While the residential market is starting to slow down in Salt Lake City, reps and distributors in this market are looking for construction of vacation homes and commercial projects to pick up the slack.
One of the defining characteristics of Salt Lake City's electrical market is how far its electrical distributors and independent manufacturers' reps travel in their sales territories. Salespeople from distributors and reps based in the Salt Lake City metropolitan call on customers not only throughout the Salt Lake valley and the rest of Utah, Nevada, but in southern Idaho and Wyoming, too. Indeed, Salt Lake City is sometimes called the “Crossroads of the West” because of its position as a major transportation and distribution hub for the Intermountain West region.
Five years ago, athletes and sports fans from around the globe traveled to this picturesque city for the 2002 Winter Olympics and were dazzled by the stunning mountain vistas in the nearby Wasatch range of the Rocky Mountains and its postcard-pretty downtown. Salt Lake City is also the worldwide headquarters for the Mormon church.
The city was on a high for years because of excitement about the Olympics and the gold-medal levels of construction for competition venues. But after the Olympic flame was extinguished, residents and businesses had to adjust to a quieter economy. Truckers cruising through the intersection of Interstate Route 80 and Interstate 15 in recent months on their way to Idaho, Colorado, Arizona and Nevada may have noticed that the housing development creeping up the Wasatch foothills and being built in the outer reaches of the Salt Lake City metropolitan area weren't growing as fast.
Although it's never been known for the type of wild housing growth seen in Atlanta, Dallas, Houston, Las Vegas, Phoenix or some parts of Southern California, Salt Lake City has historically had a very strong housing market. However, electrical distributors and manufacturers' reps have seen a definite slowdown in recent months. While recently visiting several electrical distributors in his territory, Kent Brown, a principal of Salt-Lake City-based Porter Brown Sales Inc., an independent manufacturers' rep, said distributors are starting to see a slowdown in the single-family market and plan to shift the focus of their businesses to other areas, including small commercial projects. Salt Lake City's 1,560 single-family building permits year-to-date through April are down 28 percent from April 2006.
The slowdown in housing is most apparent in mid-range homes in the price range of $300,000 to $400,000, says Daryl Cook, a principal of G.T. Sales Inc., Salt Lake City. “The low-end and upper-end homes still seem to be holding their own,” he says. “The mid-range home market is slow-going, with a lot of them for sale. Utah has always been high in foreclosures. I don't see it being any higher than usual.”
Steve Porter, a principal of Porter Brown Sales, says the rental market has softened, indicating the housing market may follow. “There are a lot of units out there for rent right now where we haven't seen that in the past,” he says. “I think that's the precursor to what's going to happen with the home purchases. I'd say we're in the beginning of things looking a little soft, but things have still been pretty strong.”
While the single-family housing market is showing signs of slowing down, the second-home vacation market seems to be going full-throttle. “The resorts are doing well,” says John White, a principal of John White and Associates Inc., a manufacturers' rep in Salt Lake City. “Park City has had some incredible projects during the past few years and several going on right now. Several beautiful lodges and condo projects have been built or are being built since the 2002 Olympics. We also have some great resort projects in Sun Valley, Idaho; Snow Basin, Utah; Teton Village, Wyo., and others.”
The second-home vacation market is strong in several areas and very much overbuilt in other areas, agrees Cook. “The economy remains strong in Park City, Utah; Jackson Hole, Wyo.; and Sun Valley, Idaho. Where it has slowed down is in the southern part of the state in St. George, Utah, and Mesquite, Nev. “They are way overbuilt, but not buried.”
Although the single-family housing market is slowing down, several mixed-use projects in Salt Lake City are moving along. One mega-project on the drawing boards is being built by Utah County entrepreneur and real estate developer Brandt Andersen. He plans to build a 85-acre Frank Gehry-designed project that would include a five-star hotel, lakes and retail, commercial and residential space near Point of the Mountain just off of Interstate 15. The five-star hotel would rise 450 feet, surpassing Utah's two tallest buildings, both in Salt Lake City — the 422-foot Wells Fargo Center and Church of Jesus Christ of Latter-day Saints office building.
Reps and distributors are enjoying the growth in the commercial market, and expect it to continue because several more big projects are on the drawing boards or in the early stages. “The Wasatch Front's commercial real estate sector is going extremely well,” says White of John White and Associates. “The demolition of the first of two downtown Salt Lake City shopping malls have begun. The Church of Jesus Christ of Latter-day Saints is investing $1 billion to build a retail, office and residential development on nearly 20 acres across three blocks in Salt Lake City over the next five years.”
Overall, Salt Lake City is growing faster than the national average. Herm Isenstein, president, DISC Corp., Orange, Conn., forecasts that electrical distributors in the Salt Lake City area will sell approximately $340 million in electrical products this year, up 8.6 percent over 2006. Isenstein expects the distributor-served electrical market for the nation to grow at a rate of 6.2 percent this year. Salt Lake City's growth is being fueled by the contractor market, which is up almost 12.5 percent this year. The distributor-served industrial market in Salt Lake City is expected to grow 5.5 percent this year.
G.T. Sales Inc.'s Cook says the commercial market is strong. “We have a very strong commercial market in all of our territories,” he says. “What is most prevalent is all of the Wal-Marts, strip malls, office buildings, Costcos, schools and hospitals. Industrial is also stronger than usual. Mining (gold) remains strong, as does the oil and gas sector. The oil refineries are running full and many repairs and some additions are being done.”
The Legacy Parkway Project, a 14-mile stretch of four-lane highway that will provide an alternate roadway for northern Utah commuters between Salt Lake City and Kaysville, is another huge construction project. The roadway project is aimed at alleviating congestion in one of Utah's most heavily traveled freeway corridors. It's expected to be completed in late 2008. Expansion of the city's light rail system is also underway.
Market sources say another big project, the Intermountain Medical Center, is due to open in October. It's being built on a 100-acre campus centrally located in Murray City, in the heart of the Salt Lake valley. Its central location should enhance response times for trauma care and patient access throughout the Salt Lake Valley. The 1.3-million-square-foot facility will have five “centers of excellence,” and when completed will be the largest medical campus in Utah and one of the largest medical campuses in the western United States.
Office vacancy rates for the Salt Lake City metropolitan area are relatively low compared to national averages. The market's overall office vacancy rate increased slightly from 11.3 percent at year-end 2006 to 12.2 percent for the first quarter of 2007. Vacancies in the downtown market for all classes of space increased approximately 1 percent to 11.9 percent. The suburban market saw a three-quarter percent increase to 12.4 percent.
The area's independent manufacturers' reps are optimistic about the Salt Lake City market in the foreseeable future. Kent Brown of the Porter Brown rep agency says it's a good sign that the area's electrical distributors are willing to offer sales forecasts into 2008. “They are saying the commercial market will carry them into 2008,” he says.
White of John White and Associates says the Utah economy continues to rank with the best in the nation, and that it will remain solid over the next 18 months. He says Utah has one of the nation's tightest labor markets — wages are increasing, which is good news for the state's workers. White also said overall the Utah real estate sector is healthy, and that he expects more moderate price appreciation over the next 12 to 18 months.
All in all, it's a good time to be working in the Salt Lake City electrical market, and to live in one of the most beautiful regions of the United States, says White. “We have so much going on throughout our area,” he says. “We have an incredibly beautiful area, with Yellowstone, Jackson Hole, the Tetons, and Sun Valley to the north. The ski resorts of Utah, Idaho, and Wyoming are the best in the world. The national parks of southern Utah are spectacular, and Lake Powell has more shoreline than the entire west coast of the U.S. and has some of the most unique areas to visit by water you could ever imagine.”
Salt Lake City by the Numbers
2007 sales through electrical distributors Approximately $340 million in electrical products this year, an 8.6 percent increase over 2006, according to forecast data provided by DISC Corp., Orange, Conn., for www.ewhotspots.com.
Building permits: The Salt Lake City metropolitan statistical area (MSA) had 2,020 building permits (single-family and multi-family) year-to-date through April 2007. That's down 12 percent from April 2006.
Major construction projects underway: The City Creek Center is a $1 billion shopping center development under construction near Temple Square in downtown Salt Lake City. It's being built by Property Reserve Inc. (the commercial real estate division of The Church of Jesus Christ of Latter-day Saints) and Taubman Centers Inc. Plans for the center call for shopping and residential elements.
The Intermountain Medical Center will be built on a 100-acre campus. The 1.3 million-square-foot Intermountain Medical Center will be the largest medical campus in Utah and one of the largest medical campuses in the western United States. Its central location should enhance response times for trauma care and patient access throughout the Salt Lake Valley. The campus will open on Oct. 29.