The fast-growing Salt Lake City metropolitan area, also known as the Wasatch Front, stretches about 40 miles north of downtown Salt Lake City to Ogden and about 40 miles south to Provo. The area now boasts a population of about 2.1 million — or about 75 percent of the state’s population. Highly favorable demographics continue to lure top-quality retailers, restaurants and shopping centers to the region, which enjoys one of the largest average family sizes in the country (3.6), the youngest median age (28.9) and an unusually high median household income of about $63,000. The market also has a highly educated, value-based population with a strongly established work ethic that encourages retail patronage and expansion. Growth in Salt Lake County, which has a population of about 1.1 million, is particularly strong in the southwest portion. Area planners are projecting a population growth of 1 million people in the Wasatch Front during the next 30 years.
Unlike other Western markets, retail in the metro area is not highly volatile. Most retailers did take an expansion hiatus here during the recession, but store fallout was minimal, except for a handful of closings by bankrupt national retailers. Some major national retailers, including Target, Sports Authority and Petsmart, have taken advantage of the correction to reposition themselves in more strategic locations where they have often unveiled new prototypes. Petsmart, for example, is introducing to the market a more compact format. Other retailers back from the expansion break include Smashburger, which now has four Utah locations, Brinker International’s popular Corner Bakery concept, and the cult favorite In-N-Out Burger, which now has opened seven Utah stores.
Discount grocer WinCo Foods is also expanding, recently adding two new locations for a local total of five. WinCo stores average about 94,000 square feet and employ more than 200 employees each. Associated Food Stores Inc. has rebranded 34 former Albertsons in Utah to “Fresh Market” stores after completing the purchase of Albertson’s Utah stores from Supervalu Inc. late last year. Performance Bicycle and Palm Beach Tan are also expanding in the market.
Activity is occurring in existing buildings, where retailers are paying roughly $12.75 per square foot, compared to the $15.50 per square foot they would pay for new construction. Shop space rates average $18.50 per square foot with junior anchor spaces leasing for an average of $14.25 per square foot. Money does remain somewhat sparse for new projects, though it’s not for want of consumer demand. While residential developers are getting financing for new projects at about 4.5 percent, lenders who were doling out non-recourse loans to landlords and retailers pre-downturn are now demanding personal guarantees and more equity, even for seemingly sure-fire deals.
Several major regional projects are moving forward. City Creek Center, the retail centerpiece of a planned $1.5 billion mixed-use project that’s expected to transform the downtown Salt Lake City culture, is slated to open in spring 2012. Its retail component, developed by Taubman Centers, will feature 700,000 square feet of retailers and restaurants anchored by a pair of flagship stores, a two-level, 124,000-square-foot Nordstrom and a three-level, 150,000-square-foot Macy’s. Other components of the City Creek center will include a high-end, 50,000-square-foot local grocer, a 12,000-square-foot Deseret bookstore and an 11-kitchen food court. City Creek is financed by Property Reserve, Inc., the commercial real-estate arm of the Church of Jesus Christ of Latter-day Saints. It’s being built adjacent to two top Utah tourist destinations; the church’s Temple Square and the recently expanded Salt Palace Convention Center.
Also in the works is a mixed-use lifestyle shopping center, Station Park, just off Interstate 15 at Legacy Parkway in Farmington. The retail/restaurant half of the approximately 800,000-square-foot project is being developed by CenterCal Properties. Tenant commitments include a Cinemark Theater, local grocer Harmon’s and several other national retailers. The center was originally pegged for a 2010 opening but has been delayed until 2011. Other retail developments include The Boyer Co.'s Southgate Center, a 350,000-square-foot, proposed Target-anchored project in Provo that is delayed about a year. Target Corp. is also building a store on 12 acres at 1120 S. 300 West, a few blocks from the Salt Lake City central business district, with plans for an October opening. The store is part of the 210,000-square-foot 300 West Towne Center project under development by Miller Weingarten Corp.
The stability of the region, which enjoys a relatively healthy retail vacancy rate of 7.9 percent, is expected to help it outperform other U.S. trade areas in the decades ahead. The good news is Wall Street is no longer demanding rapid expansions from retailers and is instead rewarding them for the type of prudent, efficient operating growth for which this area is already known.
— Robert Cooper and Doug Dautel are X Team International partners. Robert is a retail specialist and co-owner and Doug is a research director at Professional Brokers in Midvale, Utah.