new apartment construction? The increase of as many as 11,000 units over the next four years will not seriously destabilize the Salt Lake County rental market, although there are bound to be periods of temporary stress in some submarkets as high concentrations of large projects reach the market nearly simultaneously. The overall vacancy rate will increase by a few percentage points, but market stability will be maintained and renters will have expanded rental opportunities. The probability of an overbuilt rental market is unlikely for the following reasons: Market indicators show no sign of oversupply in July 2017 Employment growth has been strong, with the rate of increase above 3% in Job growth is expected to continue over the next 36 months at 2.5% annually. 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 more than 50% 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 growing preference of the younger generation (20 to 30-year-olds) for apartment living Solid absorption 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 OUTLOOK Projected demand for additional rental housing in Salt Lake County over the next four years is 10,200 units or 2,550 units annually (2017 through 2020). This projection reflects a continuation of the 2% annual growth rate for rental housing experienced by the rental market from 2000 to On the supply side, over the next 48 months, 11,000 units are expected to be added to the market, based on the number of units under construction and proposed projects likely to be completed. The addition of 11,000 units to the rental inventory over four years amounts to an annual increase of 2.4%, a rate higher than the historic rate of growth in demand of 2%. Consequently, the supply of new rental units could exceed demand by as much as 1,000 units by 2020, 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 Over the next four years, rental inventory will increase 2.4% annually the market in the next 18 months The timing for completion of the units under construction is a bit front loaded, which could result in a vacancy rate near 6% by year-end Development in will be more orderly as market conditions discourage serious overbuilding and vacancy rates barring a recession and/or serious slowdown in job and household growth should return to around 5%. Over the next few years, smaller projects (from 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 4% by year-end 2018 for all ages, sizes, and types of units. Finally, absorption rates for new, large projects will extend, for most projects, beyond six months after completion of construction. Summer 2017 Apartment Market Report / 19

20 About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients ideas and putting them into action. To learn more, visit or on Twitter. SALT LAKE CITY INVESTMENT SPECIALISTS Kip Paul kpaul@comre.com Mike Carroll mcarroll@comre.com Diane Taylor dtaylor@comre.com James Bekker jbekker@comre.com Ralph Riedel, CCIM rriedel@comre.com Jorgi Paul jpaul@comre.com Concept / Layout / Design / Data: CUSHMAN & WAKEFIELD Information Services Group Cushman & Wakefield Copyright No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question. Cover: Encore Apartments, Salt Lake City, Utah