It’s a proven formula for real estate success: Combine a thriving tech scene and downtown development with enviable access to nature, and residential property will boom.
From San Francisco and Seattle to Portland and Denver, proximity to both an outdoor lifestyle and a high-tech economy have helped Western cities boom. Grappling with housing affordability and gridlock, many have even become victims of their own success.
For those unfamiliar with Salt Lake City, Utah’s capital seems like an unlikely pick as an up-and-coming metro. Outside of assumptions about its conservatism, owing to its position as the seat of the Mormon church, Salt Lake City may offer only one frame of reference for those unfamiliar with Utah urbanism: a unique grid system, known as the Plat of Zion, that resulted in massive, oversized city blocks.
Those seeing Salt Lake City for the first time today would find a city, and downtown, starting to hit its stride. By many measures, Salt Lake City isn’t merely catching up with its peers, it’s booming. The Urban Land Institute ranked it the nation’s third-best market for commercial development in its 2018 Emerging Trends report, fueled in part by the big names relocating here (Goldman Sachs’s second-largest U.S. office is in town).
A booming regional tech economy, dubbed Silicon Slopes, includes homegrown firms valued at more than a billion dollars total, as well as offices for big names such as Adobe, Twitter, and Electronic Arts. Literally and figuratively adding runway to the region’s economic growth, a $3.6 billion airport renovation will open in 2020.
This growth, in a city just a few hours from numerous world-class ski resorts and national parks, has fed a rapidly appreciating real estate market, both regionally and downtown. The state’s population grew 9 percent over the last five years, much of it concentrated in Salt Lake City, where the median sales price for a home at the end of 2017 was $273,000 (still significantly lower than the average in Austin and Denver). Realtor.com doesn’t see things stopping anytime soon, naming Salt Lake one of 2018’s hottest markets and predicting a 4.5 percent increase in home sales.
Apartment development has blossomed in Salt Lake City, as trendy areas such as Central 9th and the Depot District have seen the explosion of restaurants, coffee shops, and breweries associated with more livable neighborhoods. In 2010, downtown had just 5,200 rental units. By 2020, that number will nearly double to 10,000, including units in a new $90 million high-rise called Liberty Sky, a 24-story all-residential tower unprecedented in Salt Lake’s history. It seems like a solid bet; downtown’s population is expected to surge to 20,000 by 2020, and apartment vacancy currently hovers at a minuscule 2 percent.
The city is becoming what young adults from the region and elsewhere have wanted for years, according to Isaac Riddle, a journalist, Salt Lake native, and founder of Building Salt Lake, a key source of real estate and development news.
“Ten or 15 years ago, when someone finished college, like myself, they left,” he says. “A lot of us are now coming back, and those who are graduating are staying. Now, Salt Lake City has amenities you used to have to go to Denver, Portland, or the Bay Area to get. You can stay in Salt Lake now. And you can see the energy.”
The city seems to have hit critical mass. Salt Lake County, which includes Salt Lake City, is forecast to add nearly 600,000 new residents by 2065, according to a University of Utah study, a 50 percent growth rate.
“Compare it to Portland, Seattle, LA, and San Francisco, where everything has become expensive,” says Dave Ward, a developer at the Boyer Company, a partner in Liberty Sky. “Comparatively, Salt Lake City is easy to get around, has tremendous outdoor recreation options, and people can live near where they work. When you look at the quality of life and the ability to further a good career, Salt Lake has a pretty compelling argument.”
A church investment with serious community impact
Traditionally, the relatively small city, with a population of roughly 194,000, was much more suburbs-oriented. Only in the last decade, especially the last five years, has Salt Lake City’s downtown gone from a 9-to-5 urban center to a desirable place to live.
“The city didn’t really have a lot of downtown living options before then,” says Jesse Dean, director of urban development at Downtown Alliance, a nonprofit representing city businesses. “The last five years have seen a huge focus on downtown living.”
Salt Lake City saw its fortunes turn around after the Great Recession. But unlike other metro areas, it can point to a single investment by a church as a key turning point. City Creek Center, a 20-acre, $1.5 billion mixed-use development downtown that broke ground in 2007, was a project funded by the Church of Jesus Christ of Latter-Day Saints. As Dean said, a traditional developer probably wouldn’t have pushed through with a project of that magnitude just as the economy tanked. But the church, operating on a longer timeframe, and traditionally a big player in city politics and development, was more concerned with community growth and providing jobs during a downturn.
When it opened in 2012, the retail, residential, and office complex helped revitalize downtown and the city’s Main Street, offering a live-work-play development that Dean said “put Salt Lake City on the map.” More importantly, its success rippled outwards, encouraging other substantial real estate projects to break ground.
Derek Kitchen, a 29-year-old city council member who represents a district that encompasses downtown Salt Lake, says that the city has seen a dramatic change in the last few years: hundreds of new apartments have gone up, former parking lots have become multistory buildings, and people are investing in the city.
In 2016, the 111 Main Office tower opened, adding more than 400,000 additional square feet of prime commercial space downtown, much of it occupied by Goldman Sachs. The building also included the new Pelli Clarke Pelli-designed George S. and Dolores Dore Eccles Theater, a new cultural centerpiece for the resurgent downtown. Since City Creek Center opened, the Main Street district has become a dining destination, and the Downtown Alliance is attempting to open a year-round public market in the Depot District, on the western edge of downtown. Many of the city’s old warehouses, especially in the Central 9th District south of the city center, have been converted into office space for tech firms.
Downtown Salt Lake City’s resurgence, which started to peak later than in other big U.S. cities, exemplifies the conservative nature of local development, according to Riddle. Legacy developers, more risk-averse by nature, take more time to make sure they’ve found the right product for the right space. It took out-of-state firms from Seattle, California, and Texas, who began to sink sizable amounts of money into Salt Lake starting in 2015, to show local firms that multifamily development downtown was something the market wanted.
This expansion downtown has benefited the entire region.
“We’re also seeing tremendous growth in the suburbs, especially multifamily development in neighboring communities,” says Ward. “There’s growth and price escalation everywhere.”
The wisdom of steady, conservative growth
Despite Salt Lake City’s smaller size and slower post-Recession boom, it hasn’t been immune to the challenges faced by other U.S. metros. Rapid growth exacerbated the affordable housing issue; according to Kitchen, apartments are often on the market for just days due to the low vacancy rate. According to city statistics, rents increased twice as fast as wages between 2011 and 2014, and a quarter of renters spend at least half their paycheck on housing. The crisis led Mayor Jackie Biskupski to propose an extensive housing plan, “Growing Utah,” late last year (her predecessor had also submitted a plan to attack the affordability challenge).
In 2016, the city proposed a transit master plan in response to rapid growth. The ambitious proposal would make sure that three of every four city residents would “enjoy buses or trains coming at least every 15 minutes within two blocks of their homes.” The plan’s final form, as well as a payment scheme, are still being shaped by the city council.
While nearly every major city currently wrestles with these issues, Salt Lake City has actually begun discussing and debating solutions earlier in its boom than others.
“There’s a rent crisis across the country right now,” says Riddle. “But I would say Salt Lake’s proactive approach is unique. They started talking about these issues in 2015, when the real building boom started. This city plans ahead in ways that others don’t.”
The city’s current expansion may show the benefits of a slower, more considered approach. City Creek Center was built near the bottom of the market with long-term results in mind. Conservative developers didn’t dive in, instead making sure the market was ready for residential development downtown. Like most people’s view of downtown Salt Lake City, these preconceived notions of development aren’t always correct.
“With this city, it’s about reality versus perception,” says Ward. “There’s a longstanding conservative image here, that you can’t have fun in Utah outside of trips to Park City or national parks. That perception is finally getting recognized as being just not true.”