Mormon Church Boosts
Salt Lake City's Downtown

Salt Lake City's rebounding commercial real-estate market is poised to get another lift as the Mormon Church moves to redevelop about 20 acres in the heart of downtown.

Property Reserve Inc. outlined plans and began demolition last year on the property, across from the world headquarters of the Mormon church and Temple Square, one of Utah's biggest tourist attractions. (Property Reserve is the real-estate arm of the Mormon church, also known as the Church of Jesus Christ of Latter-day Saints.) By 2011, the mixed-use City Creek Center project is slated to include about 900,000 square feet of new retail space, as many as 500 residential units and about 1.4 million square feet of existing office space. The church has said the project's price is in the hundreds of millions of dollars, without specifying.

The proposed design for Salt Lake City's City Creek Center includes a pedestrian-only street.

The redevelopment, to be spread across almost three blocks, is dubbed City Creek Center and poses significant challenges even for seasoned developers. "This one is a handful," says Bruce Heckman, vice president of development for Taubman Centers Inc., which is developing City Creek's retail component and is an equity partner with the church in the project. To make way for new retail, the project entails razing two outdated urban malls that have struggled in recent years. The plan proposes to use glass to cover over a new pedestrian street.

The overall City Creek proposal has generated some controversy. The church dropped plans to demolish a office building after concern arose about the building's historic value. The proposal includes a skybridge not permitted on certain streets under the city's downtown plan. The city is holding hearings to determine whether to consider amending the plan to allow for such bridges to be considered, says George G. Shaw, Salt Lake City's planning director.

The region is enjoying a robust economic recovery. Two years of job declines followed the technology bust, the post-9/11 downturn and the buildup to the 2002 Olympics. The economy began turning around in 2004. Now, strong tourism, business and services, natural resources and the mining and construction sectors helped propel job levels 4.4% in January from the same month a year earlier, well above the national rate of 1.7%, according to the Bureau of Labor Statistics. Population growth in the region, home to about 1.6 million people, also has been above average.

Some say the plan's progress has been a catalyst for other downtown projects. Among them is a new, approximately 230,000-square-foot office building for Boston's Fidelity Investments, also known as FMR Corp.; an art, culture and science museum-like center dubbed the Leonardo to be located by 2009 in the city's old main library; and an expansion of the area's TRAX light-rail system.

While some say City Creek's progress has increased investors' confidence in the city, it is important to note that commercial real estate throughout the region is benefiting from the strong economy. Rents in the area's office, warehouse, retail and apartment sectors are rising but are below national averages. A area vacancies are falling in all but the retail sector. Area office vacancy rates have improved, dropping from around 18% in 2004 to 12% in the fourth quarter of last year, the sixth-lowest of 54 major metropolitan areas surveyed by Property & Portfolio Research Inc., a Boston company.

Some of the region's low-cost appeal has been eroded as median single-family home prices jumped 42% to $223,600 in the fourth quarter from 2004. Moody's Economy.com expects growth in the region to slow in the next few years, but for now success brings its own challenges. "The big concern is that the growth is so strong that businesses may have trouble finding workers," says Gus Faucher, director of macroeconomics at Moody's Economy.com.

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