Even with demand running strong, construction completion totals slowed in 2011 and slowed again in 2012. For the first half of this year, Reis cites 615 units of market-rate net absorption alongside no new completions. According to the firm’s October 8 report on individual construction projects, 485 market-rate units will complete all told this year in four projects. The largest, recently completed, is the 252-unit Talavera at the Junction in Midvale. An October delivery, meanwhile, is cited for the 108-unit Eastgate at Greyhawk Apartments in Layton.
The market is tight—a result of the recent imbalance of supply and demand and a long preceding history of high occupancy. Reis puts second-quarter vacancy at just 4.0%, down 40 basis points from the quarter before, down 160 year-over-year. Rent growth reflects the overall strength. At $776 and $733 per month, second-quarter asking and effective averages were up 0.9% and 1.1% for the period and were up 1.4% and 1.9% year-to-date, following respective increases of 2.4% and 2.6% all told in 2011. The two-month July–August span brought 153 units of positive net absorption and gains of 0.5% for both average rents. “Through the remainder of the year,” states Marcus & Millichap in its third-quarter report on the local market, “light construction will provide local owners with an opportunity to fill vacant units and raise rents ahead of a surge in completions starting early next year.”
Reis is reporting a marked increase in construction activity. Including 55 units due online in October in the second phase of the Belmont Station development in Sandy, 1,439 market-rate apartments are currently under construction, 1,314 of which have been assigned 2013 completion dates. Included is the 122-unit CityScape Apartments at 144 S. 400 East in Salt Lake City. Reis cites an October 2012 groundbreaking. The total should rise: the firm’s second-quarter analysis calls for the completion of more than 2,300 market-rate apartments next year. Leading the way will be the January delivery of the 324-unit Park Lane Village project in Farmington. Construction began in June 2011. As reported by GlobeNewswire in September, Parley’s Partners has begun construction of the $45 million upscale Birkhill on Main Apartment Homes in south suburban Murray. The first phase will include 137 apartments, 41 of which are classified as market-rate. All told, 311 luxury apartments and a small office building are planned for the project. Downtown’s City Creek Center mixed-use development also claims a rental component: 111 market-rate apartments and 150 condo units delivered here last year; 300 additional condo units are planned. “City Creek’s recent opening and renewed development in the Sugar House district,” asserts Marcus & Millichap, “will attract businesses and young professionals to the area, boosting demand for the several planned and under way apartments in the area.”
Reis expects the vacancy rate to end the year at 3.8%. The marked increase in construction deliveries in 2013 will have little effect on the low vacancy profile. Gains of 3.3% and 3.9% are forecast for the mean asking and effective rents for 2012 all told. Higher growth rates should follow next year as the market stays tight. Development should remain active but is not expected to result in higher vacancy rates for the foreseeable term.