Salt Lake City apartments keep rising while rents show no sign of falling

If you’re searching for an affordable apartment in Salt Lake City right now, you may want to sit down before reading further.

Dizzying new numbers show the market for available rentals in Utah’s capital is tighter than ever. Vacancies in and around the state’s main population center haven’t been this low in 20 years and are far enough below 2% that economists are now having difficulty measuring the rate at all.

This pinch comes despite an unprecedented upswing in construction of multifamily housing along the Wasatch Front that is now shifting into an even higher gear, according to new data from the Salt Lake City real estate firm Cushman & Wakefield.

This historic wave of residential development is pushing the urban core upward (with towers) as well as westward, with dense mixed-use projects laden with housing that often cover a block or more of the Depot and Granary districts.

A record 93 apartment projects are either under construction or in the works in Salt Lake County, according to Cushman & Wakefield’s new tally — with potential for up to 18,697 mint units coming to market over a few years, including the region’s first luxury residential skyscrapers. Average rents for all apartments taken together could top $1,400 a month.

Between half and two-thirds of all those new apartments are landing in Salt Lake City, which the latest census shows is just shy of 200,000 residents after a decade of Utah being the nation’s fastest-growing state.

The number of new dwellings “would be a significant volume for any city, let alone Salt Lake City. It’s just stunning to us,” said Kip Paul, the firm’s director of investment sales, who called the trend “unprecedented” in his 40-year career.

Paul and other top analysts are predicting the new spate of construction won’t meaningfully ease the ongoing shortage of available apartments at more accessible prices, which has rents climbing rapidly and many residents priced out.

The latest year-over-year jump in rents across Salt Lake County averaged 10%, the second highest gain in 20 years.

And, yes, that picture does appear to defy economic gravity.

Housing gaps

This supply-and-demand disconnect in Utah rentals runs parallel to a similar price trend and relative lack of stock in new and existing single-family homes across the state. The median home price in Salt Lake County is now above $550,000 — with inventories of available homes at all-time lows despite loads of construction.

As record apartment building ratchets up even further, analysts say it could still be at least a year — if then — before all this new housing supply makes a palpable dent in the area’s rental crunch.

Take both trends as evidence of the depth of Utah’s housing gap. Estimates released earlier this year suggest homebuilders in the state and the rest of the country are trying to make up for 10 years of shortfalls in construction after the Great Recession, creating a lack of at least 50,000 affordable homes and rentals in the Beehive State.

Right now, financiers and developers are reacting to an intense spike in demand for apartments and other types of housing across Utah, spawned in part by the coronavirus pandemic, low interest rates and cravings for new living spaces. Most these new apartment, town home and condominium complexes in Salt Lake City are then getting sold to eager investors.

The combined effects have cranes swinging and building crews scurrying across the city in a boom that has put developable land, building materials and labor all at a premium. Nowhere is the rush more obvious than in the Granary District, a once-blighted warehouse and industrial area in the eastern shadows of Interstate 15.

Ready for ‘gritty’

Seventy-seven acres in the Granary neighborhood are now seeing some kind of construction or are headed to development, and large assemblages of additional land are changing hands with more homes, offices and shops in mind.

Between some 14 projects now in flux in that part of town spread over a contiguous 18-block area, there are upward of 3,000 housing units coming, over 1 million square feet of new office and flexible workspaces and at least six new retail hubs.

The density they’re bringing is starting to show, especially in a part of the city once pocketed with bland one-story buildings, vacant concrete, garbage and the occasional homeless encampment.

A modern coworking space called Industry, carved into a World War II-era foundry centered at 650 S. 500 West in the Granary, got off the ground in late 2019 with a first phase of about 120,000 square feet of quirky and adjustable workspaces.

That cavernous renovation is not only close to full of business tenants, said Jason Winkler, one of project’s chief developers with a company called Q Factor, but is also now surrounded by similar large-scale projects on at least four adjacent city blocks, with construction pending or on the way.

Much of the work is adapting and renovating existing historic buildings instead of demolishing them and putting up new ones.

Mass transit is a large factor in spurring this new urban growth, too, with much of it clustering within a few blocks of TRAX lines and Utah Transit Authority’s intermodal hub, at 300 S. 600 West, and a proposed light rail extension along 400 West.

Well aware of this surge in new investment, the Salt Lake City Council is vetting the idea of borrowing $7 million from state transportation dollars to chip in on what is now proposed as a nearly 1,000-stall parking garage on land next to Industry to serve development in the Granary.

Q Factor itself is pursuing two large housing projects next to Industry, with 200 units apiece of moderate and luxury apartments, Winkler said, along with a pedestrian-friendly face-lift with trees and gathering places along several adjacent blocks of 500 West.

The firm’s development manager, Jesse Dean, said most residents have no idea how transformative this latest round of building in the Granary will be “just because it’s taken so long and been at a slower pace until now.”

Winkler and his wife, Ellen, pioneered redevelopments to great success in similar transitioning areas in Denver, starting with workspaces, then housing and retail spots with a vision of creating entire neighborhoods in phases. Several developers are now pursuing that same formula on the city’s southwest quarter, where land is a bit less expensive.

Winkler said the neighborhood is ripe for it, due to its proximity to downtown, a host of vintage buildings with character, and shifting tastes in Salt Lake City. “If you watch different cool corners of really interesting cities and just kind of read how they rebirth themselves,” he said, “the Granary has every single little piece of what you could want.”

Salt Lake City and Utah, Winkler said, “are ready for something that’s different, a little funky and a little gritty.”

Inching westward

Folks behind another linchpin in downtown’s emerging shift westward, known as the West Quarter along 300 West, also hit a milestone last month on their way to completing the project’s first hotel and main residential tower in a huge development across the street from Vivint Arena.

Construction crews placed a final steel beam on the joint tower in a “topping out” ceremony attended by city officials and hundreds of site workers for Jacobsen Construction.

Ryan Ritchie, with The Ritchie Group, developing the West Quarter with Garn Development, said it “will contribute significantly to a vibrant and sophisticated urban core as Salt Lake City’s stature among American cities continues to ascend.”

The project also will create a new midblock walkway and is likely to spur a major upgrade for adjacent Japantown.

And the West Quarter’s 230 residential units also will join Liberty Sky, a luxury residential tower almost completed at 151 S. State, and other soaring skyscrapers in pushing the high end of rents on Salt Lake City’s skyline.