LEHI, Utah – After a rough year for commercial office space in Utah, analysts expect optimism and demand to return to the market in 2021.

“Right now, you look at it and it feels like there are so many empty parking lots out there,” said Lana Howell, senior director of research with Colliers Utah. “But the big picture—if you pull back and look at our economy and see that people are very interested—we’re still considered very cheap compared to California.”

As the pandemic forced employees to work from home, Howell said vacancy increased slightly and new office space filled up at a slower pace last year.

“I think as the vacancy rate goes down a little bit you’ll see developers willing to build again,” she said.

The pandemic impacted commercial and residential real estate differently, said Dejan Eskic, a senior research fellow with the Kem C. Gardner Policy Institute at the University of Utah.

“It’s made housing more expensive and it’s driven up demand,” Eskic said. “For 2020, we’ve seen 15% to 16% increases in the price of housing.”

When it comes to office space, the pandemic put some projects on pause.

“2020 ended with office construction activity down about 45% to where it was in 2019,” Eskic said. “However, office jobs haven’t seen that sort of decline. They’ve had a net positive growth.”

Howell and Eskic said questions remain about what the workplace will look like as the COVID-19 vaccine is administered and workers return to the physical office.

“On the commercial side, we’re still in an environment where we’re trying to see what the world looks like post COVID,” Eskic said.

In the 2021 Economic Report to the Governor, the authors write that the Utah housing market is poised for another banner year while commercial construction will be slower to recover.

“The job losses of 2020 will likely lead to an increase in vacant space,” the report said. “As the job market recovers in 2021, this empty space will need to be reabsorbed before new space is built.”

One bright spot for commercial real estate has been the increased demand for industrial, warehouse and manufacturing space, which was fueled in part by changes in shopping habits during the pandemic.

“The sector surpassed its record-setting 2019 with a 1.7% increase in permitted construction value in 2020, totaling $683.7 million,” said the 2021 report to the governor. “The increase in logistics warehousing and retail distribution and storage space pushed demand to a new record.”