Like much of the state, Utah’s northern Wasatch Front is basking in a strong market while preparing for a rumored recession. In this roundtable, experts discussed the revitalized downtown Ogden area as well as the various trends taking place in the commuter communities of Davis and Weber counties.
We’d like to thank The Davis Conference Center for hosting the event and Ron Kusina, director of the Weber Economic Development Corporation, for his help in leading the discussion.
(1) Martin Lewis, Utah Business; (2) Scott Lunt, Davis Conference Center and Hilton Garden Inn; (3) Vickie McCall, Weber Real Estate; (4) Steve Waldrip, The Boyer Company; (5) John Pitt, Davis Chamber of Commerce; (6) David Harmer, Ogden City; (7) Mike Jensen, Davis Hospital Medical Center; (8) Steve Curtis, Layton City; (9) Mike Bouwhuis, Davis Applied Technology College and Layton City council member; (10) Dave Hardman, Ogden/Weber Chamber of Commerce (11) Brandon Wood, NAI Utah Commercial Real Estate; (12) Kent Jorgenson, UTA; (13) Collette Mercier, Ogden/Weber Applied Technology College; (14) Michael Vaughan, Weber State University; (15) Jewel Lee Kenley, Ed Kenley Ford; (16) Cari Fullerton, Bank of Utah; (17) Sara Toliver, Ogden/Weber Convention and Visitors Bureau; (18) Stuart Adams, The Adams Company; (19) Barbara Riddle, Davis Area Convention and Visitors Bureau; (20) Ron Kusina, Weber EDC. Not Pictured: Curt Geiger, Descente North America.
Let’s start by looking at the financial industry, particularly how subprime mortgages and other rates are affecting the economy here.
FULLERTON: There is good news in the financial services sector. We are seeing commercial activity being fairly robust in all segments, from light manufacturing and services to storage units and medical facilities.
The down side that we are seeing is the residential market because no one is certain where it’s going to go. Right now we are in a lull. The builders aren’t moving their product to the extent that they need to. They are not reducing prices to the point that is affordable. And affordability has changed based on what kind of mortgage product buyers can get.
The product that’s out there was somewhat designed in price to meet those subprime buyers. It’s not going to equalize. Builders and developers are hoping that they’ll see some activity this spring. But all of the incentives are gone, the free landscaping, finished basement, nice new appliances. Those aren’t enough any longer to entice buyers, it’s a price issue. Supply and demand are going to meet at price. And price will, in fact, have to come down.
Some studies on the Wasatch Front say there is at least an $80,000 affordability gap from what people can afford based on their wages. That is going to make movement in homes above $350,000 very uncomfortable in the short term. So we will see some excess inventory. We are not feeling it yet as a bank. The people that can continue to ride this out – pay their interest payments, get creative, lease option to buy, those kinds of things – will make it.
The good news is conventional rates are great. And if there are real buyers out there that are qualified, there will be plenty of product. It’s a buyers’ market. We are looking to a moderate growth, but in ‘08 it is going to be worse before it’s better.
ADAMS: We have seen a cycle with real estate and we have had a great run over the past 20 years. We saw a similar cycle back in the late ‘70s, early ‘80s when we saw gas prices move from a quarter up to $1.50 and we saw what that did on the inflationary effort. We saw mortgage rates move from what was maybe then 8 or 12 percent up to 18 percent. This cycle is significantly different. We’ve seen the same movement in oil prices. It’s gone from a dollar to $3. And we haven’t seen the inflationary element.
We have seen conventional rates in the last week or two at historically 20, 40, 50-year lows. I think the public basically doesn’t have that perception. They have the perception that this is a bad time to buy. In reality, if you have subcontractors who are working very reasonably, you have builders that are aggressively trying to sell their product and you have the lowest interest rates in probably the history of my lifetime, it’s the best time to buy because you are going to see that market move, you are going to see inflationary pressures come back. You are going to see those rates move up.
HARDMAN: In new housing, the construction costs are pushed back the other direction with the builders. They are still continuing to grow in costs. I think that’s a real deterrent to get those prices down. I would like to hear maybe about some resale.
McCALL: Utah traditionally has always been about two years behind the national trends. So when we see high escalation and peaks in California, Idaho and Nevada, Utah is a little more stable. We are a little slower in that growth market. Also, when they dive, we are slower to follow that bandwagon. What I see happening more than anything is this fear of buyers and sellers to enter the marketplace. There are great rates and there are a lot of homes, but I think you become callous by the news and the media, when, in fact this is a great time to be in the market.
How are things going at Business Depot Ogden and other commercial and industrial real estate sectors?
WALDRIP: We haven’t seen as much as the national media have focused on these downturn indicators in the economy. Our local manufacturers that have a national reach are still expanding. The market has stayed pretty strong. All the indications are that 2008 will be every bit as strong as 2006 and 2007.
It seems like the decision-makers that are deciding to invest major sums of capital in these new operations, expanding businesses and relocating businesses haven’t slowed down yet. Maybe one of the factors is money is still cheap and is getting cheaper. It’s easy to get cheap capital right now if you have a good business model.
The margins on the development side are also a lot tighter and it makes it more difficult to get a pro forma that works on deals. We’ve still been able to do it because interest rates have stayed low, so our cost of money has stayed lower. But if any of those factors shift, we’ll be in real trouble as far as the development side because money will be more expensive. We’ve tried to push our lease rates up, but we are responding a little bit to the market as well, so you have to gently try to rise with the tide with everybody else.
What can you tell us about the infrastructure in our area?
ADAMS: There are significant issues regarding transportation. Mobility is essential. There are lots of things that are happening. UDOT is going to widen I-15 from Farmington to the Layton Hills Mall area by filling in the median and adding a fourth lane.
Legacy Highway is 70 percent complete. It will open in October next year. The reconstruction at Weber County of I-15 is basically on the same schedule, open in the fall of next year. There are also studies being done on the east/west movement within both Weber and Davis County which need to be addressed to be able to maintain mobility in the future.
There are lots of needs and obviously never enough money to satisfy the needs. The challenge is if we actually stop construction we would see a negative impact on the economy. But I believe the Legislature has been very, very aggressive in trying to fund transportation needs.
JORGENSON: Well, I am happy to report April 27th opening of commuter rail from the Pleasant View to Salt Lake. It’s going to be a great addition to our communities.
Much like Salt Lake, I think TRAX gave the area a sense of importance to downtown and to the whole Wasatch Front. I just see commuter rail as a great opportunity and it will be interesting to see how people utilize it.
We also are looking at transit-oriented development. In pretty much every station that commuter rail is located, there is ample opportunity for growth. It gives us an opportunity to try some new things so we can create commercial and residential and working environments right along a transit corridor.
In the last 10 years we’ve seen some things in public transit that we really didn’t envision or anticipate. We didn’t know if people would use these, but, clearly, Utahns are open to them. As our population grows we are going to see more and more people transition to public transportation.
We also have the Brigham City extension that they are working on. In Brigham City they are looking at putting their money into acquiring land so that they can have their own right-of-way, as we do from Ogden to Salt Lake. It’s going to add more opportunities along the whole Wasatch Front. People will now look at communities in the north to live because they know they can get on commuter rail and have easy access into work centers.
PITT: This is terrific as long as it’s coupled with the things that the mayor was talking about, such as keeping jobs here locally so families stay.
If we envision Utah as we believe, we have got another million people moving into the Wasatch Front in the next 20 years. That’s going to just fill in those gaps that are being emptied by the extra transportation. We’ve got to have the type of industrial and manufacturing jobs that the mayor is talking about in Layton and elsewhere in Davis County to keep it from just continuing to bog that down.
CURTIS: Layton itself is very excited about the commuter rail and what it will do for Layton City. We also see the revitalization of what we call Old Town as rather significant inasmuch as we have seen some good movement transpire around the real estate.
KENLEY: In the automobile industry we employ one out of every six people in the United States. We are going through a huge period of change, as all of you know, with the emphasis on going green. But I don’t think that Utahns are like any of the other states. It’s easy to sell them in the states where they don’t have inclement weather like we do, or mountains or large families.
We have farmers carrying three tons of hay. They can make a truck that gets 40 miles to the gallon but it’s not going to go up in the mountains, and it’s not going to carry all of those heavy things or pull your boat and take all your equipment up skiing.
I love the mass transit thing, even though I sell automobiles, but with the amount of growth we have, we have to have everything. We don’t want to kill our quality of life, being able to pull a big vehicle up the mountain.
WOOD: I think that John’s comments are extremely valuable about needing to keep the jobs here so people are working close to where they are living. Over the last several years it’s been very difficult for cities and counties to preserve ground for those type of uses because retail and residential developers are paying much more than what the office and the industrial user can pay. Those are the jobs that are creating income that people want to live in this area.
The cities and counties have a real opportunity, in light of current economic conditions, to really make a stab at preserving some of these areas for job growth for those industries that will bring the higher-paying jobs to the communities before it gets all gobbled up.
HARDMAN: We are really excited about the development that’s taking place around the commuter rail station in downtown Ogden, and that’s a huge investment for retail that will tie into the Riverwalk project. We think that this will expand the activity center of the downtown Ogden area. We’ve already seen a tremendous growth in the last year with the opening of the Salomon Center and the Megaplex. Those have just had an incredible start.
When we were breaking ground for Larry Miller’s multiplex theater, he and I were visiting and he said, “Dave, my advisors have not counseled me that this was the best use of my funds. But I believe it’s the right project.” And as we had the grand opening this past year, we visited again and he said, “When we broke ground it was the right project. Today, it’s the profitable project.”
The operator of the Salomon Center said that they are above projection in their performance of all of the aspects, whether it’s the restaurants or the activities. We anticipate that all of these activities and opportunities are really significant in being able to take advantage of the commuter rail.
Last year we began a ski shuttle. We made a contract for three years to provide service from our hotels in downtown Ogden to both of the ski resorts. It was successful the first year. But the first two months of this season we have had more visitors use that transit capability than all of last year.
Let’s talk a little bit more about the tourism industry here. How are we dealing with this expanding industry?
HARMER: Tourism is one of the best modes of economic development because the tourists come here, drop their money and go home. They are not building additional houses and sending their kids to the schools.
But one of the biggest problems I see against tourism – at least up in Ogden – is that we have not done an adequate job of packaging the many products and experiences that are easily delivered to the tourist. We have rock climbing, we have the two rivers, we have kayaking, we have mountain biking; all these kinds of things are available, but we don’t make it as accessible as we could.
Another problem we have is that people in our hotels aren’t educated enough about the local activities. I have had a number of people from out of town tell me that they go up to the person at the desk and say, “I’m thinking of staying over. It’s so beautiful here. Where can I go mountain biking? Or, how could I do X?” And the answer they get is, “I don’t know.”
The mayor formed a high adventure committee. It includes the Forest Service, people up in the Ogden Valley, people in the county and so forth. Everybody is working together to identify what additional venues we can develop to try to make this more of a tourism draw. Dave Hardman was talking about the access to the ski slopes. We were all complaining that you’d go up to Snowbasin to ski and the people you met from out of town would be staying in Park City or downtown Salt Lake and they are being bussed up from there. They should be staying in downtown Ogden or in Layton or some of the cities up here.
Early on it was hard to get people to stay in downtown Ogden because there was nothing to do there. But we are changing that and changing it rapidly.
RIDDLE: Tourism is a clean industry. It actually impacts in a positive way every citizen of this entire state because you have a $708 savings per household. That’s up from $550 last year. Within Davis County we are part of Top of Utah. Let’s make no mistake about that. We market and sell our community for people to stay here, but there are amenities and activities that reach far outside of our county. In fact, we sell ourselves as a ski destination. We’re one destination, 10 resorts. You can stay in Davis County and you can shoot north or you can shoot down south and enjoy all of this remarkable snow we are having this year.
We have nine golf courses within the Davis County area. That’s pretty remarkable for being the smallest county in the whole state. We have nine great golf courses. That doesn’t include the one private course.
Lagoon Amusement Park saw 15 percent growth last year in its attendance and finally reached that $1.4 million number. Antelope Island had a growth of over 12 percent. The conference center is almost doubling in size. That was based on such a strong utilization of that facility. So we are really proud of that. It’s a great resource to have within our county.
As far as stats go, we saw in 2007 a slight decrease in our occupancy. But we felt like the ‘06 numbers were artificially inflated with some of the base lodging being under renovation. So our revenue per available room is up.
The other thing that we don’t really realize is it helps in our quality of life because we are able to build new facilities that tourism helps support because we are bringing people in.
TOLIVER: I have only been in the position for a couple of months, and we have such strong advocates in the Ogden/Weber area with the city and the chamber and the ski companies. It’s been fortunate in the tourism industry to have the partners with Davis and Salt Lake and Park City and everyone really rallying around the whole notion of this area being a destination for everyone. There is a lot of enthusiasm from a number of people now for tourism: I don’t think in the past it was really recognized for the economic impact it provides.
The credibility of having some of these ski industry and other industries moving into the area has, in turn, led to the press and the media coverage that we are getting. Curt mentioned The New York Times’ article. There is another one coming out in The Boston Globe. We were in The Denver Post yesterday. There is just a lot of momentum surrounding this whole initiative for the area in general. It’s an exciting place to be.
How are things going with the retail side of our economies?
PITT: Davis County has 6,800 businesses. A lot of those are the self-proprietorships that you can open up in anybody’s home with a cell phone and a laptop. They aren’t necessarily retail but still good business growth that’s keeping people in Davis County as opposed to commuting.
Beyond that, we have had tremendous growth in the retail sector, particularly in Layton. We need to see an increase of growth in the southern area of Davis County. We have a few developments that are starting up down there that are bringing some retail along. We have others that have been sitting idle for quite awhile. That’s not the case in northern Davis County at all. We continue to see an increase in retail growth there.
We also recognize that the overall income level has not necessarily increased because those aren’t necessarily the high-paying jobs. That’s why I’m focusing on the need to bring in that balance with those family-sustaining jobs that we are talking about in the east and west developments. It is good news overall, but growth in South Davis and a balanced outlook for longer-term jobs is what we are focusing on in Davis County.
HARDMAN: As with most communities around the nation, we are seeing proliferation of retail as opposed to strong centralized retail. So as we look at Weber County, South Ogden has done an incredible amount of development on retail marketing areas. They are also planning another major one along Washington Boulevard that would help the central part of South Ogden.
We also see the same thing happen in the north end of our county with North Ogden, Harrisville and Pleasant View seeing development.
We all thought that Riverdale had developed all they could develop. In the last year a whole new area that has seen great growth. Some of our Utah-based restaurants have moved into that area. Two of them – Brumby’s and Goodwood –
indicated that it was the very best that they had ever had as a new opening.
Of course we are going to have an issue with Riverdale this year in working around the expansion of Riverdale Road, but we are happy to see that and hope we can get the additional funding we need to finish that job right into Washington Boulevard.
The area around the Salomon Center and the Megaplex will be very unique retail. We have three restaurants that will be opening in the next six months – all Utah-based companies. These are things that we hope will continue to make The Junction very unique. The first condominium units will open in the next six months and will have an upscale deli and retail grocery store. They are totally presold and average about a quarter of a million dollars apiece for those condos in downtown Ogden. No one told him he couldn’t do it.