Salt Lake City-Ogden, Utah The economy of Salt Lake City’s metropolitan area continued to decline because of a weaker economy and the aftereffects of the 2002 Olympic Winter Games. The annual average wage and salary employment in the 12 months ending November 2002 was 1.3 percent below the level recorded a year earlier. Although migration to the area has slowed, the Utah Office of Planning and Budget (OBP) estimates that population has grown at an annual rate of 1.6 percent since April 1, 2000, to 1,381,200 as of July 1, 2002. The Olympics greatly affected the area’s economy. According to OBP, approximately $4.5 billion in construction projects were built or accelerated to coincide with the start of the games. Because the bulk of these projects were completed in 2001, construction employment then began to decline. Concurrently the national recession hit the area’s high-technology sector. According to the Utah Department of Workforce Services, approximately 7,000 high-technology jobs were lost from January 2001 through June 2002. The large, but temporary, economic boost of the games during the first quarter of 2002 helped ease some of these losses; however, many temporary workers departed the area and the Salt Lake Olympics Organizing Committee vacated approximately 500,000 square feet of office space in the central business district following the games. As a result, the addition of new office space and a weak economy pushed office vacancy rates to the highest level in over a decade. According to Colliers Commerce CRG, the office vacancy rate in Salt Lake County climbed to 17 percent by the end of 2002. The outlook for 2003 is for moderate employment growth that will begin in the second half of the year when the U.S. economy rebounds and the effects of construction for the Olympics have subsided. On the positive side, increased tourism resulting from the Olympics exposure and infrastructure improvements is predicted to stimulate the economy for years to come. The defense sector will also remain a bright spot in the area’s economy. This is primarily centered at Hill Air Force Base (AFB), home to the Ogden Air Logistics Center. According to the Hill AFB Public Affairs Office, the number of permanent-party civilian and military personnel working at the base increased by nearly 15 percent by the end of 2002 compared with last year’s official count of 15,957. The base’s designation as a center for low-observable (stealth) technology has stimulated expansion at prime military contractors in the area such as TRW, Inc., and L-3 Communications. In 2001 the vast majority of defense spending in the State was in the Salt Lake City metropolitan area, which the Department of Defense estimated at $2.35 billion—nearly double the level recorded in 1998 and a 23-percent increase from 2000. OBP estimates indicate that strong growth in defense spending continued in 2002, a trend that will likely continue over the next few years. Defense-related expansion and low interest rates kept single-family building and existing home sales ahead of last year’s pace despite the overall slowdown in the local economy. The number of single-family permits through December 2002 was up by 5.2 percent from last year’s December level. Existing single-family home sales through December 2002, tracked by the Salt Lake Association of REALTORS®, was up 1.7 percent from last year whereas the average sales price increased by 0.8 percent to $171,300. The market is strongest and activity the greatest in the first-time buyer market for properties selling for $100,000 to $175,000; the market becomes more competitive in price ranges above this level, and the high-end market—homes priced above $400,000—is the weakest. Multifamily construction for the year 2002 declined to 2,000 units, or 18 percent, from 2001’s total. The decline in apartment construction is far greater; for the first time, owner condominium units permitted outnumbered renter apartment units. This slower pace of rental construction is a response to the Olympics building boom that put hundreds of new apartment units on the market. The rental market continues to weaken even with the construction cutbacks of this year. In surveys conducted during 2002 by Hendricks & Partners (third quarter) and EquiMark Properties (fourth quarter), apartment vacancy rates increased by more than 3 percentage points from a year earlier. EquiMark’s survey pegs the rental vacancy rate at nearly 11 percent and finds that three-fourths of all properties offer incentives, ranging from low or no security deposits to as much as 2 months’ free rent. Both studies indicate that rents are flat and owners are offering the highest level of incentives in a decade. There are some signs that the market has bottomed out, but the speed of a return to a balanced condition depends on how quickly the economy recovers and the way interest rates go.

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