WESTERN SNAPSHOT, NOVEMBER 2005

Salt Lake City Retail Market

Tate

The highest concentration of retail space in Utah lies along what is called the Wasatch Front, named after the dramatic Wasatch Mountains that run north/south for 80 miles. An estimated 40.5 million square feet of retail space is divided between the four counties that populate the valleys and foothills of these rocky high-altitude peaks. Salt Lake County has 26 million square feet, Utah County 9 million square feet and Weber/Davis Counties 5.5 million square feet.

What many people may not know, but retailers do know, is that Utah is unique in a very appealing way. It has a historically high birthrate, producing automatic economic growth regardless of national trends:

• Utah's population growth of 29.6 percent is more than double the national average of 13.2 percent.

• Utah has the highest number of people per household at 3.13 versus the national average of 2.62.

• Utah has the youngest median age of 27.1 versus the national average of 35.2.

• Utah has the highest birth rate in the nation with 21 births per thousand versus the national average of 14.1 births per thousand.

• 88 percent of Utah's current population growth is attributable to natural increase (local birthrate). The remaining 12 percent comes from in-migration.

By all indications, these trends will continue, fueling retail development and investment.

While the entire market is strong, the southwest quadrant of Salt Lake County appears to be priority No. 1 for retail developers. There, population growth is the strongest along the Wasatch Front, with an increase of 41 percent from 2000 to 2004. With an ample supply of residentially zoned land, the growth is expected to continue for at least another 5 years.

In this quadrant, a two-mile stretch of Bangerter Highway, is a focal point. There are four large-scale projects under construction or in final approval stages there. The Boyer Company broke ground on a new 850,000-square-foot retail center called The District @ South Jordan, located at 11400 South Bangerter Highway. Anchored by Target and a 20-screen Larry H. Miller Megaplex Theatre, the development will include other tenants such as Ross, OfficeMax and Petco. Asking lease rates are $25 to $35 NNN annually. Twelve blocks south, Merrill Company broke ground on a new center anchored by Lowe's Home Improvement Warehouse.

Another mile south, The Home Depot recently opened with approximately 30 acres of additional development land available. Across the highway, land owner Cletus Hamilton is in the final stages of city approval for a new 200,000-square-foot retail center called Rose Creek Crossing. It will include a Wal-Mart Supercenter with 75,000 to 100,000 square feet of additional pads and shop space. This amount of retail activity is a direct result of the explosive population growth taking place in the trade area.

Other Salt Lake County locations are going through major changes. The announced redevelopment of the two enclosed regional malls in the heart of downtown Salt Lake City by The Church of Jesus Christ of Latter-day Saints (Mormon Church) will reshape the downtown retail market in a significant way, just as The Boyer Company's 30-acre, 675,000-square-foot mixed-use lifestyle center, The Gateway, did a few years ago. The Mormon Church has hired Taubman to assist in this major redevelopment.

General Growth Properties' acquisition of local developer Price Realty added to its portfolio the Cottonwood Mall in Holladay, Utah, in the heart of the east valley. With 52 acres of potential redevelopment land there in one of the prime demographic areas of the valley, this will be an exciting mixed-use development once plans are finalized.

Assuming voters approve a Sandy City zoning change in an upcoming referendum, The Boyer Company is poised to move forward with Quarry Bend, a 107-acre mixed-use development featuring 500,000 square feet of retail space. Located in the southeast quadrant of the valley, Wal-Mart and Lowe's will anchor the shopping center, which will replace an old gravel pit operation and one of the largest tracts of undeveloped land on the east bench of the valley. Lease rates are expected to be in the $30 per square foot NNN range annually.

In 2006, developer Johansen Thackeray will deliver between 150,000 to 180,000 square feet of new retail space at 10400 South State St., also in Sandy City. A Wal-Mart, currently located across the street from the 1.3 million-square-foot South Town Mall, will be moving west next to a Sam's Club in the city of South Jordan. Construction on this new Wal-Mart Supercenter is currently underway.

Jordan Landing, a 1.4 million-square-foot power center in the city of West Jordan, recently announced the fifth phase of construction, which will add an additional 210,000 square feet with Target as its anchor. Other tenants include Wal-Mart, Sam's Club, Lowe's, Sears Grand, Kohl's and a 24-screen Cinemark Theater.

Just south of the Salt Lake County line, Cabela's has put the relatively small city of Lehi on the map with its October grand opening at Traverse Mountain. Traverse Mountain promises to be a unique mixed-use destination development opportunity.

A few more miles south, a Woodbury power center dubbed The Meadows continues to expand. This new center has 1.1 million square feet with Wal-Mart, The Home Depot, Kohl's and a 12-screen Cinemark Theater as anchors. Just across the street, The Meadows Powell Development has announced a new 350,000-square-foot Lehi power center to be anchored by Costco and Lowe's.  

The overall retail vacancy rate for Salt Lake County is approximately 8 percent. This includes a 12.3 percent overall vacancy rate in regional malls, largely attributable to the planned redevelopment of the three regional malls mentioned previously. Without regional mall vacancy, the remaining retail properties have an overall vacancy rate of 7 percent. While concerns of consumer confidence continue to make headlines across the nation,   robust retail development and the investment market are making headlines in Utah.

Darrell Tate is a retail specialist with Commerce CRG in Salt Lake City.

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