Downtown Salt Lake City is seeing an unprecedented boom in apartment development, according to a new study released by the Kem C. Gardner Policy Institute.
In 2010, after 100 years of development, the number of downtown rental units in Salt Lake City totaled 5,200. By 2020, that number is expected to double to 10,000 units and the downtown population will grow to an estimated 20,000, about the same size as the population of Payson or Brigham City. For the purpose of the study, downtown includes the area from approximately 700 East to 700 West and from 400 South to North Temple, or roughly 1.65 square miles.
“The magnitude of the current boom combined with very high rental rates seems like a recipe for an overbuilt market,” said James Wood, Ivory-Boyer Senior Fellow at the Gardner Policy Institute. “However, as of October 2016, there are no signs of a distressed market. Vacancy rates are low, rental rates are increasing and absorption rates are strong.”
The current trends in construction, however, have brought much higher rental rates. The 15 apartment projects completed since 2011 are averaging monthly rates of $1,000 for a studio, $1,100 for a one-bedroom unit and $1,450 for a two-bedroom unit. The top-end rental rate for a two-bedroom unit is equivalent to the mortgage payment on the median priced home ($290,000) in Salt Lake County.
Over the next three to four years, vacancy rates are also expected to increase as an additional 3,000 units are completed. The doubling of the rental inventory by 2020 will likely dampen market conditions and investment opportunities, resulting in an end to the current cycle.
The full report is available online here.