Mid-Year Report for St. George, Utah
The residential market has continued to show strength in Southern Utah. New construction has been flourishing and new homes under $300,000 have been selling quickly. The construction market typically falls 12-18 months behind the residential sector. The commercial market has seen the vacancy numbers decrease consistently over the past 6-12 months, and that will have to continue for the next 12-18 months before people will take the risk of building new product. That should give the rental rates a time to increase, justifying the need for new product.
Industrial rates since 4th quarter 2009 have decreased overall from just under 15% to 6.4%. Consequently we have seen the lease rates start to increase, but they need to increase another 25-30 % before it makes sense for an investor to build new industrial space.
The office market has had some fairly good improvement as vacancies have dropped from over 15%, and now has settled in at about 11.5%. The medical office has continued to keep the lowest amount of vacancy, sitting at 3.5%-
The retail sector dropped in total vacancy from 8% in 4th quarter 2009 and has remained pretty consistent around 6.4%. Red Rock Commons has shown some of the greatest growth in national credit tenants in the past year by the recent opening of Firehouse Subs, Chic-Fil-A, and the Einstein Bagels which is currently under construction.
Overall the outlook for the St. George Commercial Real Estate market is promising. The growth and increase will need to be controlled and steady so it doesn’t become artificial and cause another bubble.