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SALT LAKE CITY — This time of year causes many to reflect upon the past 12 months and wonder what the coming year will bring. While this happens on many levels, for businesses it is particularly important to look ahead and anticipate economic conditions and trends. Fortunately for Utah businesses, the state's economy appears to be headed for another year of respectable growth.
Every few months, I participate in the production of a joint economic outlook between the Salt Lake Chamber and CBRE (full disclosure: I am employed at CBRE as a senior research analyst). This report is produced by gathering a team of analysts, researchers and economists to discuss the latest economic data and recent developments; the group examines these factors in order to understand how economies on the global, national, state and local levels will perform. By extension, this affects the performance of commercial real estate markets as they reflect broader economic conditions.
Budget Deal
Fortunately, the coming year appears to be shaping up quite well in many respects. Notably, the U.S. economy is expected to experience improved growth levels in 2014.
Fortunately, the coming year appears to be shaping up quite well in many respects. Notably, the U.S. economy is expected to experience improved growth levels in 2014.
In addition, for the first time in a long time, U.S. policymakers appear poised to act outside of the context of an imminent or on-going crisis to address budget matters. Regardless of one's opinion, the recent budget deal reached by Senator Murray and Representative Ryan will reduce headwinds for the economy by decreasing uncertainty and removing the possibility of a government shutdown. This should aid both consumer and business sentiment in 2014.
However, the potential for disruptive governance, which adversely affects confidence, will remain a possibility. A previous deal struck to end the partial government shutdown in October 2013 only extended the debt ceiling through February 7, 2014. Although the Department of Treasury maintains the ability to employ extraordinary measures, the debt ceiling will need to be addressed sometime soon (likely during the first half of '14). If national leaders do not handle this issue responsibly, negative effects on markets and economies will be felt.
Beyond the debt ceiling, questions surrounding the sustainability of U.S. fiscal policy over the long-term will continue to be of concern. Furthermore as the Federal Reserve continues the process of normalizing policy (by tapering asset purchases), the potential for market disruptions which could impact broader economic conditions will merit observation during the coming year.
Growth in Utah
On the state level, growth in 2014 is expected to remain healthy. Job growth across all sectors is estimated to reach 3.1 percent during the coming 12 months. While improvement in the state's labor economy will be experienced with such growth levels, labor force participation rates remain a concern. Labor force participation rates fell dramatically during the Great Recession and have not recovered. This indicates many discouraged workers remain on the sidelines.
On the county level, Salt Lake County's economy is expected to continue growing at respectable levels in 2014. Overall growth in the county will be similar to statewide projections.
On the county level, Salt Lake County's economy is expected to continue growing at respectable levels in 2014. Overall growth in the county will be similar to statewide projections. Conditions in Salt Lake County's labor market are expected to steadily improve in 2014. Employment growth is expected to bring the county's unemployment rate down to 4.2 percent by the end of the next year.
In addition, prominent projects such as Salt Lake International Airport's Terminal Redevelopment Program and Huntsman Cancer Institute's expansion will commence during the coming year. Such projects will provide a boost to the local economy and yield economic benefits for years to come.
Commercial Real Estate
Positive trends expected in 2014 will be reflected in the local commercial real estate (CRE) market.
Across the primary CRE sectors (office, industrial and retail) demand is expected to remain positive over the next 12 months and aid improving market fundamentals.
It should be noted however, that companies will maintain their focus on expenses and efficient utilization of real estate. Trends toward efficiency will ultimately affect commercial real estate preferences and growth levels, particularly in office markets.
Even still, the Salt Lake office market is expected to continue improving on a market-wide level with certain locations experiencing strong demand.
Salt Lake's industrial market is also expected to continue performing well. Salt Lake County is an attractive location for industrial operations of all types.
Salt Lake's industrial market is also expected to continue performing well. Salt Lake County is an attractive location for industrial operations of all types. This is fueling steady demand which is attracting attention from developers. In fact, industrial land is being absorbed quickly, indicating the potential for increasing amounts of development in the near future.
The retail real estate market in Salt Lake experienced healthy improvement in 2013 due to steady demand - a trend expected to continue in 2014. Active retailers continue seek out high-end locations with good accessibility and visibility. With healthy growth levels expected in the area's economy during the coming year, positive trends in the retail real estate market are expected to continue
Conclusion
There are many reasons to be optimistic about 2014; however, structural issues plaguing large economies around the globe with broad implications will continue to weigh on the outlook for 2014 and beyond. Still, while unforeseen events are always a possibility, major disruptions are not expected during the coming year.
As such, growth on a national level is expected to improve. The state of Utah and Salt Lake County are expected to experience moderate growth during the coming year and that growth will be reflected in commercial real estate markets.
