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Summer 2017

APARTMENTMARKET REPORTGREATERSALT LAKE AREA

A Cushman & Wakefield Research Publication

www.cushmanwakefield.com

EXECUTIVE SUMMARY

On behalf of all our Cushman & Wakefield Investment Group brokers, I am privileged to present our annual Apartment Market Report for 2017.

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 year-end 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


SUMMARY OF RENTAL RATE AND VACANCY SURVEYThe 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 2017.

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 100-250 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 multi-family 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

Encore Apartments, Salt Lake City

SUMMER 2017

SURVEY RESULTSSalt 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 2017. 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

0%

3%

6%

9%

2014 201720162015201320122011201020092008200720062005200420032002

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%

2017 4.9% 2.5% 2.8% 2.6% 2.1% 2.6%

/ Cushman & Wakefield4


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 2017201620152012201120102009

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 2009 2010 2011 2012 2013 2014 2015 2016 2017% Change 2016-2017

Studio $504 $480 $515 $538 $586 $603 $638 $705 $745 5.7%

One Bedroom $654 $629 $659 $709 $745 $757 $804 $833 $906 8.8%

Two Bedroom, One Bath $723 $706 $725 $759 $792 $809 $833 $879 $932 6.0%

Two Bedroom, Two Bath $834 $816 $862 $943 $969 $983 $1,050 $1,085 $1,158 6.7%

Three Bedroom, Two Bath $1,000 $956 $1,025 $1,051 $1,075 $1,085 $1,132 $1,244 $1,278 2.7%

Overall $740 $720 $754 $814 $850 $865 $907 $949 $1,011 6.5%

TABLE 3Overall Rental and Vacancy Rates in 2017 by Type of Unit

Type of Unit RentsSquare

FeetRent/S.F. Vacancy

Studio $745 424 $1.76 4.9%

One Bedroom $906 680 $1.33 4.4%

Two Bedroom, One Bath $932 840 $1.11 2.8%

Two Bedroom, Two Bath $1,158 1,014 $1.14 2.6%

Three Bedroom, Two Bath $1,278 1,243 $1.03 2.1%

Overall $1,011 854 $1.19 2.6%

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.


4th West Apartments, Salt Lake City

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.

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.

2.2% vacancy rate for properties with 100 to 250 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 NA NA NA NA $724 $1.73

One Bedroom $793 $1.16 $932 $1.34 $897 $1.35

Two Bedroom, One Bath $851 $0.94 $873 $1.02 $1,009 $1.14

Two Bedroom, Two Bath $968 $0.92 $1,229 $1.40 $1,138 $1.12

Three Bedroom, 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

<100 units 100-200 units >250 units

$0

$200

$400

$600

$800

$1,000

$1,400

$1,200




One Bedroom

Studio

NA

NA

NA

NA

Rental Rates by Size of Community

Beyond the Numbers Midsize apartment communities (100-250 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.


9th East Lofts, Salt Lake City


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” east-side 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 5.

2.3% overall vacancy rate for apartment communities east of I-15

2.7% 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 $829 $1.60 $707 $1.86

One Bedroom $921 $1.35 $891 $1.32

Two Bedroom, One Bath $926 $1.20 $938 $1.03

Two Bedroom, Two Bath $1,201 $1.04 $1,114 $1.08

Three Bedroom, 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

East of I-15 West of I-15

$0

$200

$400

$600

$800

$1,000

$1,400

$1,200

OverallThree Bedroom



One Bedroom

Studio

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 best-in-class development and investment opportunities.


Liberty Crest Apartments, Salt Lake City

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 6.

2.4% 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 $660 $1.58 $724 $1.73 $1,136 $2.30

One Bedroom $812 $1.15 $873 $1.35 $1,028 $1.37

Two Bedroom, One Bath $846 $0.90 $969 $1.09 $946 $0.98

Two Bedroom, Two Bath $1,091 $1.08 $1,131 $1.13 $1,201 $1.16

Three Bedroom, 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

Pre-1980 1980 to 1999 2000 to Present

$0

$200

$400

$600

$800

$1,000

$1,400

$1,200




One Bedroom

Studio

Rental Rates by Age of Community

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.


Moda Bonneville, Salt Lake City


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 2016. 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.

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 2015. 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 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.

Beyond the Numbers Only 22% of apartment communities offered concessions in 2017, indicating quick turn rates and strong occupancy levels.


Jordan Valley Station, West Jordan

SUMMER 2017

RENTAL INVENTORY AND APARTMENT CONSTRUCTION TRENDS IN SALT LAKE COUNTYIn 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 2011-2015 period. One third of all renter-occupied 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 1984. 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.

TABLE 8Permits Issued for New Apartments

Year Units Year Units

1980 1,402 1999 1,185

1981 1,197 2000 1,024

1982 861 2001 1,098

1983 2,667 2002 733

1984 7,691 2003 1,084

1985 3,374 2004 1,388

1986 2,529 2005 1,302

1987 109 2006 338

1988 98 2007 916

1989 61 2008 1,521

1990 218 2009 2,442

1991 117 2010 541

1992 115 2011 1,581

1993 1,524 2012 1,695

1994 1,231 2013 1,685

1995 2,318 2014 2,788

1996 2,673 2015 2,911

1997 727 2016 4,461

1998 1,473Source: Bureau of Economic and Business Research, University of Utah and Construction Monitor

TABLE 7 Renter Occupied Dwelling Units by City (represents a five-year average, 2011-2015)

City 20002011-2015Average Change

Salt Lake City 34,869 39,157 4,288

Unincorporated SL County 17,421 17,459 38

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 6,048 720

South Salt Lake 4,972 5,155 183

Holladay 922 2,874 1,952

South Jordan 773 3,343 2,570

Draper 1,020 2,561 1,541

Riverton 382 1,125 743

Herriman 27 1,477 1,450

Bluffdale 81 390 309

Salt Lake County 91,544 118,800 27,256

Source: U.S. Census Bureau

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

Project NameYear

Completed Units Address CityIndependence at the Point 2014 144 15110 South Beacon BluffdaleRockwell Village 2012 60 15204 South Marksman Wy. 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 DraperDraper Village 2016 181 12092 South Draper Crest Ln. DraperParc West 2017 249 461 West 13490 South DraperFarm Gate 2010 496 5675 West 11800 South HerrimanSolameer at Herriman 2012 134 13400 South Herriman HerrimanTerrameer 2012 174 5223 West 12600 South HerrimanHerriman Town Center 2017 304 12883 South Brundisi Way 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 MidvaleStation at Midvale 2017 78 7862 Center Street MidvaleVillas at Fern Circle NA 36 8089 South Fern Circle MidvaleMillcreek 9 NA 27 3225 South 900 East MillcreekMillcreek Towers NA 38 3668 South 900 East MillcreekLions Gate 2011 400 120 West Fireclay Ave MurrayFrontgate 2009 128 4716 South Commerce Dr. MurrayArtesian Springs 2017 84 4205 South Main St. MurrayLegacy Spring 2003 204 12600 South 4800 West RivertonMonarch Meadows 2004 248 4800 West 13400 South RivertonMeadows at Park Avenue 2016 135 12674 South Sienna Meadow 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 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 CityElement31 at Brickyard 2016 208 3130 South 1243 East Salt Lake CityLiberty Crest 2017 177 150 South 200 East Salt Lake City360 Apartments 2017 151 360 South 400 West Salt Lake CityBall Park Apartments 2016 61 1380 West Temple Salt Lake CityTaylor Gardens 2016 112 1790 South West Temple Salt Lake CityNinth East Lofts 2017 68 900 East 444 South Salt Lake CityModa-Bonneville 2017 168 252 South 500 East Salt Lake CityArtspace Macaroni Flats 2012 13 244South 500 West Salt Lake CityParagon Station Lofts NA 38 200 South 300 West Salt Lake CitySego 28 NA 28 425 East 700 South Salt Lake CityPrana Townhomes 2015 21 255 West 800 South Salt Lake City

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.


SUMMER 2017

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

Project NameYear

Completed Units Address CityAire Condos (rental) NA 30 996 South 200 East Salt Lake CityBlueKoi 2011 20 1706 South 900 East Salt Lake CityMeadowbrook Station 2009 237 4010 Howick Street Salt Lake CountyOquirrh Hills 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 SandyThe East Village 2017 271 159 East Midvillage Blvd. SandyParc at City Center 2017 330 213 West Civic Center Dr. 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 JordanSouth Ridge 2015 145 10668 South Jordan Gateway South JordanBrick Stone Apts 2011 100 220 East 3300 South South Salt LakeMeadow Brook Lofts 2016 80 3808 South West Temple South Salt LakeRiverfront 2016 288 745 West Fine Street South Salt LakeSouth Main NA 112 2550 South Main South Salt LakeSilvercrest 2012 186 4500 South 2200 West TaylorsvilleMadrona NA 37 4560 South 700 East 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 Valley CityVillage at River’s Edge 2004 244 1225 West 3300 South West Valley CityFairbourne Station 2012 225 2900 Lehman Avenue West Valley CityPinnacle Highbury 2013 290 2800 South 5600 West West Valley CitySagegate at Haynes 2015 278 5600 West 2600 South West Valley CityTotal 19,008*through July 2017Source: Cushman & Wakefield

Blu�dale - 204 units, 1.1%Draper - 1,616 units, 8.5%

Herriman - 1,108 units, 5.8%

Salt Lake City - 4,765 units, 25.1%

Riverton - 587 units, 3.1%

Murray - 612 units, 3.2%Millcreek - 65 units, 0.3%

Midvale - 1,279 units, 6.7%

Salt Lake County - 525 units, 2.8%

Sandy - 2,047 units, 10.8%

West Valley City - 1,341 units, 7.1%

West Jordan - 1,822 units, 9.6%

Taylorsville - 223 units, 1.2%

South Salt Lake - 580 units, 3.1%

South Jordan -2,234 units, 11.8%

FIGURE 1 Number and Percent Share of New Market Rate Apartment Units by City, 2000 - July 2017 48%

of all new apartment units built since 2000 are located in Salt Lake City, Sandy, and South Jordan

(continued)

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.



SALT LAKE COUNTY: DEMOGRAPHICS AND EMPLOYMENT TRENDSThe 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 2000. 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 in-migration 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 2005.

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 -1,628

2015 1,094,289 13,360 2,875

2016 1,108,872 14,583 3,229

2017 1,127,117 18,245 6,292

2018* 1,145,846 18,729 6,871Source: Governor’s Office of Planning and Budget*Projected

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%

2016 683,762 22,465 3.2%

2017* 705,437 21,675 NA

2018* 725,515 20,078 NASource: Utah Department of Workforce Services*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 2007.

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

TABLE 12Apartment Projects Under Construction in Salt Lake County

Project Units Address City Type

Veranda 239 490 West 13490 South Draper Tax Credit

Rosegate in Herriman 298 11865 Freedom Park Dr. Herriman Market Rate

Park East 70 1709 East Murray Holladay Rd. Holladay Market Rate

The Station at Midvale II 84 7682 South Center Square Midvale Tax Credit

Metro at Fireclay Phase II 165 4930 South Main Street Murray Market Rate

Metro at Fireclay Phase I 175 57 West Fireclay Avenue Murray Market Rate

Murray Crossing 293 314 Vine Street Murray Market Rate

21 by Urbana 126 947 East 2100 South Salt Lake City Market Rate

4th West Apartments 493 255 North 400 West Salt Lake City Market Rate

616 Lofts 274 616 South State Street Salt Lake City Tax Credit

900 East Apartments 39 35 South 900 East Salt Lake City Market Rate

965 Central 50 965 South 200 West Salt Lake City Market Rate

Alta Gateway 264 200 South 500 West Salt Lake City Market Rate

Bodhi Salt Lake 80 750 West South Temple Salt Lake City Tax Credit

Fourth & Fourth 210 400 East and 400 South Salt Lake City Market Rate

Granary Place 134 258 West 700 South Salt Lake City Tax Credit

Greenprint 60 840 South 200 West Salt Lake City Market Rate

Hardware Station 265 200 North 400 West Salt Lake City Market Rate

Highland Townhomes 40 2855 South Highland Drive Salt Lake City Market Rate

Liberty Boulevard 266 750 East 400 South Salt Lake City Market Rate

Milagro Apartments 182 255 West 200 South Salt Lake City Market Rate

North 4th Apartments 110 375 North 500 West Salt Lake City Tax Credit

North Temple Flats 168 1999 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 2 145 1750 West Gertie Avenue Salt Lake City Market Rate

Little Cottonwood 264 1881 East 9800 South Sandy Market Rate

Hills at Sandy Station 146 234 East Sego Lilly Drive Sandy Market Rate

The Ridge 261 7633 South Union Park Sandy Market Rate

Pinnacle Sandy 332 8400 South State Street Sandy Market Rate

Sharon Gardens 58 3354 South Sue Street South Salt Lake Tax Credit

Townhomes Sugarhouse 32 2300 South 400 East South Salt Lake Market Rate

Via Phase 2 58 3808 South West Temple South Salt Lake Market Rate

Zellerbach 292 2255 South 300 East South Salt Lake Market Rate

Jordan Valley Station 267 8600 South 3400 West West Jordan Market Rate

Total 6,564

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 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

Draper - 3.6%Herriman - 4.5%Holladay - 1.1%Midvale - 1.3%

Murray - 9.8%

Salt Lake City - 53.6%

Sandy - 15.3%

South Salt Lake - 6.7%West Jordan - 4.1%

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

increase in rental inventory

Beyond the Numbers Similar to 2016, rental inventory increased over 5% in 2017. Salt Lake City continues to dominate the market with over half of all units under construction, while Sandy follows in second place.


North Fourth, Salt Lake City

The Ridge, Sandy

SUMMER 2017

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 2018-2019: Draper, South Salt Lake, and West Jordan, Table 16 and Figure 3.

TABLE 14Absorption Rates of Recently Completed Apartment Projects

Project City UnitsAbsorption Rate

Per Month

Jordan Station South Jordan 302 15

Dry Creek at East Village Sandy 282 16

Element31 at Brickyard Salt Lake City 208 11

The East Village Sandy 271 18

Liberty Crest Salt Lake City 177 20

9th East Lofts (Tax Credit) Salt Lake City 68 22

Riverfront South Salt Lake 288 19

The Station at Midvale (Tax Credit) Midvale 102 30

Villas at Founder's Point (Tax Credit) Midvale 97 30

Parc @ City Center Sandy 330 15

Herriman Town Center Herriman 304 17

Draper Village Draper 181 15

Parc West Draper 249 16

Moda-Bonneville Salt Lake City 168 22

Total: 3,017 Average: 19Source: Cushman & Wakefield

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.


600 Lofts, Salt Lake City


TABLE 15Proposed Apartment Projects in Salt Lake CountyName Units Address City TypeIndependence 255 15200 South 855 West Bluffdale Market Rate

Canyon Centre 123 7250 South Canyon Centre Dr. Cottonwood Hts Market Rate

Diamond Ridge 54 12160 South 1000 East Draper Market Rate

Draper South Point 119 166 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 126 4205 South Main Street Millcreek Tax Credit

Atresian Springs Phase III 134 36 East Columbia Avenue Millcreek Tax Credit

Lotus Calla 43 3723 South 900 East Millcreek Market Rate

Lotus Tapestry 42 832 East 3900 South Millcreek Market Rate

Meadowbrook Apartments 145 27 West 3900 South Millcreek Tax Credit

Spring Run Townhomes 48 965 East Murray Holladay Blvd. Millcreek Market Rate

Central Station Senior Apts. 84 4926 South Box Elder Street Murray Tax Credit

Central 9th Studios 12 928 South Washington Street Salt Lake City Market Rate

Central Ninth 43 968 South Washington Street Salt Lake City Market Rate

Flats on Richards 32 18 West 1700 South Salt Lake City Market Rate

Hardison Apartments 77 500 East South Temple Salt Lake City Market Rate

Hardware Station 195 255 North 400 West Salt Lake City Market Rate

Liberty Place 69 640 East Wilmington Avenue Salt Lake City Market Rate

Liberty Square 139 633 East 500 South Salt Lake City Market Rate

Liberty Square Townhomes 53 600 East 500 South Salt Lake City Market Rate

Liberty Uptown 109 315 East 200 South Salt Lake City Market Rate

Little Diamond 146 211 North Cornell Street Salt Lake City Tax Credit

Magnolia 65 315 East 200 South Salt Lake City Market Rate

Marmalade Flats 300 550 North 300 West Salt Lake City Market Rate

Metropolitan 74 315 East 200 South Salt Lake City Market Rate

Paxton 365 103 365 West Paxton Avenue Salt Lake City Market Rate

Pierpont Apartments 85 Pierpont Ave and 300 West Salt Lake City Market Rate

Rockwell Lofts 21 700 South 349 West Salt Lake City Market Rate

Salt Lake Costume 19 1701 South 1100 East Salt Lake City Market Rate

The Morton 137 245 South 200 East Salt Lake City Market Rate

West Gateway Commons 100 100 South 600 West Salt Lake City Market Rate

The Arcadia 211 8875 South 300 West Sandy Tax Credit

The East Village Phase II 65 159 Midvillage Boulevard Sandy Market Rate

Cliffs at Jordan Station 237 10448 South Jordan Gateway South Jordan Market Rate

Daybreak Condos 180 Daybreak Parkway South Jordan Market Rate

Flats at the District 120 11800 South District View Dr. South Jordan Market Rate

Liberty Crossing 157 2210 South State Street South Salt Lake Market Rate

Liberty on Main 120 2100 South Main Street South Salt Lake Market Rate

Ritz Bowling 287 2265 South State Street South Salt Lake Market Rate

The Hub of Opportunity 57 3844 South West Temple South Salt Lake Tax Credit

West Temple Apartments 260 3900 South West Temple South Salt Lake Market Rate

Gladstone Place 187 7800 South Mountain View West Jordan Market Rate

Novi at Jordan Valley Station II 181 8600 South 3400 West West Jordan Market Rate

Oquirrh Flats 96 3380 West 8756 South West Jordan Tax Credit

Station at Gardner Mill 272 1200 West 7800 South West Jordan Market Rate

The View at Oquirrh Flats 192 8000 South 5600 West West Jordan Market Rate

Total 6,436Source: Cushman & Wakefield


SUMMER 2017

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 6,436Source: Cushman & Wakefield

Blu�dale - 4.0%Cottonwood Heights - 1.9%

Draper - 14.0%

Herriman - 1.9%Holladay - 0.2%

Millcreek - 8.4%

Murray - 1.3%

Salt Lake City - 27.6%

Sandy - 4.3%

South Jordan - 8.3%

South Salt Lake - 13.7%

West Jordan - 14.4%

FIGURE 3 Share of Proposed Apartments Units by City 55%

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

PROJECTED RENTAL DEMAND COMPARED TO PROJECTED INCREASE IN RENTAL SUPPLYWhat 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

Beyond the Numbers Tax credit communi-ties comprise 16% of all proposed multi-family proj-ect. This diversification allows the Greater Salt Lake rental market to become more acces-sible and affordable to a wider variety of people, and maintain a well-balanced development.


Ritz Classic Apartments, Salt Lake City - rendering


2020—a substantial 9.26% increase in rental inventory since 2015. 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 2016. 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 OUTLOOKProjected 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 2015.

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

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 2018. Development in 2019-2020 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.

Over the next four

years, rental inventory will increase 2.4%

annually


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]

Jorgi Paul801.303.5570

[email protected]

Concept / Layout / Design / Data: CUSHMAN & WAKEFIELD Information Services GroupCushman & Wakefield Copyright 2017. 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

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. 2017 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 www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.

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