Salt Lake City on Mend
After a Wild Ride

The 2002 Winter Olympics made Salt Lake City into a boom town. Then came the bust.

The Olympics gave Salt Lake City a reprieve from the post-tech bubble, post-9/11 downturn that hit the rest of the country.

But when the skiers and skaters went home, Salt Lake City's economy went into a tailspin. The host city was saddled with a glut of offices and hotel rooms while apartments went vacant as demand fell.

Last year, the city's economy rebounded after two years of job losses. But the area's office and apartment markets still struggle, and its promising retail market may be hurt by a stream of new construction.

The region's 2.9% job growth for the 12 months ended in March outpaced the national rate of 1.7%, according to consulting firm Economy.com. Growth was propelled by a stronger professional- and business-services sector and the trade, transportation and utilities sector, which offset job losses in telecom, which finally began adding jobs in the second quarter. Job growth is expected to boost the area's population through 2009.

Salt Lake City's Salt Palace Convention Center plans to add a 145,000-square foot exhibit hall and 64,000 square feet of meeting space in an expansion scheduled for completion in August 2006.

The office market, bloated by 2.5 million new square feet of space annually from 1996 through 2000, saw vacancies inch down from a peak of 18.9% at the end of last year.

The strongest segment is retail, with rents creeping up and vacancies relatively low. But 1.4 million square feet of space is expected to be added each year through 2009, PPR says, potentially hurting the market.

The Mormon Church is a key player in the real-estate market and is pushing to upgrade 35 prime downtown acres near Temple Square, the home to the Mormon Tabernacle choir and the church's epicenter. The church has hired Taubman Centers Inc., the Bloomfield Hills, Mich., owner of high-end shopping malls, to help with the project, which includes two older malls and other properties with 1.7 million square feet of office space and 1.2 million square feet of retail space.

"We're trying to make sure it really is synergistic to downtown and not just an isolated fortress that looks into itself," says Bruce Heckman, vice president of development for Taubman and manager of the project known as Salt Lake City Square. Church officials have put the cost of the project in the $500 million range and more details are expected in September.

Meanwhile, the Salt Lake City Convention and Visitors Bureau is in the midst of a $58 million, 210,000- square-foot expansion of its Salt Palace Convention Center, allowing it to attract larger conventions.

The plans may spur more growth. Chicago-based Hamilton Partners recently dusted off plans to build a 25-story downtown office building, designed by Skidmore Owings & Merrill. Bruce Bingham, a founding partner of Hamilton, says the company is encouraged by the city's improved economy as well as the church's downtown plans, which may increase office demand if they include the demolition of some older office space. "We look at the church's involvement as an enormous positive," says Mr. Bingham.

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