The competition for housing in and around St. George has always been fierce, but with vacancy rates for most business properties now at or below 1% in 2022, the competition among businesses may be even fiercer.
Commercial space across the board is squeezed tighter than ever in southwestern Utah, with vacancy rates for offices and retail stores at about 1% and rates for industrial space at lower than 1%, according to a new mid-year report released by NAI Excel, which releases regular commercial real estate updates for locations from Las Vegas to the Wasatch Front.
There is some uncertainty in the market moving forward given rising interest rates, high construction costs and monetary inflation, but the St. George area’s combination of fast-paced population growth, educational opportunities and quality of life considerations mean it remains as attractive as ever to businesses looking to either move to the area or expand into it, said Jon Walter, chief operating officer for NAI.
A number of large projects are currently under construction, including large medical office spaces and a massive expansion of commercial space in the Quail Creek industrial area, which could help meet some of the growing demand for space, but the market remains very tight, Walter said.
“There’s still a major shortage of properties to buy,” he said. “It’s extraordinarily difficult to find existing buildings to move into. It’s getting a little easier to find land, but there are still a lot of challenges.”
All of that scarcity has driven rents upward, with the going rate for office space at $17 per square foot. Retail space is even more expensive, at more than $20 per square foot.
The lack of space mirrors the long-term trends seen in the area’s housing market, where median sale prices for homes have risen more than 25% in the past year and where rents for apartments and other multi-family housing units having gone up by 14% between the end of 2021 to mid-year 2022. The NAI report shows that more than 1,000 new units are under construction.
A major factor moving forward will likely be the impact of the federal government’s ongoing efforts to combat inflation, Walter said. He noted that recent efforts to contract the economy have resulted in higher interest rates for borrowers, making some businesses less likely to move ahead with expansion plans if the finances don’t make sense.
Still, the demand for new space suggests the area remains an attractive one for businesses.
Southwestern Utah has seen some of the fastest-paced growth in new jobs anywhere in the U.S. over the past year, and despite an overall slowdown in the national economy, the state as a whole continues to find new places for workers.
Utah’s nonfarm payroll employment increased 3.5% over the 12 months from July 2021 to July 2022, adding more than 56,000 new jobs. The statewide unemployment rate stood at just 2%.
“High inflation and now two consecutive quarters of declining national Gross Domestic Product (GDP) would normally be accompanied by lowering job counts,” said Mark Knold, chief economist at the Utah Department of Workforce Services. “But neither is the case at both the national and state levels where job growth was aggressive in July.”
David DeMille writes about southwestern Utah for The Spectrum & Daily News, a USA TODAY Network newsroom based in St. George. Follow him at @SpectrumDeMille or contact him at dd******@th*********.com. To support and sustain this work, please subscribe today.
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