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Everybody has been waiting for City Creek. Now it’s here, the big question is: What’s next? The city has a lot going on. The Utah Performing Art Center on Main Street will take down the buildings all the way from First South to the Tribune with a new high rise proposed in that mix. There’s an issue of space and rents—are rents coming up to what they need to be for the new high rise?
Development downtown is so much more difficult and moves so much slower, so a build-to-suit downtown for 100,000-square-foot tenant is fairly difficult. I do like building to demand rather than building buildings because the redevelopment agency wants it or a city wants more development. We shouldn’t be doing that because it affects rates, and without rates going up in downtown Salt Lake, we’re not going to see more development. It’s good that the market has tightened. We’ll have some pressure on rents, and it will get to point where we’re going to start to see more development downtown.
Discuss what you guys are doing on the north end of Gateway. That’s creating a whole new center from what I can tell.
BOYER: We’re happy with the downtown office market. While there are blocks of space downtown, the blocks of space that are newer or Class A blocks are far and few between.
I echo what Vasilios said. The challenge is we’ve got to see rate growth. And in order to experience additional build-to-suit and spec development in the downtown, tenants have to be willing to pay the freight because it’s just more expensive to build in a downtown area. Your cost per square foot on land are $40 to $60 a square foot and not $8 a square foot like out in the suburbs. You’re putting structure parking in at $15,000 to $30,000 a stall. Every element is just a little more expensive, so there has to be understanding on the tenant’s part of an additional rent factor associated with that.
Let’s spend a few minutes talking about Southern and Northern Utah.
FUGAL: St. George continues to be more affected by Las Vegas than the Wasatch Front. Their vacancy, their absorption, is pretty anemic. St. George has been severely impacted by what happened in Vegas and even Arizona, more so than what is happening in Salt Lake.
SMITH: With regards to Logan, we sold a few properties there last year. It’s a fairly robust economy. They have lower unemployment rates. What we’re seeing now is more student housing being built in the Logan area. At BYU we’re seeing over 1,000 beds being built, and we’re seeing similar growth in Logan for Utah State.
PETERSON: We’ve been working with the City of Ogden on the RDA area for the Riverwalk project. We’re still working through the entitlements, and that’s a long process. But potentially 500-600 for sale and for rent units will go in there. Ogden seems to be doing particularly well with the BDO and industrial side. The LDS Church is putting $100 million into the temple, and it bought all the land around it to redevelop and protect that area. And there’s been a lot of investment from Boyer and some other developers. Ogden is going to have its day, and it’s probably better now than it’s ever been.
SHIELDS: Having done the hotel project which is under development right in the center of town, I can say that Ogden has really turned the corner. They took some very aggressive steps. Ogden has always kind of been the weak stepsister. It was sort of the place you would go after you’ve done everything. They have changed that city with what they’ve done to be one of the cities of the Wasatch Front rather than being the last stop on the chart. They’re in better shape than they’ve been in five decades.
What about the Provo/Orem area?
FUGAL: We’re witnessing a trend where the Wasatch Front is going to be looked at as one major metroplex area market. You can get from Draper to Provo just as fast as you can from Draper to downtown Salt Lake. It’s very central. That demographic between the million-plus people here and the over half a million in Utah County is creating one real metroplex area. And Orem/Provo is going to be the beneficiary of that.
You think about eBay bringing its campus online and everything going on at the point: Thanksgiving Point, Transverse Mountain launching a 2-million-square-foot commercial center, and the factory outlet mall which is under construction. A lot of people don’t realize Craig Realty is coming online with 100 shops right next to Adobe and its $100 million campus.
We are in the midst of a major change. There’s a transformation going on here along the Wasatch Front. It’s the convergence of mass transit and a Fortune 500 tendency that is bringing jobs as opposed to taking jobs away for once.