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Growth putting Salt Lake City in world spotlight

By Jon Springer

SALT LAKE CITY -- Though the Mormon influence of its founders remains its most conspicuous feature, this city has developed in diverse ways.

Founded 150 years ago as a religious utopia in the wilderness, the Wasatch Front (Salt Lake, Utah, Davis and Weber counties, including the cities of Salt Lake, Provo and Ogden) is today experiencing phenomenal population and job growth. The computer industry has provided thousands of new jobs, while tens of thousands of people, attracted by a high quality of life, have been migrating to the area every year. And as host of the 2002 Winter Olympic Games, Salt Lake will soon capture the attention of the world.

This activity has hardly been lost on retailers and developers. The retail market in Salt Lake is "strong and competitive," said Matthew Wallace, a market research analyst for Grubb & Ellis Wallace Associates, Salt Lake City. Area shopping centers have welcomed new tenants, and done major expansions and renovations, while the area's first new regional mall in more than 12 years is under construction in Provo.

Led by multiplex theaters and chain supermarkets, retailers have been expanding aggressively throughout the area. Utah, which has one of the highest household sizes in the United States at 3.12 persons, is one of the most profitable states in the country in terms of grocery sales. Albertson's, Smith's and Associated Foods, the area's leading grocery chains, are battling to assemble land near new housing.

Developers of hotels and offices are also attracted to Salt Lake, Mr. Wallace said.

"Competition for corners and and freeway locations is fierce between interests in retail, office and hotel," said Mr. Wallace. "We've been discovered by hotel chains of all stripes, and they're building like crazy."

In a market report, Mr. Wallace said Utah is currently experiencing the highest population growth and birth rate in the nation, and the second-lowest mortality rate. Migration has also been a major contributor to Utah's growth. In 1995, 22,800 persons migrated to Utah, the greatest percentage from California. That state's improving economy lowered migrations to around 14,000 in 1996.

Statewide, Utah topped the 2 million population mark in 1996, with 77% living in the Wasatch Front. Less than half -- around 48% -- are Mormon. Retail trade, excluding motor vehicles, has increased 9% since 1992, and was projected to increase 3% to 4% in 1997 over 1996. Retail vacancies marketwide totaled 4.5% in 1997 -- down from 11% in 1992.

"Retailers over the last five years have come to realize that Utah is a strong place to do business. All the major national tenants are here now," said Hunt Williams, the ICSC state retail director for Utah and an associate at CB Commercial in Salt Lake City. "The myth that the Mormon influence is a hindrance to doing business here is way overblown."

Buoyed by a relatively low-cost, yet educated workforce, Utah's economy has diversified from its traditional reliance on mining and the military, experts say. Hundreds of computer firms, including Novell, Micron, Iomega, 3-Com and U.S. Robotics, have located major facilities around Provo and Sandy, areas becoming known as "the Silicon Valley of Utah." Salt Lake's location also makes it a gateway to the Intermountain West and a major distribution hub for companies such as Coca-Cola, which is building a 1,900-acre distribution facility in Sandy.

Known worldwide as a skiing destination, the area is also gaining a reputation for its golf courses and other recreational opportunities, helping tourism become a year-round business. They also make Salt Lake a great place to live, said Don Pott, general manager of South Towne Center, a 1.2 million-square-foot superregional in Sandy owned and managed by The Macerich Co., Santa Monica, Calif.

"Utah has been a pretty well-kept secret as far as quality of life is concerned," said Mr. Pott. "We've got great natural resources and national parks, and great skiing, hiking and boating. And the weather is a whole lot better than Chicago, where I came from. The summers here are long and dry."

In September 1997, South Towne Center completed a major expansion which added the largest department store in the state -- a 212,000-square-foot Dillard's -- along with 27,000 square feet of additional shop space. The renovation came one year after Macerich opened South Towne Marketplace, an adjacent power center including Old Navy, Super Target, Linens N' Things and Barnes & Noble. Through September 1997, sales at South Towne Center were up 20% from the previous year, said Mr. Pott.

"Growth hasn't meant competition for us as much as it's made the area a destination," said Mr. Pott.

A major factor in South Towne's expansion has been a $1.5 billion renovation of a 16.5-mile section of Interstate 15, the major north-south artery in Salt Lake. The federally funded project, expected to be complete for the 2002 Olympics, includes replacing every interchange and 130 bridges along the road.

"One of the problems of the area's growth is that our freeways are completely overwhelmed and woefully inadequate," said Mr. Wallace. "Retailers along I-15 [including South Towne Center] will surely see benefits as a result of the road improvements."

Further south, construction is under way for Provo Town Center, a 1 million-square-foot superregional and Utah's first new mall since 1986. J.P. Realty, Salt Lake City, is developing the project, which is set to open its first phase in October. J.P. is the largest owner of retail properties in Utah, including Cottonwood Mall, an 800,000-square-foot superregional in Salt Lake City.

Sears, Dillard's and JC Penney will anchor the new mall, said Rex Frazier, president of J.P. Realty. Penney is moving five miles down the road from University Mall, a superregional that has served Provo since 1973. The two malls will compete to serve a market of around 450,000.

"I think they'll both be able to survive," said Mr. Williams. "University Mall's got a good demographic base, while Provo Town Center will benefit from a good location along the freeway."

Negotiations are under way to find an anchor department store to replace Penney at University Mall, said Rob Kallas, CSM, general manager. The 1 million-square-foot center is owned and managed by Woodbury Corp., Salt Lake City.

"There's been a lot of growth in our area, and while [the new mall] concerns us, we think our communities have gotten to the point where they can support another mall. It was only a matter of time, and I guess the time has come," said Mr. Kallas, adding that a major renovation -- University Mall's first since 1991 -- is now under way.

In Layton, Utah, Layton Hills Mall completed a remodel in 1996 and added several new tenants over the past few years to appeal to upscale shoppers, said Linda Kelley, general manager of the 700,000-square-foot center. The mall is owned by Strategic Retail Trust, a Michigan-based pension fund, and managed by ERE Yarmouth, Atlanta.

High-end retailers are also seeking space in new specialty centers.

In August, the Shops at Riverwoods, a 192,000-square-foot specialty center, will open in Provo. A joint-venture between Esnet Group, Provo, and a subsidiary of Terranomics, San Francisco, the Shops at Riverwoods will feature four Gap concepts (Banana Republic, The Gap, Gap Kids, Baby Gap), Williams-Sonoma, Abercrombie & Fitch, Ann Taylor, Talbots, Borders Books & Music, Macaroni Grill and Copeland's Sports.

In Murray, Utah, a 100,000-square-foot specialty center is set to open across the street from the area's top-performing mall, Fashion Place. The Shoppes at Fashion Place is aiming for a Labor Day grand opening, said developer Bill Roderick of Roderick Enterprises, Salt Lake City. The center is not affiliated with Fashion Place, the 1 million-square-foot superregional owned and managed by TrizecHahn Centers, San Diego.

In downtown Salt Lake City, neighboring malls ZCMI Center Mall and Crossroads Plaza Mall & Tower are experiencing "growth and the pains that go with it," according to Mel Pearson, general manger of ZCMI Center.

Construction on I-15 and a new light rail system has made getting downtown problematic for shoppers, Mr. Pearson said, "But once we get them downtown, we feel we can offer them a lot."

The 556,000-square-foot ZCMI Center, and its anchor, ZCMI Department Store, are owned by the Church of Jesus Christ of Latter Day Saints (the Mormon Church). The 925,000-square-foot Crossroads Plaza, owned and managed by The L&B Group, Dallas, is anchored by Mervyn's and Nordstrom.

While nationwide trends of retail expansion and consolidation are likely to affect Salt Lake as well, Mr. Williams projects more growth is likely, now that retailers have discovered the one-time paradise in the wilderness.

"I represent some big national tenants like Pep Boys and Blockbuster, and this is becoming a tier-1 market for them," said Mr. Williams. "Utah and the Intermountain region have always been thought of as a small sideline market. But it's really becoming more important than ever before."

Moreover, the area should draw more attention from both retailers and the media as the Olympics draw nearer. But as Mr. Wallace is quick to point out, the Games are a result of Utah's growth, and not the cause of it.

"With or without the Olympics, Salt Lake's growth is what it is," he said.