“Utah Business Magazine” August 15, 2017,
Written By Spencer Sutherland
This is wonderful article we found in the “Utah Business Magazine” we thought you might like to read. The business environment in the Salt Lake City Downtown is flourishing and continuing to make Salt Lake City one of the premiere places in the country to do business and live!
“Downtown Salt Lake City has always been the state’s preeminent business district. But in the early 2000s, something new started to happen. A number of companies decided to leave downtown and head for the suburbs. First it was Cottonwood Heights and Sandy, now the area between Draper and Lehi has become the new hotspot for corporate headquarters, especially in the tech sector”.
There were a number of reasons for the suburban flight. Though Salt Lake City saw major infrastructure upgrades leading up to the 2002 Winter Olympics, including improvements to I-15 and light rail, there were still perceptions that it was hard to get downtown and there wasn’t enough parking. Throw in a lack of housing and the decline of Crossroads Mall and the ZCMI Center, and it’s easy to see why businesses decided to leave downtown.
But with the recent completion of the 111 South Main and 222 South Main high-rises, combined with the addition of the City Creek Center and other new housing developments, downtown Salt Lake City has seen a recent resurgence in commercial real estate activity.
“Downtown real estate has been fairly active during 2016 and the first quarter of 2017,” says Eric Smith, senior vice president at commercial real estate firm CBRE. “A lot of that activity has been based on the new 111 South Main coming online, but ever since City Creek came downtown you’ve had a change of mindset for companies and tenants wanting to be in the downtown market.”
What City Creek brought to the area, Smith explains, was an amenity base that had been lacking downtown—high-end shopping, dining, entertainment and housing. “City Creek really changed the landscape of downtown into a live-work-play environment like you have in other major cities across the country,” he says. “That’s when tenants stopped looking to move out of downtown and into the suburbs.”
Chris Kirk, managing director of CBC Advisors, calls the recent downtown growth “a bit of a renaissance.” Much like the rest of the country, Salt Lake City is seeing a trend toward urban living, and the newly completed downtown apartments and condos are filling up quickly.
“In the past, people would drive to their building, do their work and go back home,” Kirk says. “But now there’s a completely different feeling when you walk around downtown. There’s a vibe and an urbanization here. There are people pushing strollers and walking dogs. At lunchtime there are business people going to lunch. People are going out after work. That vibe is starting to be really important to Salt Lakers. Historically that’s been just what you’d see in bigger cities.”
One of the biggest drivers in downtown’s business resurgence is the new space that has been built to accommodate it. The 222 Main high-rise was completed in 2009 and boasts 459,000 square feet of office space, 175,000 of which are occupied by Goldman Sachs. Law firm Holland & Hart also occupies several floors in the building.
111 Main, the state’s newest skyscraper, was completed in the fall of 2016 and adds another 440,000 square feet of office space downtown. Nearly 85 percent of the space is already occupied, thanks to major tenants Goldman Sachs, the U.S. Department of Justice, and law firms Dorsey & Whitney and Durham Jones & Pinegar.
Smith says the new high-rise on Main Street has been able to attract tenants “without damaging the downtown market at as a whole,” meaning vacancies left by companies moving into 111 Main have been backfilled by new tenants coming into the downtown market.
At the end of the first quarter of 2017, downtown Salt Lake City had a vacancy rate of 14 percent, which Smith calls a healthy rate. “We’re not in a situation where we have too much vacancy in the market and we’re not overbuilt, even with 111 Main coming online,” he says. “In fact, it’s hard to find large blocks of space downtown right now.”
Smith says though companies are impressed by the aesthetics of the newer offerings downtown—111 Main features floor-to-ceiling windows, column-free floors and skyline lighting—location is the biggest selling point of working in the central business district.
“[111 Main] is right on the corner of Main Street and 100 South, which is right at the front door of City Creek, right next to the new Eccles Theater, right in front of TRAX, right by the Salt Palace—it’s a prime location in the heart of the city.”
An accessible location in a vibrant downtown area, complemented by nearby housing, is an important hiring tool for companies that are seeking to attract educated, young talent, Smith says.
“It’s been important for millennials to have an opportunity to be close to their office and amenities,” he explains. “Even though the suburbs have been growing, it’s hard to duplicate what you have downtown, where you can go shopping, or go out to eat, or run into people on the street and have that networking environment right out the front door of your office building.”
Chris Kirk agrees that a downtown location comes with benefits that are hard to replicate in a suburban area. “There are great buildings out there [in the suburbs]—beautiful buildings with gyms and cafeterias. But when you walk out on the street here [in downtown], there’s an energy you don’t get in a suburban area.”
The 111 Main and 222 Main office towers added a considerable amount of new office space to downtown—but additional development is constricted by a lack of available land. That’s why developers are eyeing the edges of the downtown core, which is traditionally defined as encompassing North Temple to 600 South, and roughly 400 East to I-15.
One development group is planning a new class A office tower just outside of that area, on 650 S. Main Street. The location is extremely attractive due to its accessibility from I-15 and a nearby TRAX stop, says Aaron Jones, senior vice president at Newmark Grubb ACRES, the leasing agent for the 650 Main project. “It will allow tenants to be downtown but not have to deal with some of the accessibility issues you have just a couple of blocks to the north,” he says.
650 Main is designed to appeal to tenants that would typically be more attracted to those big, beautiful suburban office buildings. The first phase will include a 10-story tower with unusually large floor plates—in fact, the 40,000-square-foot floor plates on the lower floors will be roughly double the floor plates of 111 Main and 222 Main, says Jones. This will enable tenants who would normally occupy two or three floors to consolidate their workforce on one floor.
“Bringing employees together on one floor certainly contributes to the collaboration and communication that companies try to foster in their workforce,” says Jones, adding that it’s also more efficient and cost effective.
The building will also include amenities like an onsite gym, bike storage, outdoor patios and a restaurant. Combine that with its suburban-style floor plan, and it will likely appeal to tenants unique to downtown—like tech companies, which are mostly concentrated in the suburbs.
Many tech companies that launched in Utah or moved to the state were able to get built-to-suit offices in the suburbs “at a price point that was extremely attractive,” says Chris Kirk. “You’re not going to get the same price per square foot downtown that you are in the suburbs—it’s going to be more expensive, you’re more land constricted, it’s a different proposition.”
But tech companies are increasingly interested in being downtown—not necessarily for their corporate headquarters but for satellite offices.
“Companies are looking to put, if not their full presence, a portion of their business here so they can tap into the labor that wants to live urban and live downtown,” Kirk says. Ancestry is headquartered in Lehi but also leases 22,000 square feet downtown. InsideSales has a large footprint in Provo, as well as 20,000 square feet downtown. Domo and Bluehost also have satellite offices in Salt Lake City.
“With such a low unemployment rate, it has become very competitive for tech companies in Utah County,” Smith explains. “Having satellite offices downtown is an effort to attract more of the talent from the University of Utah and from Davis and Weber counties to get the employees they need.”
Office space expansion is not the only thing happening downtown. A new hotel, with retail and housing, is in the works to support the Salt Palace Convention Center. To bring more fans into the city, the Utah Jazz is renovating its arena. Vestar, the new owner of The Gateway, is working to bring more dining and entertainment to the outdoor mall.
There are also a number of downtown owners and developers who are looking for creative ways to attract tenants. The vacant Dick’s Sporting Goods space at The Gateway is being converted to office space. The School Improvement Network turned an old car dealership into 130,000 square feet of tech space. The CenturyLink tower is also getting an upgrade for new tenants.
“When downtown Salt Lake City is strong, it continues to help to build the rest of the business environment throughout Utah,” Smith says. “You need to have a strong downtown to support and continue to grow business within the state.”
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