September 1, 2009

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Utah County Outlook

September 1, 2009

Roundtable Utah County We’d like to thank Noah’s in Lindon for hosting the event and Jeff Edwards, CEO of the Economic Development Corporation of Utah, for leading the discussion. Though hit by the slowing economy like the rest of the state, Utah County remains optimistic about the future. Our experts discussed the area’s robust technology and nutraceutical industries, revamped educational offerings and its ever-strong entrepreneurial spirit. Participants: Steve Densley; Provo/Orem Chamber of Commerce; Charlene Christensen, Utah Valley Convention and Visitors Bureau; Michelle Larsen - Mountainland Association of Governments; Sheralyn Romrell, Employer Solutions Group; Craig Bradley, Agel Enterprises; Brandon Fugal, Coldwell Banker Commercial; Stan Lockhart, IM Flash; John Garfield, Provo Marriott; Joe Brown, G Code Ventures and Utah Flash; Brad Whittaker, CEDO; Tim Metler, Metler Homes and Utah Valley Home Builders; Greg Soter, Soter Associates, Inc.; Shane Marshall, Utah Department of Transportation; Joel R. Wallin, Downtown Business Alliance of Provo; Russ Fotheringham, EDCUtah; Wilford Clyde, Clyde Companies; Jeff Edwards, EDCUtah; Don Norton, Far West Bank; Brad Wittusen, Redstone Advisors; Mike Alder, Brigham Young University; Ryan Caldwell, EnticeLabs; Clark Merkley, Employer Solutions Group; Jon Anderson, Commerce CRG How can Utah’s business community support and strengthen Utah County’s robust technology community? ALDER: There are two or three things that are missing in Utah County that would help our tech industry. One was an incubator, which Novell provided us recently. We haven’t had a high tech incubator that we could look to. We also haven’t had research parks that we could move mezzanine-size companies into. And, all the venture capital funds are kind of inactive right now. At least nobody’s made me aware that they’re funding. So if people have to go outside for funding to other places, a lot of times the companies get moved. But most of the companies are staying in Utah County right now. Our economic development team here has been very good at finding places for our companies. Even though we haven’t had incubators and we haven’t had research parks, we have great partners in economic development that are scooping up any new company and trying to help them out and see if they can’t get them started. We really need more investment capital in the early stage here. CALDWELL: I think one of the reasons why it’s so critical to focus on the technology industry is that tech drives all the other sectors. Solid tech companies, like Omniture, bring in hundreds of jobs that actually net the whole community hundreds of thousands of dollars per job. And that in turn allows the construction industry, the real estate industry, the legal industry and other industries to flourish. Right now [Utah County] doesn’t have the incubators and we don’t have a community that really supports start-ups. A lot of the starts-ups that are coming out of BYU don’t have the experience, they don’t have the exposure and they don’t have the connections to be able to ensure their start-up can make it. We now are at this critical mass point in Utah where if the community takes the tech industry seriously and they really build it and they provide the incubators and provide connections, then you can start to have what they have in places like Silicon Valley, which is when you have a company that starts to fail and sheds its employees, those employees get picked up by another company. Start-up companies here also don’t have the mentorship and they don’t have the kind of connections to be able to navigate the space. A strong incubator that has 30 start-ups or 10 start-ups can really create some exciting things and pull in jobs. And if these start-ups work, they have huge amounts of revenue. For example, if you look at what our tiny, little start-up is doing right now, we’re pulling in hundreds of thousands of dollars from the IBMs to the Ciscos and other companies outside of the state. Every single time we do that, that full dollar comes into the state. That full dollar goes to pay employees who live here, who buy things here and so on and so forth. Utah has some really great tech companies, and if the state’s [business community] can provide just a little bit stronger infrastructure for start-ups, then our community will really benefit. FOTHERINGHAM: We now have incubators that are looking to start up from Mapleton up to Lehi and plenty of spaces in between, and that’s exciting to me because these entrepreneurs need that support up front in order to really get their ideas off the ground. But it is starting to happen. FUGAL: I think the fact that Microsoft just signed a deal at Thanksgiving Park that will bring hundreds of new jobs to this market and potentially expand well beyond that validates Utah County’s position as a technology hub. I think we’ll continue to see that validated in the future as we compete more effectively against other locations across the country. DENSLEY: I’m really excited about the National Security Agency (NSA) facility. If that center goes the way I think it will as a data center, there could be a huge spin-off of other opportunities that grow up around it. It’s just really, really exciting to see the potential. LOCKHART: Most observers, when they look at the high tech hub that has grown up in Utah County, they are absolutely amazed and wonder what in the world happened here. And the fact of the matter is we have quite an entrepreneurial culture here in this county. And there are lots of great ideas that bubble up through the entrepreneurial ranks, and many of those ideas are technology-related. And we’ve had phenomenal success creating businesses, especially high-tech businesses in Utah County. And so whatever our shortcomings might be, Utah County is really becoming the envy of other areas in the country. ALDER: We’ve tried to coin the phrase “Utah Valley Technology Corridor,” hoping that venture capital will pay a little more attention to our area. But it’s very difficult for them to come across the Point of the Mountain and visit us and leave their money here because they think that all the companies should move to Salt Lake. There’s a lot that’s been done, but there probably could be a little work on image to help us get better known for what’s been achieved. Discuss the economic impact the area’s educational institutions have on the area. FOTHERINGHAM: I think BYU is an economic force in this valley without really trying to be so. UVU has also been able to really engage the community and really promote economic development. So, UVU has already gotten off to a running start in doing that. They are going to be a very strong force. And the two together, BYU and UVU, make me very excited about what the future holds because of what they represent together, not only the number of students that are there, but the kind of thinking that is coming out. WHITTAKER: The Small Business Development Center is really exciting. It’s a combination of education in the state and our incubator program. Overall, it’s a business resource center that’s being combined with resources at UVU, the Small Business Development Center and the Utah Manufacturing Extension Partnership. So, the center has brought a lot of people together to try to support and mentor start-up businesses. And UVU is taking a very active role in that. The construction probably will not start until the end of September, the first part of October. It will be a new 12,000-square-foot building that will be used for incubator space. ROMRELL: I too am really excited about what UVU is doing. I see the school’s entrepreneurial program that they’re building, and they’re making it really strong. And they are really working on getting some of those mentors in. I see them bringing in a lot of educated, experienced people to mentor some of these new entrepreneurs, which is exciting. FUGAL: The problem is UVU is drastically underfunded as compared to all of the other state universities. My hope is that if UVU can gather more support on the state level and secure more funding, then we’re going to see that institution flourish even more. ANDERSON: And I’m confident that UVU will flourish. The institution is approved by the Utah Board of Regents to educate 40,000, which would make it the largest university in the state. We have numerous university-age, entrepreneurial-thinking individuals who really can contribute to the valley over the future as that university develops. CALDWELL: Utah County has this perfect fertile ground to have what would be, I would say, much better than research. We’re starting to see more and more venture capital stay here. In fact, one of the companies that we’re talking to is considering taking a huge amount of its budget and putting it with us because we can spend the money more effectively with the employees here. CLYDE: I think one thing that our education system has is that BYU brings a lot of people from outside our area here, and a lot of those people want to continue to stay in our area because of the quality of life. Are you finding the quality employees you need to staff your organizations? GARFIELD: I think who we’re missing are high-level executives. Unfortunately, the last three top level people I’ve hired I had to recruit from outside the state. We’re not finding locally the caliber we need, but that’s simply because there are not a lot hotels in the valley. WITTUSEN: The technology managers and the HR people and the CFOs, managers of the technology companies that I work with, certainly don’t complain about the pool of developers, software developers, programmers, project managers, these types of roles. They feel there’s a pretty good pool here, and the education at UVU and BYU is pretty high quality. What they do complain about is the image problem and the difficulty of attracting top level national management talent. Discuss Utah County’s image. How does it help or hurt your business? GARFIELD: We have quite a few individuals who stay at the hotel who work here in town but refuse to live here. So they come in on a Sunday night, they work, they stay with us for four days, and then they fly home. It’s because culturally they have a hard time assimilating here into this county. So it’s kind of a nice little market for us. We go out and we recruit people to come and live with us for the week, and then they go home for the weekend. WITTUSEN: And, yet, one of the reasons that probably every one of us living here is because of the culture and quality of life. It’s the reason I love living here and the reason I relocated here from Wall Street with my family, but it’s probably the same reason that are going to keep people away. SOTER: My context is the image of Utah Valley and the marketing in Utah Valley. Let’s say that a chef had created some piece of food and there was something about it that looked a little weird. So when most people look at this dish, they might be a bit standoffish, and say, “I don’t know. That looks a little bit strange to me.” But those who took a bite of it and tasted it might say, “Wow. You know what? That is killer even though it looks a little weird. And I was a little standoffish, but I really like that.” A marketing head might say that the chef needs to do something to make it more generic and appealing to people. But the chef would say that its uniqueness is important. I think there’s power and value in taking something that has a little bit of weirdness and a little bit of peculiarity about it. Utah County is different, whether it’s our culture or the religion or the mountains or the lake or this or that, there’s something about Utah County that stands out and we need to promote it, not bland it down. FOTHERINGHAM: We’re getting more people who are tasting what we have here in Utah County, and they’re liking it. And they’re telling other people about it. Last year, we had an international corporation make a decision to locate here in Utah, and recently a company that services this larger company indicated that they were going to be moving west. And they were looking in Arizona and Nevada, but this larger corporation said, “We want you to look in Utah.” And now they’re not only looking in Utah, but they’ll be here soon to look in Utah Valley. Another big industry in the area is nutraceuticals. How is this industry handling the economic storm? ANDERSON: I would go so far to say multi-level marketing and the nutraceutical industry has probably been the second biggest driver in our valley after technology. There are some significant jobs in this valley that are because of those kind of marketing efforts. EDWARDS: If you measure the impact to the whole state, the numbers are in the billions of dollars in terms of the GDP to the state. It’s a very large contributor to the overall payroll in the state. BRADLEY: [Agel] is up 15 percent over last year. We manufacture here in Springville as well as, you know, our headquarters are here. So we bring in a lot of dollars to the state. The nutraceutical industry is big in this valley, I think, because of the multi-languages and because Utah Valley is full of entrepreneurs. Like the rest of the state, Utah County’s roads are under construction. Discuss the trans-portation projects in the works. MARSHALL: This last legislative session was a good session for transportation in the state of Utah. Over the next four or five years, we’ll spend $2.4 billion in Utah Valley, most of that going to I-15, but several projects are also on the books from north of Utah County all the way to the south end of the valley. The limits are from American Fork Main Street to basically Provo. Besides I-15 work, we have SR-92, which is the Alpine Highway, from basically I-15 to SR-74. We’re spending about $250 million to build a new interchange at American Fork Main Street. About $130 million will be spent from I-15 near Lehi to SR-68, so there will be eight new lanes of traffic out to Saratoga Springs and the Eagle Mountain area. CLYDE: There are great transportation projects happening in our county and we’re going to improve our transportation system tremendously. The timing is right because pricing is extremely competitive, and I think UDOT’s finding they can actually book more projects out because the bids are coming in a lot less than what they had anticipated. So even though it’s going to be some inconvenience here for the next few years, we need to remember that these projects are adding value to our transportation and are feeding our families. Discuss Utah County’s commercial real estate sector. What big projects are going up? WALLIN: The Zions Bank Building is still scheduled to finish in March of next year. University Towers and the convention center are still in the works. Overall, things are still going well. People are kind of a little shaky, but they’re saying as long as the recession doesn’t go on forever, they’re OK. FUGAL: One thing that is handicapping our growth to a degree has been the dramatic reduction in sale activity. There’s very little sale activity going on in this valley right now, and most of that is attributed to lack of financing or lack of reasonable financing. The amount of equity that is being required of not only developers, but also a lot of business owners, is creating some concern and has caused the market to pause a bit. That being said, we’re still seeing positive lease momentum. We’re still signing deals. There are still companies growing. So I would say the outlook it very positive for Utah County.
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