WESTERN SNAPSHOT, JANUARY 2008

Salt Lake City Retail Market

Haws

The media reports are glowing. In July 2007, Forbes magazine ranked Utah second among the “Best States For Business,” and the Beehive state ranked third in CNBC’s poll “America’s Top States For Business.” And in October 2007, Forbes.com put Salt Lake City in the top spot on its “Best Cities for Jobs” list. Indeed, business is good in Utah, and a significant component of that success is occurring in the retail market in the Salt Lake Valley and along the Wasatch Front.

There are two prominent trends that have contributed to the successful surge of retail development in the area for the last 8 years. The first trend is retail development has followed continued suburban expansion. Utah is experiencing unprecedented population growth, averaging a 26.9 percent increase every 10 years for the last 50 years. Subsequently, strong residential growth during the past several years in newly emerging areas continues to provide ample demand for shopping centers anchored by grocery and discount retailers. The cities of Lehi, Draper, Riverton, Herriman, South Jordan and Syracuse have experienced tremendous growth and are now seeing the retail development that follows the rooftops.

The second prominent trend is occurring in established areas, with retail developers beginning to take advantage of opportunities to reinvigorate blighted or underperforming greyfield locations. Plans were recently announced to give the now-vacant (except for Macy’s), 57-acre Cottonwood Mall in Holladay a major facelift. Owned by Chicago-based General Growth Properties, the $552 million redevelopment project calls for a mixed-use development with 534 residential units located among 700,000 square feet of retail and 100,000 square feet of office space.

Several other enclosed malls along the Wasatch Front are undergoing renovations. Fashion Place Mall in Murray, also owned by General Growth, announced in June 2007 that it plans to add 240,000 square feet of shop space to the current 876,000-square-foot floor plan by 2010. This includes Utah’s first Cheesecake Factory restaurant, which opened in November 2007. Valley Fair Mall in West Valley City, purchased by Sandy-based Satterfield-Helm Management Inc. in 2005, announced a redevelopment project late last year to transform from a traditional indoor mall to an outside shopping plaza. The revitalization also includes the recently opened Costco.

On the site of the former Ogden City Mall, demolished in 2002, Salt Lake City-based The Boyer Company is currently constructing a new mixed-use development named The Junction. It includes the four-story Wells Fargo Center with 65,000 square feet of Class A office space, 51,000 square feet of restaurant and retail space, and 92 residential units. The project also includes the recently opened $18 million 2,300-seat Larry Miller Megaplex 13 cinema and the $19.5 million 125,000-square-foot Saloman Center, which will be the new headquarters for the ski-product brand. Planned as a recreational facility, the Saloman Center features a mix of entertainment and leisure activities, and dining establishments, including a FatCats Fun Center with a 32-lane bowling alley and miniature golf, Champ’s Sports Bar, an iFly vertical wind tunnel, Flowrider surf pool, a 55-foot climbing wall, and a Gold’s Gym.

Now under construction is City Creek Center, a $1 billion, 20-acre shopping center development in the heart of downtown Salt Lake City. A joint project of Bloomfield Hills, Michigan-based Taubman Centers Inc. and Property Reserve Inc., the commercial real estate arm of The Church of Jesus Christ of Latter-day Saints, the redevelopment project replaces the Crossroads Plaza and ZCMI Center malls and will feature an open-air design, office space, 300 housing units in five residential towers and six acres of open space. Nordstrom, Macy’s and Dillard’s will co-anchor the 900,000-square-foot retail portion of the development, scheduled to open in the fall of 2011.

According to Salt Lake City-based Commerce CRG’s Mid-Year Review 2007, the retail vacancy rate along the entire Wasatch Front is 7.37 percent, but this represents a fairly broad spectrum with a few anomalies at each end. Rates in north Utah County are extremely low at 2.8 percent while Weber County represents the top end at 14.47 percent. The vacancy rate for Salt Lake and Utah Counties is 6 percent, with rents in Salt Lake County showing no significant change from 2006, averaging $17.49 per square foot.

There are three submarkets that are performing exceptionally well. The city of Lehi in northern Utah County continues to set the bar, with retail sales up 62.6 percent since August 2006. The 2005 opening of Cabela’s at Traverse Mountain played a significant role in Lehi’s success. Opened in May 2007, the new Ikea store in Draper has already made its presence felt. According to Salt Lake City-based Bonneville Research, Draper’s retail sales are up 44.9 percent since August 2006. South Jordan’s The District, another development by The Boyer Company, has boosted the city’s retail sales up by 9.6 percent.

In forecasting 2008, the Utah Governor’s Office of Planning and Budget predicts continued robust economic growth. Although residential development will likely continue to weaken, strong commercial growth will support construction jobs and bolster the development industry.

Greg Haws is a senior project manager for The Planning Center in Draper, Utah.

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