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Salt Lake City's office vacancy rate of 10.6% is above its 10-year average of 8.0% but below the national average of 13.9%. Despite steady office employment growth, which has averaged 2.1% annually in the past five years, lower office utilization rates have negatively impacted office fundamentals. While tech exposure is not as high as in Provo, the industry's shift to smaller footprints has contributed to weaker demand in the urban core. In the past 12 months, Salt Lake City has contended with -310,000 SF of absorption as -60,000 SF of office space delivered. Office availability at elevated levels is likely to persist in the near term if companies continue the trend of lower space requirements upon renewal or leasing new space. In 24Q3, the average lease deal was about 3,300 SF, a 36% decrease from the 2015-19 average of roughly 5,200 SF. Although the construction pipeline has begun to ease with -60,000 square feet delivering in the past 12 months, about 2.1 million square feet has completed in the past three years. About 220,000 SF of office space is underway and, once completed, would expand the existing inventory by 0.3%. Rents have been impacted by tempered demand and higher vacancies but continue to rise modestly.
Salt Lake City's retail market conditions remain historically tight. Consistent household growth, above-average income gains, and a steady labor market underpin consumer and tenant demand. With minimal supply pressure and few store closures, the availability rate is at an all-time low while rent gains soar to a record high. The retail availability rate has remained between 3% and 4% for the past two years. With limited space on the market, only a handful of leases over 20,000 SF were signed in 2024. The largest leases came from a mix of established national retailers and expanding regional tenants. Local businesses dominated the leasing of smaller spaces, including a range of restaurants and fitness and health tenants. Market conditions have become increasingly tight due to consistent demand and a lack of new construction. In the past five years, 660,000 SF of retail space has delivered, increasing inventory by less than 1%. In contrast, from 2015-2019 nearly 2.5 million SF completed, expanding stock by 3.4%. Currently, around 380,000 SF is under construction throughout Salt Lake City, which would expand inventory 0.5%, and most of that space is preleased.
The Salt Lake City vacancy rate has gradually risen from an all-time low of 2.5% in 2022 to 6.8% today. Roughly 4.5 million square feet delivered in the past 12 months, compared to the five-year average of 7.2 million. The pace of new construction has outpaced demand, as measured by the 4.4 million square feet of net absorption in the past 12 months, underperforming the five-year average of 5.7 million. The glut of supply coupled with weaker demand has made upward pressure a consistent theme in recent quarters. This theme will likely continue with 2.7 million square feet under construction. Construction starts have started to cool in response to the shift in market conditions. Rent growth is decelerating in industrial assets as vacancies climb. The average rent in the metropolitan area has increased by 3.0% year-over-year compared to 7.3% at the same time last year. Like developers, investors have been more cautious with the recent rise in the vacancy rate along with elevated borrowing costs.