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Commercial Property Loans in Utah

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Utah's economy has been growing steadily over the past few years, with a low unemployment rate of 2.9% as of August 2021, according to the Bureau of Labor Statistics. The state's population has also been increasing, with a growth rate of 1.7% in 2020, according to the U.S. Census Bureau. This growth has led to a strong demand for commercial real estate in Utah, particularly in the multifamily, office, industrial, retail, self-storage, and hospitality markets.

Economy in Review

Utah's economy is diverse, with major industries including healthcare, education, government, and technology. The state has a business-friendly environment, with low taxes and regulations that make it attractive to companies looking to relocate or expand. In recent years, Utah has also become a hub for tech startups, with companies like Adobe, Qualtrics, and Pluralsight all based in the state. The COVID-19 pandemic had a significant impact on Utah's economy, but the state has been able to recover quickly. According to the Utah Economic Council, the state's GDP is expected to grow by 4.5% in 2021, and the unemployment rate is projected to continue to decline.

Multifamily Market

The multifamily market in Utah has been strong in recent years, with high demand for rental properties due to the state's growing population and low unemployment rate. According to CBRE, the average rent for a two-bedroom apartment in Salt Lake City was $1,300 per month in Q2 2021. Financing options for multifamily properties in Utah include conventional loans, FHA loans, and Fannie Mae and Freddie Mac loans.

Office Market

The office market in Utah has also been growing, particularly in Salt Lake City and the surrounding areas. According to CBRE, the vacancy rate for office space in Salt Lake City was 11.5% in Q2 2021, with an average asking rent of $25.50 per square foot. Financing options for office properties in Utah include conventional loans, SBA loans, and CMBS loans.

Industrial Market

Utah's industrial market has been booming in recent years, with companies like Amazon and UPS opening large distribution centers in the state. According to CBRE, the vacancy rate for industrial space in Salt Lake City was just 3.5% in Q2 2021, with an average asking rent of $0.68 per square foot. Financing options for industrial properties in Utah include conventional loans, SBA loans, and CMBS loans.

Retail Market

The retail market in Utah has been impacted by the rise of e-commerce, but there is still demand for well-located retail properties in the state. According to CBRE, the vacancy rate for retail space in Salt Lake City was 7.6% in Q2 2021, with an average asking rent of $17.50 per square foot. Financing options for retail properties in Utah include conventional loans, SBA loans, and CMBS loans.

Self-Storage Market

The self-storage market in Utah has been growing in recent years, with demand driven by the state's population growth and strong economy. According to CBRE, the vacancy rate for self-storage space in Salt Lake City was just 4.8% in Q2 2021, with an average asking rent of $1.17 per square foot. Financing options for self-storage properties in Utah include conventional loans and SBA loans.

Hospitality Market

The hospitality market in Utah has been impacted by the COVID-19 pandemic, but there is still demand for well-located hotels and resorts in the state. According to CBRE, the occupancy rate for hotels in Salt Lake City was just 47.5% in Q2 2021, with an average daily rate of $94. Financing options for hospitality properties in Utah include conventional loans, SBA loans, and CMBS loans. In conclusion, Utah's strong economy and growing population have led to a strong demand for commercial real estate in the state. Financing options for each real estate type vary, but conventional loans, SBA loans, and CMBS loans are all available for most property types. As always, it's important to work with a trusted lender who can help you navigate the financing process and find the best loan for your needs.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Utah, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Utah

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Utah. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Utah

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Utah. Click to get a free insurance quote for your property — no obligation.