Prices keep rising as new construction continues across Southern Utah – The Spectrum

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The Great Recession took its toll on Washington County, with unemployment above 10% when the decade started in 2010 and the fast-paced growth of the 2000s slowed to a virtual standstill.

But the decade ended with a bang. The growth returned, long-dormant development projects were revived and now, as the 2020s begin, economic forecasts see nothing but steady growth on the horizon.

A new report from real estate company NAI Excel outlines the changes different economic sectors haveseen since 2010, and the picture is clear the 2010s may have started slowly, but the once they got going, they haven't looked back.

Vacancy rates for leasable commercial and industrial areas, along with multi-family housing units, fell to below 5% in much of the city by the middle part of the decade as the economy sped back up. Then, in more recent years, the demand for more space drove an onslaught of new construction.

Many new construction projects were completed or started in the last few years of the decade, and even moreprojects are on the horizon.

Construction crews finish paving around Joule Plaza Thursday, Jan. 30, 2020.(Photo: Chris Caldwell / The Spectrum & Daily News)

In the last twoyears, Washington County has added 552 multifamily housing units, reviving a segment of the housing mix that had been nearly nonexistent in the first part of the decade.

In 2016 and 2017, some student housing was added. But before 2018, there was almost no construction of multifamily housing in the county.

Vacancy rates hit a low point in 2016 at less than 1%. However, 2018 and 2019 brought more multifamily projects to the area, and the vacancy rate has climbed slightly since then, measuring at3.2% at the end of 2019.

Bigger, faster: Report pegs Southern Utah for 7 million sq ft of new development in 2020s

Still, despite the newly completed projects, like Grayhawk and Retreat at Sky Mountain,asking rent is on the rise. Asking rent for a two-bedroom hovered around $648 for apartments at the beginning of the decade. Now the average asking price is over $1,000.

Discussions around "attainable housing" St. George and Washington Countys rebranding of affordable housing has been ongoing, and some housing projects slated in Washington County will be considered "attainable" for some lower-income workers, a segment of the community that has been largely starved of living spaces they could find affordable.

Construction crews work on Splash City in Middleton Thursday, Jan. 30, 2020.(Photo: Chris Caldwell / The Spectrum & Daily News)

Southern Utah's retail markets have taken a hit due to online shopping much like the rest of the country. Retail meccas like Red Cliffs Mall and K-mart complex on Bluff Street have seen major renovations and changes in recent years.

Yet, despite the tumultuous decade for retail, around 1.1 million square feet of retail space was added to the county since 2010. Projects like Red Rock Commons, Smiths, Harmons and Lins added significantly to the retail market.

Asking lease rates for retail space is up to $17.50 per square foot, rising from $12.72 in 2010. Vacancy rates declined 3.5 percentage pointsover the last 10 years, with the current rates at 4.3%.

The NAI report states that as major retailers are slow to expand, concepts around retail shopping are evolving. Already, big construction projects like Commerce Pointe and retail in Washington Fields are under construction. The report projects retail growth along the Southern Corridor and near exits 2, 13 and 16 off of I-15 in the next 10 years.

In Iron County, vacancy rates for retail space hovered around 6-8% throughout the decade. However, at the end of 2019, rates dipped to 2.2%. Lease rates for Iron County also didnt see much significant changeover the decade, with asking lease rates around $13.00 per square foot.

Construction crews work near Washington Parkway Thursday, Jan. 30, 2020.(Photo: Chris Caldwell / The Spectrum & Daily News)

Vacancy rates and asking rent prices for office space in Washington County have beenon the rise in recent years. However, the decade started with a peak in vacancy rates at 16.7%, dropping to its low in 2017, but on an upward turn now at 4.4%.

Asking lease rates have steadily increased from around $4 a square foot in 2010 to almost $14 in 2019.

The move and expansion of the Intermountain Hospital campus to River Road had the biggest impact on the office market. The old campus located off of 400 East, has made the medical office vacancy rate almost 16%.

The number of square feet of office space added this past decade was tepid, according to the report. And even though traditional office space construction was down, the construction of emergency care, assisted living, education, government and other special-use facilities are significant, the report states.

Iron Countys asking lease rates rose to an average of about $12.00 per square rate. At the same time, vacancy rates fell most of the decade, and are now around 2.2% for office space.

From 2010 to 2016, just three hotels were added to Washington and Iron counties. That changed dramatically over the last two years, though,with1,800 rooms addedas part of21 total projects.

The report states hotel operators are finding occupancy rates and revenue per available room are falling, despite the past few years of record highs.

The number of hotels built in Washington and Iron counties have had spurts of growth over the last 50 years. However, between 2017 and 2019, numbers reached their all-time highs.

Construction crews work near River Road Thursday, Jan. 30, 2020.(Photo: Chris Caldwell / The Spectrum & Daily News)

Around 2.3 million square feet of industrial space was added over the last decade and more than 15% of it was completed in 2019. Eleven industrial projects were completed in 2019 alone, the biggest one being phase one of the Paparazzi facility, and phase two, which is under construction, will be more than double the size of the first one.

The average asking lease rates have almost doubled since 2010, with prices at $8.60 per square foot for buildings under 20,000 square feet and $6.60 for larger buildings. As asking lease rates have skyrocketed, vacancy rates have dropped from 14% to 5%, with the low point in 2017 at 2%. Vacancy rates for spaces smaller than 20,000 square feet are at 1.3%, with new, larger facilities driving up the rate.

Around 353,000 square feet of industrial space was added in 2019, bringing the total, county-wide, to over 10.4 million square feet.

Following a similar pattern as Washington, Iron County saw average industrial lease rates fall during the first few years of the decade and are now on an upward climb. The county started or completed six industrial or storage projects last year. However, there is still very limited availability for industrial space in the county now though, with vacancy rates less than 1%.

Lexi Peery is the environment, politics and development reporter for The Spectrum & Daily News, a USA TODAY Network newsroom based in southern Utah. You can reach her at lpeery@thespectrum.com and follow her on Twitter @LexiFP.

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Prices keep rising as new construction continues across Southern Utah - The Spectrum