COMMERCIAL REAL ESTATE 2019

THE ADVISOR

UTAH: AN EVOLUTION STORY

STATE OF THE MARKET | THE LAST MILE THE ADVISOR A Year of Growth With many significant milestone accomplishments on the horizon, such as COMMERCIAL REAL ESTATE 2019 an expanded international airport, a world-class inland port and continued Chairman | Utah real estate development across key business sectors throughout the state, Brandon D. Fugal Utah currently faces critical decisions that will shape its ability to compete [email protected] nationally and internationally for generations to come. Managing Director | Utah Progress assuredly presents many challenges — adequate infrastructure, Blake Rigby population increase, transportation planning and affordable housing [email protected] to name a few. However, Utah can firmly plant roots within the global CEO | Utah marketplace as a leading U.S. market if we continue to embrace proven Lew Cramer business fundamentals and effectively navigate impending obstacles in the [email protected] way of growth. The state has proven time and time again that it has what Public & Media Relations | Utah CONTENTS it takes to compete at the highest level when the private and public sectors Bryan Welch foster an atmosphere of collaboration. (801) 947-8300 [email protected] 02 A YEAR OF GROWTH A Year of Change A message from the leadership team at Collier’s International. POST MILLENNIAL 36 The next wave of retail shoppers are what the Retail Industry Utah was built on a legacy of industry. A dedication to excellence, strong Leaders Association calls the (R)Tech shopper: consumers who economic fundamentals and innovative business practices within the public 04 UTAH: AN EVOLUTION STORY want to shop anytime, anywhere, in any way. That means brick- and private sectors have created a dynamic marketplace for companies Salt Lake City hasn’t always been a hub for major global and-mortar stores need to find a way to integrate digital space with businesses, but over the past decade, Utah real estate has physical space. looking to expand operations within the state. The Utah community of transformed itself from a relatively unkown tertiary market into a today will certainly not be the same 30 years from now. thriving secondary market. Tremendous progress brings significant change. We at Colliers AN ANNUAL PUBLICATION BY 40 THE LAST MILE COLLIERS INTERNATIONAL The last mile is the stage of shipping that gets the product to believe that in order to achieve extraordinary results you must put forth 10 EXPOSED the consumer’s home and it’s the most expensive segment of extraordinary effort. Consistent growth does not happen by mere chance. Along the Wasatch Front, trends in collaborative open format office a product’s journey. Disruptive technologies such as mobile It requires collaboration and foresight. It necessitates advanced tools and spaces have been driven by the state’s robust tech sector. Here’s computing, machine learning, cloud computing, cloud services, how many large businesses are experimenting with open/closed artificial intelligence, and the internet of things can help. resources. office hybrids. A Year of Opportunity 46 ON LOCATION MIX AND MATCH Commercial real estate plays an important part in cinema. Local By providing the most powerful proprietary intelligence, tools and Contributors 14 John Adams Many traditional retail spaces are being redeveloped into mixed-use properties have had notable roles in over 1,000 movies, television resources to the Utah market, Colliers remains committed to facilitating Jacob Andra buildings that combine living spaces with officing options, shopping, productions, and advertisements, and have even brought additional growth, optimizing change and providing opportunity to commercial and Heather Beers entertainment, and a plethora of dining experiences. revenue streams and notoriety to Utah. community partners. Ana Bentz Lindsay Bicknell With a global footprint of over 15,400 professionals and more than 500 Elainna Ciaramella 18 THE RIGHT ROUTE 50 CLINICALLY SMART offices in 69 countries, Colliers International is the fastest growing publicly Tyler Cocker Port congestion is a huge problem facing both the Ports of Los New technologies and legislation have created an environment Angeles and Long Beach. There’s a growing urgency to move cargo where medical clinics and independent practices can’t afford to be traded commercial real estate firm in the world — delivering results for Brandon Dalton Kelsie Foreman away from seaports and into distribution, and inland ports like the on their own unless they are in the hyper-specialized realm of care. clients on a local, regional, national and international basis. Not only does Sarah Ryther Francom one planned for Utah can help facilitate this. Colliers integrate the resources of real estate specialists worldwide, but we Elle Griffin DEATH. TAXES. REAL ESTATE. remain committed to serving clients with a hyperlocal and entrepreneurial Lana Howell 54 Brian Hugo 24 NOWHERE TO GO Multiple provisions of the 2018 tax reforms stand to benefit mindset. Rachel Madsen Utah currently has more households than available housing units. commercial real estate directly, and though the final details have Our over 200 professionals, located across Utah’s various submarkets, Amanda Nogales And those available housing units are ever increasing in value, yet to be worked out, those looking to buy, sell, or rent commercial making them unaffordable to a percentage of the population. This space will likely benefit from broader tax cuts and deductions. think differently and implement creative strategies to accelerate client Emma Penrod Eric Peterson has led many to speculate that the next generation will face a success with a true, full-service real estate approach. It is an exciting time to Dana Sohm bonafide housing crisis. live and do business in Utah. Kathy Sturzenegger 58 AIMING HIGH Bryan Welch The scope of Salt Lake City’s airport expansion goes far beyond Donnie Welch 28 THE BURBS essential upgrades, such as security, capacity and safety: travelers We look forward to serving you! Kassi Cox Whale Outside of Salt Lake City and Lehi, Utah has several suburbs that will see improvements in convenience, functionality and efficiency— are home to big, vibrant businesses. Companies like Overstock, improvements that will have a major impact on the state for years CHG Healthcare, Pluralsight, and doTERRA are just a few examples to come. Published In Partnership with: of big businesses that have planted roots in the 'burbs. Your partners, 62 COLLIERS INTERNATIONAL 34 A NEW CURRICULUM Colliers International provides investment sales, landlord and These are no Animal House-style dormitories. Colleges and tenant representation, property management, valuation and Brandon Fugal, Chairman universities around the country are renovating student housing consulting, and advisory services for world-class industrial, Blake Rigby, Managing Director facilities with their target market in mind. investment, multifamily, office, and retail properties worldwide. Lew Cramer, CEO Copyright 2019 by Colliers International. All rights reserved. Every effort has been made to ensure the accuracy of the information herein. However, Colliers International is not responsible for any STATE OF THE MARKET omissions or errors that might occur. Reproduction in whole or 68 part of any text, illustration or photography without express written Taking the pulse of major markets throughout the state of Utah. permission of the publisher is prohibited.

2 | THE ADVISOR THE ADVISOR | 3 UTAH: AN EVOLUTION STORY

BY ANA BENTZ

There was a time when you wouldn’t think of Salt STRONG FUNDAMENTALS Lake City as a hub for major business. But over Great culture and picturesque surroundings were a the past decade, Utah has transformed itself into few of the reasons why global software giant, Adobe, a thriving commercial market similar to the likes invested in Silicon Slopes. "[Utah has] proven to be a of Silicon Valley. Elite-level businesses from solid business decision," says Jonathan Francom, vice around the globe increasingly consider the state president of employee and workplace solutions at an attractive alternative to gateway markets on Adobe. "Adobe chose to establish a long-term presence the east and west coasts. Leading companies and in Utah due to the region's vibrant communities, investors want to work, live, and play in Utah. But business-friendly environment and its highly-educated what exactly makes the environment so appealing? and skilled talent base." With a business-friendly climate and an atmosphere QUALITY OF LIFE of great cultural and recreational opportunities, it's "Utah has been, and continues to be, a great home no wonder why Utah is competing with other major for us," says Anita Grantham, chief people officer at markets throughout the United States. Grantham Pluralsight, Inc. According to her, Pluralsight chose to noted that with so many successful companies making make a presence in the state back in 2004 due to the their homes in Utah, it's no longer just a fly-over state. overall experience Utah brought the company and "We have investors, customers, team members, and their people. "Both our team members who are from technologists from all over the world coming to Utah to Utah and who have relocated here love the lifestyle meet with the exciting businesses here." Utah offers them. They get to enjoy Utah's low cost-of- Utah Governor, Gary Herbert, does not see an end living and high quality of life, spending time outdoors to this tremendous growth anytime in the near future. with friends and family, all while doing meaningful and He attributes Salt Lake City's commercial success to fulfilling work in their careers." a young, driven, and entrepreneurial workforce that Founded in Farmington, Pluralsight bootstrapped continues to grow throughout the state. Gov. Herbert its way to becoming one of the most promising tech says he is proud of the culture that Utah and Salt Lake unicorns nationally — receiving approximately $200 City offer to businesses and employees, before noting million dollars in series funding and filing for IPO in that the culture here is "an unparalleled quality of early 2018. Just like Pluralsight, the list of homegrown life, opportunities for growth and forward-thinking Utah businesses achieving critical acclaim on a global policies that do not encumber growth and success but scale is rapidly growing. encourage it." Local organizations aren't the only groups looking for a long-term Utah home base. In 2017, a survey ECONOMIC DIVERSITY from Salt Lake City's Downtown Alliance discovered Utah offers more than just thrilling outdoor activities that when organizations were deciding whether to and stunning mountain views. Incredible stability, low relocate, establish or continue growing in Utah, their unemployment rates and a pro-business government number one concern was creating work-life balance are just a few of the factors attracting new employers. for employees. In other words, in the toss-up between Utah's dynamic business fundamentals have captured choosing an affordable location or an enjoyable one, the eyes of corporate executives within the aerospace, enjoyable typically wins out in the end. However, in the agricultural, financial, healthcare, manufacturing and case of Utah, it is entirely possible to find both. real estate industries, just to name a few.

4 | THE ADVISOR THE ADVISOR | 5 111 S. Main, Salt Lake City. Photo courtesy of Dana Sohm ESTABLISHING a presence in Utah was a top priority “ to further our market-leading position and provide a strong platform for future growth in the region. Dylan Taylor, CEO, Colliers Real Estate Services

Colliers' Salt Lake Office Colliers' 111 S. Main office, Salt Lake City Colliers' Utah County Office

Leading multinational investment bank and financial services Utah was an important stepping stone in the company's future. company, Goldman Sachs, is among the list of businesses that have "Establishing a presence in Salt Lake City was a top priority to Labor Comparison: Major Industry Breakdown found success in Utah. Goldman first entered Utah in 2000 with a further our market-leading position and provide a strong platform handful of employees. Now, the company operates its second largest for future growth in the region." Taylor says that entering the office in the Americas and fourth largest office worldwide from thriving Utah market has brought Colliers countless opportunities Salt Lake City. The office employs over 2,350 employees, which to leverage and expand talents and services, not only locally but accounts for nearly 7 percent of its global workforce. nationally and internationally as well. "Companies are beginning 2.7% 5.9% At a press conference announcing the company's 2010 expansion to turn to secondary and tertiary markets, and the Intermountain to Utah, Goldman representative Jeff Schroeder said, "We are in a Region's ongoing transformation shows no signs of stopping. 21.7% hundred cities around the world and roughly 29 or 30 countries. Continued growth and expansion remain high priorities on our 6.7% Education & Health Services Salt Lake has the fastest growth rate. We've been pleased with what list as we strengthen and diversify operations across the globe we've seen. I'll tell you, one of the reasons is the way the community to better serve and accelerate the success of our clients and Trade, Transportation, & Utilities comes together." David Lang, managing director of Goldman Sachs professionals." added, "We've had a history of success here in Salt Lake City. We Colliers International indeed leads the way as one of the most Professional & Business Services Utah has the most diverse economy hire fabulous people, very talented people, highly-educated people." innovative and entrepreneurial companies in the world. The 8.8% objective will always remain the same: to elevate commercial in the nation while also maintain- Leisure & Hospitality POISED FOR GROWTH opportunity for companies looking to optimize operations and ing industry expertise in many Global real estate services and investment management company, expand market share. Colliers' strong commitment to enhancing industries, such as aerospace, life Manufacturing Colliers International, has heavily set its focus on Utah. With more business will undoubtedly benefit Utah well into the future. sciences, and finances. Utah also than 13,000 professionals operating in 69 countries, Colliers offers Other: Natural Resources, Other Services, commercial real estate services on a local, regional, national, and AT A CROSSROADS 9.0% has one of the fastest growing IT Public Administration, Unclassified international basis. In early 2018, the firm entered Utah through Colliers, Goldman Sachs, Adobe, and Pluralsight all exemplify the industries in the nation. 20.4% acquisition. It is both the largest and top-performing full-service fact that Utah has evolved. The state no longer is overlooked as a Construction commercial real estate brokerage in the state. tertiary market. In fact, it has become a destination place with all Financial Activities Colliers has begun introducing and growing international service the necessary elements required to build a world-class hub for capabilities throughout Salt Lake City, connecting the market with global commerce. 10.6% Information businesses looking to expand opportunities worldwide. But what There are many reasons why international companies and makes Colliers so unique is a dedication to maximizing potential investors are attracted to Utah, but it all boils down to one thing: within the communities they serve while staying committed to Utah is a wonderful place to start and grow a business. And as long 14.3% socially and environmentally responsible business practices. as innovative, forward-thinking organizations make headquarters Colliers' overall strategy focuses on doing the right things for here, Utah will continue to experience economic success for clients, people, and communities every single day. decades to come as the state transforms from, as Gov. Herbert says, Dylan Taylor, CEO at Colliers Real Estate Services, says choosing "'The crossroads of the west' to 'the crossroads of the world.'"

6 | THE ADVISOR THE ADVISOR | 7 COLLIERS INTERNATIONAL COLLIERS| UTAH INTERNATIONAL | UTAH

UTAH PROVIDES A HIGHUTAH QUALITY PROVIDES OF ALIFE HIGH QUALITY OF LIFE Logan Logan Brigham City Brigham City Utah is a national leader in highUtah job is a national leader in high job Ogden Ogden growth, low unemployment, lowgrowth, cost oflow unemployment, low cost of Layton Layton

doing business, and talented labordoing. Utahbusiness, and talented labor. Utah Salt Lake City Salt Lake City West Valley City Park City West Valley City Park City regularly tops rankings among bestregularly states tops rankings among best states Sandy Vernal Sandy Vernal Lehi Lehi for business, careers, living, health,for business, and careers, living, health, and Orem Orem Provo Provo quality of life. Utah provides anquality array of life. Utah providesUtah an isarray a Utah Theis a Utah Theboasts a Highly UtahOpportunities boasts a Highly for OpportunitiesUtah contains for a Utah contains a Duchesene Duchesene of employment opportunities in ofvarious employment opportunities in various Young & High-Growth YoungEconomic & High-Growth Conditions EconomicEducated Conditions & Skilled EducatedJobs & &Careers Skilled JobsMultilingual & Careers MultilingualNephi Nephi industries,UTAH and offers its residentsindustries, numerous and lifestyleoffers its residents numerous lifestyle Price Price State in UtahState are Great in UtahWorkforce are Great in UtahWorkforce are Plentiful in UtahPopulation are Plentiful Population options that range from quiet ruraloptions settings that torange thriving from quiet rural settings to thriving Utah is a national leader in high job growth, low urban centers. urban centers. Green River Green River unemployment, low cost of doing business, and talented labor. AMONG THE TOP STATES AMONG THE TOP STATES ONE OF THE FASTEST ONE OF THERANKED FASTEST RANKEDMORE THAN MORE THAN Utah regularly tops rankings among best states for business, IN THE U.S. FOR JOB GROWTH IN THE U.S. FOROVER JOB GROWTH OVER Richfield Richfield Most of Utah's population residesMost along of Utah'sThe Wastach population resides alongGROWING The STATES Wastach IN THE U.S. GROWING STATES IN THE U.S. Moab Moab careers, living, health, and quality of life. Utah provides an , roughly 150 miles of contiguous, roughly cities and 150 miles of contiguous cities and array of employmentFront opportunities in variousFront industries, and communities, running predominantlycommunities, north-south running along predominantly north-south along nd nd offers its residents numerous lifestyle options that range from 2 235 3.6%35 3.6%120 120 the I-15 corridor and the westernthe slope I-15 corridorof the Wasatch and the western slope of the Wasatch BEST STATE FOR BESTHIGHER STATE EDUCATION FOR HIGHER EDUCATION WHY UTAH? WHY UTAH? WHY 15.2% 15.2% UTAH’S JOB GROWTH RATE UTAH’S JOB GROWTH RATE quiet rural settings to thriving urban centers. POPULATION INCREASE POPULATIONOVERALL INCREASE ECONOMY OVERALLINSTITUTIONS ECONOMY IN UTAH INSTITUTIONS IN UTAH LANGUAGES LANGUAGESCedar City Cedar City Mountain range, from Brigham MountainCity to Nephi. range, from Brigham City to Nephi. 2017-2018 SPOKEN2017-2018 IN UTAH SPOKEN IN UTAH Most of Utah's population resides along The Wastach 2010-2018 861(:6%(672010-2018 861(:6%(67 1$7,21$/'$7$%$6( 1$7,21$/'$7$%$6( 67$7(65$1.,1* 67$7(65$1.,1* 2)6&+2/$56+,36 2)6&+2/$56+,36 86%85($82) 86%85($82) '(6(5(71(:6 '(6(5(71(:6 Front, roughly 150 miles of contiguous cities and communities, (65,%$2 (65,%$2 /$%2567$7,67,&6 /$%2567$7,67,&6 running predominantlyUtah is world-renowned north-south alongfor its the Utahbounty I-15 is corridorworld-renownedof public lands for its bounty of public lands St. George St. George and the westernand recreation slope of the opportunities Wasatch Mountain rangingand range,recreation from from mountain opportunities ranging from mountain MEDIAN AGE OF MEDIANUTAH AGE NAMED OF UTAH NAMED UTAH IS EXPERINCING UTAH IS EXPERINCINGABOUT ABOUT Brigham Citywilderness to Nephi. to desert landscapes.wilderness Utah has tofive desert national landscapes. Utah has five national OVERWHELMING JOB GROWTH IN OVERWHELMING JOB GROWTH IN TOTAL POPULATION WORKFORCETOTAL POPULATION WORKFORCE Utah is world-renownedparks, six national for its forests, bounty numerous of publicparks, lands statesix national andparks and forests, numerous state parks and CONSTRUCTION, CONSTRUCTION, recreation opportunitiesrecreation areas, ranging and from over mountaina dozenrecreation ski wilderness resorts. areas, and over a dozen ski30.6 resorts. 30.6 48% 48%FINANCIAL, FINANCIAL,15% 15% to desert landscapes. Utah has five national parks, six national #2 #2 THE YOUNGEST STATE IN THE YOUNGEST STATE IN OF UTAHNS HAVE OFHEALTH UTAHNS HAVE & HEALTH & Utah is a geographically diverseUtah state, is encompassinga geographically a diverse state, encompassing a BEST STATE BEST STATE OF UTAH RESIDENTS SPEAK OF UTAH3.2 RESIDENTS SPEAK 1.33.2 1.3 forests, numerous state parks and recreation areas, and over a THE U.S. BY MEDIAN AGE THE U.S.FOR BY MEDIANBUSINESS AGE OBTAINEDFOR BUSINESS POSTSECONDARY OBTAINEDTECHNOLOGY POSTSECONDARY TECHNOLOGYA LANGUAGE OTHER AMILLION LANGUAGE OTHER MILLIONMILLION MILLION dozen ski resorts.convergence of three distinct geologicalconvergence regions of three: the distinct geological (65,%$2 regions: the (65,%$2 IN 2018 CERTIFICATESIN 2018 OR DEGREES CERTIFICATESSECTORS OR DEGREES THAN SECTORSENGLISH AT HOME THAN ENGLISH AT HOME )25%(6 )25%(6 87$+*29 87$+*29 87$+*29 7+(6$/7/$.(75,%81( 87$+*29 7+(6$/7/$.(75,%81( Utah is Rocky a geographically Mountains, diverse the Great state, Basin, encompassingRocky and Mountains, the Colorado a the Great Basin, and the Colorado UTAH’S POPULATION BY GENERATIONUTAH’S POPULATION BY GENERATION convergencePlateau. of three distinct geological regions:Plateau. the Rocky Silent & Greatest Silent & Greatest born 1925 and earlier 5.2% born 1925 and earlier 5.2% Mountains, the Great Basin, and the Colorado Plateau. THERE ARE MORE THAN THERE ARERANKED MORE THAN RANKEDOVER OVERABOUT ABOUT MORE THAN Baby BoomerMORE THAN Baby Boomer The beehiveThe beehive is the stateis the symbolstate symbol of Utah.The of Utah. Thebeehive area'sThe is Mormon the state symbol of Utah. The Mormon born 1945 - 1964 15.6% born 1945 - 1964 15.6% first settlerssettlers used used the the symbol toto representrepresentsettlers hard used hard work the work and symbol and to represent hard work and Generation X 17.6% Generation X 17.6% industriousness.industriousness The beehive is. Thewhere beehive all workers isindustriousness where cooperate all workers in . The beehive is where420 all workers 4204th 469th 6948 48 born 1965 - 1979 born 1965 - 1979 246 246Millennial Millennial the constructioncooperate of something in the construction much bigger ofthancooperate something themselves, in muchthe construction bigger of somethingTHOUSAND much bigger THOUSANDBEST STATE FOR BESTTHOUSAND STATE FOR THOUSANDTHOUSAND THOUSAND born 1980 - 1994 born28.1% 1980 - 1994 28.1% MORE PEOPLE IN UTAH MOREVENTURE PEOPLE IN CAPITAL UTAH VENTUREDEGREES CAPITAL AWARDED DEGREES AWARDED THOUSAND THOUSAND as a model forthan a properly themselves, run society. as a model forthan a properly themselves, run society. as a model for a properly run society. JOBS ADDED TO JOBSSPANISH ADDED SPEAKERS TO SPANISH SPEAKERS THAN THERE WERE IN 2010 THAN THERE 861(:6%(67 WERE IN 2010 861(:6%(67IN 2015 IN 2015 Generation Z Generation29.8% Z 29.8% 67$7(65$1.,1* 67$7(65$1.,1* UTAH’S ECONOMY IN 2018 UTAH’S 86&(1686%85($8 ECONOMY IN 2018 born 86&(1686%85($8 1995 -2012 born 1995 -2012 (65,%$2 (65,%$2 '$7$86$,2 81,9(56,7<2)87$+ '$7$86$,2 81,9(56,7<2)87$+ Generation Alpha Generation Alpha born 2013 or later 3.7% born 2013 or later 3.7% 0 200k 400k 600k 800k 0 200k 400k 600k 800k

8 | THE ADVISOR THE ADVISORDowntown | 9 Salt Lake City Downtown Salt Lake City EXPOSED CLOSING THE OPEN OFFICE DEBATE FROM CLOSED TO OPEN OFFICE LAYOUTS, UTAH BUSINESSES CUSTOMIZE ENVIRONMENT TO FIT WORK CULTURE.

BY ERIC PETERSON

Once upon a time, the notion was held that an office only needed to be functional. It could be a windowless cubicle dungeon, dimly lit by the insect-like buzz of a sputtering neon bulb and that was good enough. It helped the company’s bottom line by virtue of thrift—or cheapness—depending on where you sat in the building.

Nowadays, managers (thankfully!) realize that an inviting office space, rich with amenities that energize employees, do more to the standard office than make a company profitable. Along the Wasatch Front, trends in collaborative open format office spaces have been driven by the state's robust tech sector but that trend also extends beyond tech companies. Many large businesses are experimenting with open/ closed office hybrids, while other businesses make their mark by repurposing historic buildings or engaging directly with their surrounding locales. Brandon Fugal, chairman at Colliers International | Utah, says it's exciting to see Utah's dynamic growth in all business sectors, from technology and financial services to the biosciences and aerospace industries. With so much good business in the state, it's also driving a need for companies to get the most out of their workspace, not just for the sake of efficiency, but also for obtaining the right talent.

THE RIGHT OFFICE ATTRACTS THE RIGHT TALENT "With a tight labor market and record low unemployment, and employee recruitment and retention being the highest priority, companies are exploring new ways of enhancing their office environments in order to differentiate themselves from their competitors," Fugal says. Amenities from cafeterias to on-site gyms are appealing for employees, making work seem more like a home than an office, and employers are seeing the benefits in an office where their employees can file their reports, make their calls, grab a bite to eat, or get in a workout on site between meetings. "It's an opportunity for employers to effectively increase productivity in their employees by adjusting the space to people's moods and it also extends the hours," says Cynthia Foster, national director of office services at Colliers International. "Because if people are feeling healthy, social, and fed they don't need to leave the office."

10 | THE ADVISOR THE ADVISOR | 11 WITH A TIGHT LABOR MARKET AND RECORD LOW “ unemployment, companies are exploring new ways of enhancing their office environments in order to differentiate themselves from their competitors.

Brandon Fugal, Chairman at Colliers International | Utah

OPEN OFFICE SPACES FOR YOUNGER EMPLOYEES Another trend that has taken hold— especially with tech companies—are open office formats with shared work tables and spaces to help foster collaboration, a selling point, especially for millennials and Gen-Z. "With the younger workforce it's about coming together for informal meetings," says Chris Kirk, managing director at Colliers International Utah. "Booking a conference room can be very formal but sitting in an open area on couches by a window with a cool view can be every bit as productive and a little bit more casual, fun, and creative." Fugal also points out that many Entrata Headquarters, Lehi. Photo Courtesy of Layton Construction companies are learning how to incorporate both open and collaborative spaces with more private spaces for special meetings and projects. Mountain America Credit HISTORIC BUILDINGS FOR CREATIVE EMPLOYEES Kirk points to the law firm of Durham, Jones, and Union's new 11-story, 330,000 square-foot Other companies are learning how to repurpose older Pinegar that recently moved into the top two floors of the headquarters in Sandy offer a prime example historic buildings to give them a modern twist. For 111 building in downtown Salt Lake City. Even though it of this. Plenty of natural light cascades example, Kirk recently helped an architecture firm get into was a higher rent space, through efficiencies in the layout through floor-to-ceiling glass windows on a historic building complete with exposed rafters, open they were able to reduce their square footage. "Sometimes the exterior of the office's collaborative ceilings, red brick, and a handful of other contemporary you can upgrade a space but it's not necessarily a major spaces, but there are also private office finishes. Having a compelling design-oriented workspace financial impact," Kirk says. spaces throughout the interior space—that was crucial to the architecture firm's culture and Kirk All agree that the conditions are truly aligned for a and all the amenities one could hope for. found a space that was the perfect meld of what his client dynamic work environment in Utah, with Kirk saying "This iconic building incorporates not needed. That's the kind of matchmaking that goes into a lot more and more brokers across the country are recognizing only the finest finishes but also provides of his work at Collier's International. the appeal of working in Utah with its vibrant downtown occupants everything from secure bike "They want to set the right tone for their employees scenes in Salt Lake City and Provo and its close proximity storage to a two-level fitness center," Fugal as well as their customers," Kirk says. "They're looking at to the majestic Wasatch range. "Utah is on the radar for says. their [work environment] as well and are trying to find the people now in a way that it has never been before," Kirk Other companies like Entrata, a software building and the space that reflects their ethos." says. company in Lehi, have utilized space in Large tier employers, out-of-state capital, and a way that dazzles guests and potential TRADITIONAL ENVIRONMENTS FOR TRADITIONAL employees themselves are now eagerly keeping an eye out clients. In the foyer of the Entrata offices, BUSINESSES for opportunities in Utah. For employees already here the potential clients will be greeted by a giant None of this is to say that businesses with more traditional workspaces alone are keeping them admiring the sunsets red double-decker bus and an expansive and timeless workspaces like financial firms and law offices from their towering windows before making another call, two-story digital wall showcasing engaging aren't also learning how to innovate. Shared workspaces instead of just watching the clock creep toward quitting and futuristic displays. "Guests are might not always be a good fit and efficiencies and time. welcomed into a headquarters that is both sustainability are still appealing to traditional employers. state-of-the-art and inviting," Fugal says.

12 | THE ADVISOR THE ADVISOR | 13 MIX AND MATCH IT IS IMPOSSIBLE NOT TO “ redevelop and reinvent retail. The continuing evolution of retail space has TRADITIONAL MALLS ARE OUT seen its biggest changes in the last 20 years

MIXED-USE DEVELOPMENTS ARE IN Tim Simonsen, Senior Executive Vice President and Partner, Colliers International HERE'S HOW TO TURN OLD INVESTMENTS INTO NEW ONES. BY KELSIE FOREMAN

If you’ve found yourself perusing the shops at a retail mall looking for a new pair of shoes or jeans, you’ve probably noticed that your shopping center is looking a little emptier these days. Due to the rise of ecommerce and Amazon, an increasing number of consumers choose to buy their goods online, rather than in-store, leaving the traditional shopping mall looking for new ways to innovate.

Consumers today are looking for convenience, a one-stop shop where they can purchase anything they could ever need. They're looking for more than your stereotypical retail mall. Based on consumer wants, today's retail malls are in need of massive redevelopments. Ones that transform a traditional retail space into an area that combines living and working with shopping, entertainment, and dining. In fact, redevelopments like this are probably the only thing that can save retail malls. For if no redevelopments are made, business growth within the retail sector becomes stagnant. When asked what would happen to retail malls that chose to forego any redevelopment, Zach Beaudry, an executive vice president at Colliers International, ,what would happen to retail malls that chose responds with a chuckle. "I'd wish them luck. I think they'd have a hard line to hold to stay fluid in the market." It goes without saying, but in this economy, you either adapt or die. Tim Simonsen, a senior executive vice president at Colliers International also agrees that change is necessary for these societal staples and says that, "it is impossible not to redevelop and reinvent retail. The continuing evolution of retail space has seen its biggest changes in the last 20 years." However, he adds that retail real estate will always be an "integral part of people's lives."

Photo courtesy of University Place

14 | THE ADVISOR THE ADVISOR | 15 IT'S ALL ABOUT GETTING “ more people in the space and that's really what drives retail entertainment.

Jeff Woodbury, Senior Vice President, Woodbury Corporation

REDEVELOP MALLS INTO MIXED-USE BUILDINGS When it comes to redeveloping the retail real estate space, the solution, it seems, is to rebrand and redevelop these spaces as an environment suited for mixed-use. In other words, shoppers can expect the malls of tomorrow to house everything from movie theaters, restaurants, and health clubs, to office spaces and apartments. Mixed-use spaces are the perfect solution for the shopper looking for a convenient one-stop shop. While discussing the future of retail malls, Stuart Thain, executive vice president of retail, land and "It's all about getting more people in the space and that's really Simonsen says that the key to developing the investment at Colliers International, explains that Utah's what drives the retail entertainment," says Woodbury. "So if we ultimate mixed-use space is more than just incredible growth has dictated a need for mixed-use space. have a concert, or we have a yoga class, people will walk through leasing out retail spaces to health clubs and Thain says, "With the greater Salt Lake City market adapting to the food court and pick something up on the way to the park." movie theaters. In fact, it requires a much a more urban environment as a result of escalated population Due to the success of the redevelopment of University Place and more elaborate mix of gaming studios, food growth, more multifamily is being incorporated into mixed-use changes in shopping habits, several other retail malls throughout halls, water parks, golf driving ranges, concert development as projects look to build synergy through providing the valley are following suit. "In Utah and along the Wasatch venues, cooking classes, surf parks, and much the right balance of hotels, recreation, parks, office, retail and Front, nearly every major retail tenant is looking to expand their more. multifamily." footprint and market share with new locations. Utah's economy is "Developers must create the full array of For a great example of successful mall redevelopment, one only one of the best in the country. That will not change. There are very goods and services. Restaurants, restrooms, needs to look at University Place in Orem, owned and developed few negative economic factors. If you want great return, Utah is a gathering places, easy transportation, drop off by the Woodbury Corporation. Originally named University Mall, great place to invest. It is the best place to live and do business," and pick up locations, and a safe and secure over the last few years the shopping area has undergone a massive says Thain. environment for families," says Simonsen. $500 million transformation, complete, of course, with a new Though mixed-use developments don't happen overnight, "These centers must be 'technologically smart.' name and a little something for every shopper. retail spaces throughout the valley such as The Gateway, Valley Constant electronic contact between friends The mixed-use development now houses Costco, Trader Joe's, Fair Mall, and The Shops at South Town are making small changes and family coupled with the right amount of Big O Tires, Massage Envy, Tai Pan Trading, Cinemark movie to improve the success of the retail real estate space wherever instant ecommerce advertising to capture the theater, and a host of delicious restaurants. Jeffrey Woodbury, the possible. dollars on site will be critical." senior vice president at the Woodbury Corporation higlights a "The mixed-use mall is not a quick and easy fix," says Mr. brand-new apartment complex located on-site and mentions that Simonsen. "South Town has been formulating their plan now for CREATE THRIVING COMMERCIAL CENTERS there will be a hotel added to the property sometime in the next five years. They have been successful in fixing their transportation It's no surprise that redeveloping a retail mall to year. access with the addition of the northbound I-15 exit directly into house things such as water parks, golf driving At University Place, you can literally walk out the front door the mall. They have repurposed the former Dillard's box into a ranges, and go-kart tracks is a daunting and of your apartment and walk to a grocery store, a movie theater, new entertainment venue named Round One." costly project for developers, but it's one that and more. With everything a shopper could ever need found in But South Town's redevelopment doesn't end there, Mr. Simonsen says is worth the investment. Both for one convenient location, you'll never have to leave. Simonsen adds that the developers are looking at adding multi- the mall and the areas surrounding it, as well. family housing, several new restaurants and hotels, and a new "Mixed-use developments are very EMPHASIZE COMMUNITY SPACES "category killer" hard-goods store in the west end of the retail beneficial to the thriving retail areas," says While there are a host of new things happening at University space. Some malls are even looking at adding a bit of office space, Simonsen. "By creating day-time jobs with Place, both the shoppers and the developers at Woodbury are most similar to the office spaces at City Creek Center. With additions office space; eating establishments which cater excited about the addition of The Orchard, a park-like space located like these, it isn't hard for shoppers to find everything they could to customer needs morning, noon, and night; outdoors, in the heart of the property. Complete with synchronized ever need, all in one convenient location. public transportation convenience; hospitality water shows; a plethora of covered seating; within close proximity "We have all heard the adage live, work, and play," says Simon- choices; and experiential retail venues, guests to the apartment homes; and the ability to host year-round concerts, sen. "This is where mixed-use developments or combinations of are able to create memories and feel-good times farmer's markets, and other activities. The weekly events held at The developments create places to live, places to work, and places to with friends and family." Orchard help bring even more people into the mixed-use space. recreate and entertain. All within the same development."

16 | THE ADVISOR THE ADVISOR | 17 THE RIGHT ROUTE BUILDING AN INLAND PORT HOW UTAH’S PLANNED INLAND PORT WILL OPEN UP NEW OPPORTUNITIES FOR THE STATE, AND THE WORLD. BY ELAINNA CIARAMELLA

Planes, trains, and automobiles, or in Utah’s containers can be loaded onto the dock. Intermodal case… semi-trucks and rail-lines filled with rail is critical to moving containers quickly and effi- cargo. All of these are critical to the inland port ciently to an inland port, especially in Utah, where coming to Utah, which will forever affect the cargo can be distributed quickly and efficiently. way we do business. THE ANATOMY OF AN INLAND PORT THE NEW TRADE ROUTE An inland port, or a dry port, is a hub where cargo International trade is booming, but North Ameri- is received, warehoused, broken down into smaller can seaports are ill-equipped to handle the massive batches, and distributed. A true inland port has di- volumes of cargo, and our infrastructure struggles rect connection to a seaport through Class I rail and to keep up with the rising demand. As a result, major transportation infrastructure such interstate there are problems with congested docks, contain- highways. Utah has both – plus a superb airpot hub. er delays, and increasing supply chain costs. Derek Miller, board chairman of the Utah In- Since 1980, global trade has increased by 600 land Port Authority Board, said there’s been talk of percent, directly impacting the front of the supply an inland port in Utah since the 1970s, but a trade chain―the seaports. And the rise of Amazon and mission to Hong Kong in 2015 is what finally got other e-commerce companies have put a squeeze on things moving. the other end of the supply chain―the local distribu- The governor, Miller, Lew Cramer (CEO of Col- tion hubs. Local hubs are under increasing pressure liers International | Utah) and other leaders visited from consumers for faster, cheaper deliveries. the Port of Hong Kong, giving them a unique per- When the Great Recession ended, US imports spective of the issues and opportunities that come and exports saw tremendous growth, increasing by with a port. That visit was the inspiration for the in- 36 percent and 38 percent, respectively. However, land port, something that would make undisputedly while seaport infrastructure has grown, it’s failed Utah a center of commerce for the western United to keep up with the cargo volume, leading to con- States, similar to how Hong Kong has become a ma- gestion on the already-busy docks. jor hub in the southeast and Asian regions. Port congestion is a huge problem facing both In 2017, a feasibility study was conducted and, the Ports of Los Angeles and Long Beach, the bus- “after that, the state legislature got very interested iest seaports in North America. Due to conges- and created the Port Authority Board to guide the tion, it’s now taking longer to “turn” a container development along,” says Miller. due to the increased volume of cargo, leading to bottlenecking, increased fees, and dreaded ship- THE CROSSROADS OF THE WEST ping delays. Utah has been known as the crossroads of the West There’s a growing urgency to move cargo away since it was settled, says Miller. It was true during from seaports and rapidly into distribution chan- western expansion, the Gold Rush, the building of nels, and inland ports like the one planned for the continental railroad and the telegraph line. And Utah can help facilitate this. The faster cargo can because of Utah’s central location, it was true when be moved and loaded on a train or truck, the faster they built the interstate freeway system.

18 | THE ADVISOR THE ADVISOR | 19 TOP FIVE U.S. Inland Ports

Cincinnati- Tri-State St. Louis Pittsburgh Memphis Northern Huntington, Kentucky WV

43 Million 37.5 Million 32 Million 22.5 Million 12.2 Million annual annual annual annual annual tonnage tonnage tonnage tonnage tonnage

Utah was blessed geographically and now we’re at the next stage of that, says Miller. “When we talk about inbound and outbound trade, Utah is in a great position. There’s a lot that’s done and made in Utah and goes out around the world. Now we have the cross shipment, we can make a big difference in terms of efficiencies and ATTRACTING AN INTERNATIONAL AUDIENCE opportunity to put in more infrastructure to make sure Utah isn’t just the crossroads of reduce environmental impacts as well, he says. There are a lot of companies in Utah that get product from overseas and the West, but the crossroads of the world.” There are so many smart port operators around the world. If we can often products get bogged down at the ports. The inland port will allow IF YOU LOOK AT SHIPPING IN The port will make sure things can get in and out of market quicker. When people take advantage of their technology, we’ll provide more jobs and a more cargo to be transported directly from boat to train. It will be a huge ex- “ THE WESTERN UNITED STATES, order something, they’re counting the minutes not the days. It will solve the issue of effective way of handling the transportation of goods, he says. pansion of the Union Pacific intermodal hub in Utah, says Bollow. you pretty much have to go through Salt Lake cost for Utah’s exporters: the inland port will provide a quicker and cheaper way for “The intermodal hub that we have here has additional capacity. Peo- their products to get to market, says Miller. MITIGATING LOCAL CHALLENGES ple think, ‘Why do we need this inland port?’ There’s some truth to that City. Trade follows trade routes and trade Right now, our West Coast seaports are at max capacity. “Creating an express lane The congestion between Salt Lake City and Provo is unbearable, he adds. but the overall big picture is by creating an inland port, we attract the brings jobs, innovation and investment. where goods can go off the boat and onto a train to Utah will solve a problem for our “We need to have smarter ways to use our other rail to handle some of larger guys, such as the Amazons of the world or Alibaba, the Amazon West Coast ports and for the country.” this transport. It may help us get smarter transportation solutions.” of China. What gives life to the inland ports is the large manufacturing Lew Cramer, CEO, Colliers International | Utah “Globalization is not going away. There is so much interconnectivity companies like BMW. In my opinion that’s what’s going to drive the cre- BRINGING INDUSTRY TO THE WORLD in business today...international investments in Utah. Something like this ation of this port.” Miller said that the inland port will affect IT, aerospace, agriculture, the life science in- is a strong validation that Utah is serious about globalization.” The Salt Lake International Airport will also be affected, and accord- dustry, and manufactured goods that are exported around the world. But the port is not Lara Fritts, the appointee of the Airport Advisory Board to the In- ing to Cramer, the airport can do a better job of helping the surrounding just about growing Utah’s markets. It will be a benefit to surrounding states including land Port Board said the inland port will provide opportunities for Utah- business get, and stay, connected. Wyoming, Montana, Colorado, New Mexico, Arizona, Nevada, and Idaho. “Our goal is based companies, including those in Salt Lake City to export their goods “If you go to Dubai, their airports and railroads are seamless. They for this port to act as a central point for all those outbound exports,” he says. more efficiently. “We are a very fortunate state in that we export a lot of are a transshipment spot for two billion people within two hours from Lew Cramer, CEO of Colliers International | Utah and a State Transportation Com- agricultural products like hay and alfalfa. Making the trade more effi- Dubai. If we are smarter and ensure that the transshipment of goods be- missioner says, “If you look at shipping lanes in the western United States, you pretty cient is a benefit to the state,” says Fritts. tween airport and rail is much better, the impact will be huge. It will be a much have to go through Salt Lake City. We’re a day’s truck ride from the four major “There are manufacturers that haven’t located here yet that need ac- major positive, and the airport knows that’s coming,” says Cramer ports of the West Coast.” cess to an inland port who can benefit from it. The business plan I’m The inland port will massively increase the air cargo transported in He explained how the inland port will enhance Utah’s capacity to be a transship- hoping can identify not only existing opportunities, but who are those and out of Salt Lake City International Airport . Products will come in ment point for the entire western United States. Given the mountains and rivers in businesses that should be here, that need the port to be successful. Let’s from coastal ports, offload into trains and onto trucks, and a lot of those the West, most trucks and trains have to come through Utah,” says Cramer. “There are find the inland industries that can locate here and grow here,” says Fritts. orders are gone the next day, says Bollow. only two places you can take a train. We’re really important for that purpose. Trade Rusty Bollow, a senior industrial and investment broker at Colliers The goods will go straight to the warehouse, to the airport, to be de- follows trade routes and trade brings jobs, innovation, and investment.” International calls the inland port a game changer. “It will transfer Utah livered the next day. “We’re in the mid of this multi-billion-dollar air- As a UDOT commissioner, Cramer is a strong believer in simplifying the road sys- from a typical Tier II industrial market into a world-class logistics hub port expansion that will make it so we can accommodate that growth,” tems in Utah. “We may not just use the inland port in the northwest quadrant, but if and manufacturing center. It will give us the ability to grow in ways that says Bollow. we take some of these opportunities to say for example Fillmore, we can be a lot more wouldn’t be possible otherwise,” he says. As for the residents anticipating the inland port, Bollow says we’re helpful in developing the rural parts of Utah. Put your big trucks in Fillmore, reduce The inland port will make it much easier and efficient for companies moving through the processes. “It’s going to happen. It’s just we need to congestion. You help the rural counties at the same time. There are a lot of good ideas to receive port goods from overseas, specifically in regards to customs be patient, it’s not happening tomorrow.” that we are considering right now,” he says. duties, Bollow pointed out. The port will allow businesses to take better Cramer says the inland port will equate to a better speed to market for consumers advantage of the foreign trade zone (FTZ), such as reduced customs du- in and outside of Utah. If we use electric vehicles or some other smart way to handle ties, taxes, and tariffs.

20 | THE ADVISOR THE ADVISOR | 21 Photo courtesy of EDCUtah THE ADVISOR | 23 NOWHERE TO GO ADDRESSING UTAH'S HOUSING CRISIS OUR POPULATION IS GROWING, HERE'S HOW THE HOUSING MARKET CAN KEEP UP. There’s no doubt about it: housing has become quite the hot-button topic throughout the state of Utah. Utah’s population is growing at a rate more than double the national average with the second highest job growth in the nation—and housing can’t seem to keep up. According to the Housing Gap Coalition, Utah currently has more households than available housing units. And those available housing units are ever increasing in value, making them unaffordable to many new and low-income potential homebuyers. Even rental rates have been increasing over the last several years—and in Salt Lake City there are now more renters than homeowners. Many believe that the next generation is facing a bonafide housing crisis.

BY ELLE GRIFFIN

24 | THE ADVISOR THE ADVISOR | 25 Annual Gap: Difference in Households and Housing Units, Utah

14,000 250,000 13,550

12,000 200,000

10,000 9,731 can," he says. Because they can make more 150,000 money on a million-dollar home than they 8,000 do an $80,000 home, the market has become driven toward more expensive homes. 6,515 The same concept has driven up rents. 6,000 100,000 "[Apartment buildings] require investors, 4,520 4,575 and those investors expect a certain return. 4,000 If they build an 80-unit complex and charge $1,200 a unit, returns are going to 2,664 50,000 be much higher than if they charge $1,000 2,000 1,445 a unit." Because of this, more than 125,000 households spend 50 percent of their

174.272 150,669 108,382 88,670 170,206 164,008 211,115 176,411 111,455 162,288 income on rent, leaving little remaining 0 0 for food, vehicles, children—or saving for a 2011 2012 2013 2014 2015 2016 2017 1971-1980 1981-1990 1991-2000 2001-2010 2011-2020 house.

SOURCES: US Census Bureau and Kem C. Gardner Policy Institute Housing Units Households WHAT TO DO ABOUT IT It's a complicated problem to solve. One way But, according to Mary Street, executive vice president And they definitely don't want to spend time weeding their to change that, Vernon suggests, is to make and associate broker at Colliers International, the housing flower beds. up the $200 gap at the state or city level. problem is not just an issue of there not being enough As Street says: "It's my dream to have a garden. Not my Zoning requirements can help by limiting homes. To her, the housing shortage is actually a shortage in kids' dream." lot size, causing homes to be smaller and housing that is affordable and desirable. To build a strategy prices to be lower. Housing vouchers, tax that ensures access to homes for the next generation, we WHAT THE NEXT GENERATION NEEDS Projected Increase in Households in Utah, 2017-2022 breaks or incentives can also help fill the gap need to keep those things in mind. between what developers would make at a Housing affordability, of course, is still a much bigger issue. market rate versus what they would make WHAT THE NEXT GENERATION WANTS "The largest group of people entering the housing 35,000 below it. Recently, a woman in front of Street at a grocery store was market are the millennial generation," she says. "And the Either way, a better line of complaining to a friend about her daughter. She said that millennial generation has seen several good curves in the 30,000 communication can't hurt. According to she had helped her daughter buy a beautiful home, only economy." Not only did they see the country at a time of Street, there's a big disconnect between to find that her daughter took no pride in it. She never financial crisis, but they also saw the bounce back from the generation that's enacting housing weeded her flower beds, and so the mother had to go over that crisis. They were able to attain good, high paying jobs. 25,000 legislation and the generation that's actually to her daughter's home and weed them herself. They've experienced wage increases and a time of great buying homes. "The folks who are most According to Street, this is exactly the sort of cautionary financial prosperity. 15,000 impacted by this shortage will have to weigh tale the housing conversation needs to consider going However, many of them are also facing enormous in. They're going to have to run for city forward. "It's not just a supply and demand question," student loan debt. In the United States, over 44 million council. They're going to have to volunteer she says. Supply and demand economics assume that if borrowers owe a total of $1.5 trillion—that's twelve zeros— 10,000 in their communities and give counsel we increase supply, prices will go down, thereby allowing in student loan debt. More than national credit card or auto about what it means to make good, healthy more houses to become available at more affordable rates, loan debt. Over 70 percent of students who attend four- 5,000 communities. Because as long as we have a solving the housing crisis altogether. But that's not always year colleges graduate with student loans. Even though debate between one generation's perception the case. Utah has the lowest student loan debt in the nation, the of what's desirable, and what the generation The next generation of homebuyers have very different average borrower still owes a massive $19,975. This loan- 0 entering the market actually want, it will preferences than their Baby Boomer parents. They don't payoff is causing delays in major purchases, including 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 never work. You can't just build more units want large homes in suburban housing developments with homes, especially as the cost of housing continues to rise. and solve it." And talking about it seems expansive yards that they're left to take care of. They want Robert Vernon, CEO at the Provo City Housing Housing Units Households like a great start, because, after all, a house small homes near friends, restaurants and yoga studios. Authority, is dealing with this problem head on. divided against itself cannot stand. They want high-speed internet and access to open space. "Developers will build as big and as expensive as they SOURCES: Kem Gardner Policy Institute, University of Utah.

26 | THE ADVISOR THE ADVISOR | 27 THE BURBS SUCCESS OUTSIDE THE CORE BUSINESS DISTRICT MANY UTAH COMPANIES ARE LEAVING THE CORE DISTRICTS OF SALT LAKE CITY AND LEHI IN FAVOR OF SETTING UP SHOP IN THE SUBURBS.

BY SARAH RYTHER FRANCOM

Mountain America Credit Union, Sandy. Photo courtesy of Dana Sohm

28 | THE ADVISOR THE ADVISOR | 29 WHEN BUSINESSES MOVE TO A SUBURB Beyond walkability, big-city amenities, and “ and bring the workforce there, those people come and entertainment, being in the suburbs could be a spend money and that drives sales tax for the community. bad business practice for companies who need It helps build roads and infrastructure. Then people to entertain out-of-state clients. The suburbs relocate for jobs and it starts a whole new community. aren't just lacking in dining and entertainment options. "In downtown Salt Lake, you have Jordan Wall, major hotels, which means there are places for Senior Executive Vice President, Colliers the traveling business person to stay. Smaller International markets don't have proximity to those types of hotels that businesses might need." Though you'll miss out on big-city amenities when you move your office to the suburbs, there are unique perks that you might have access to, depending on where you land, adds Bullington. "Lots of suburban office parks are closer to the mountains, so those who like to mountain bike or road bike can do that at lunch," he says. "Suburban office parks are closer to some of the natural amenities that we have in Utah. Being at the base of the canyons can be very attractive to some employees."

Instructure at Grove Tower. Photo courtesy of HUB Studio BUSINESSES BUILD COMMUNITY As more businesses open up shop in suburban neighborhoods, the local communities benefit. When businesses bring in employees and When you think of Utah’s business community, you likely picture employees has become a challenge for many businesses. This makes a customers, the result is more restaurants, the tall office buildings of Salt Lake City set against a backdrop company's location more important than ever, says Jordan Wall, senior retail, and entertainment options, which leads of mountains. Now, think of the booming tech scene. Did you executive vice president at Colliers International. to more development in those suburban areas. immediately think of Lehi? You're not alone. But outside of these "It's why we've seen companies gravitate to the south end of Salt It creates a synergistic cycle that bolsters two big business hubs, Utah has several suburbs that are home to Lake and the north of Utah County," he says. "Being able to recruit and overall economic growth, says Wall. big, vibrant businesses. Companies like Overstock, CHG Healthcare, retain talent from both Utah County and the entire Salt Lake Valley is "When businesses move to a suburb and Instructure, and doTERRA are just a few examples of big businesses a huge advantage for companies. And, companies aren't necessarily bring the workforce there, those people come that have planted roots in the ’burbs. moving to where their executives are anymore. It's all about where the and spend money and that drives sales tax for employee base lives and where they will live in the next 10 years." the community," he adds. "It helps build roads THE BENEFITS OF THE BURBS While moving to the suburbs might increase your company's access and infrastructure. Then people relocate for At first glance, the suburbs might not seem like the best place to open a to potential employees, Bullington stresses that employers should keep jobs and it starts a whole new community." business, but in a lot of ways, it makes sense. So, what's driving companies skillset in mind when considering a location. For example, if you're a He points to Thanksgiving Point as a prime to locate to suburban office parks? Of course, cost plays a role asit's high-tech company in need of skilled tech workers, Lehi is still probably example of exactly this. typically much less expensive to lease or acquire office space outside of the best place for your business. "Before the office market, there was the city. But it's not just cost that's driving this trend. James Bullington, "But if you're a company that offers backend support or doesn't nothing there. The office market really led senior vice president at Colliers International, says that there are many need a highly skilled workforce, the suburbs are a great place to be," the development of Thanksgiving Point," he factors driving companies to leave the city for the suburbs. says Bullington. "If you're a small company that only needs 20 people— says. "Once the office portion was developed, "Traffic is one of the main reasons businesses are going to places like like a CPA firm, for example—then the suburbs will work. The type of we saw fast food chains, restaurants, and then Millrock Park and Canyon Park Tech Center—they don't have to deal business you have and where your customers are will also dictate where grocery stores. Business really is the driver with nearly as many cars on the road," says Bullington. "Right now in you're located. Sometimes being in the suburbs puts you closer to your that brings everyone else to a place." Lehi, getting on and off the freeway takes a lot of time because it's always customers." Pleasant Grove is another example of congested, especially during rush hour. Getting in and out of downtown business building community, says Bullington. Salt Lake has the same problem." BUT THERE ARE DOWNSIDES After doTERRA moved its headquarters to No one wants to spend their time stuck in traffic, especially after a While there are many factors driving companies like CHG Healthcare the sleepy town, restaurants, retail, and even long day at work. And as congested roads are only expected to worsen and Instructure to move to the suburbs, there are downsides to more businesses began moving into the area. as Utah's population grows, many companies are setting up shop in consider. "A lot of companies will miss that 'live, work, play' part of Today, Pleasant Grove is a growing city that Pleasant Grove, Draper, or Cottonwood Heights in hopes of shortening being downtown," says Wall. "If you want to have an apartment, be is anything but sleepy. "Business really is the the daily commute for employees. able to walk to work, and then walk to a number of restaurants and lifeblood of a whole new community," says UTAH COUNTY TECH COMPANIES But it isn't just less time in the car that has companies moving to entertainment, that just isn't really an option in the suburbs. You'll miss Wall. "It's exciting to see more businesses the 'burbs. As Utah's unemployment rate drops to record lows, finding that type of environment—the urban feel. That's the big downside." move to the suburbs."

30 | THE ADVISOR THE ADVISOR | 31 A NEW CURRICULUM TRENDS AND CHALLENGES IN THE STUDENT HOUSING MARKET THE STUDENT HOUSING MARKET HAS CHANGED SIGNIFICANTLY OVER THE LAST 15 YEARS. WHAT USED TO BE OLD DORMITORY BUILDINGS CRAMMED WITH TWENTY-SOMETHINGS HAS GIVEN WAY TO COMMUNAL APARTMENTS FOR YOUNG STUDENTS, OLDER PROFESSIONALS AND THEIR FAMILIES, AND EVEN SENIORS.

BY ELAINNA CIARAMELLA

“There's a specialized housing type for every stage of your life and student housing is a big one,’’ says Rawley Nielsen, president of investment sales at Colliers International. And as the student housing population has changed, so have their needs, wants and financial expectations. But meeting those expectations can be a challenge.

OPPORTUNITIES Having followed the market for more than 15 years, Nielsen argues that new student housing developments must be purpose-built: designed with their audience in mind. They should have plenty of common rooms for students, such as game rooms and study rooms—when you're sharing a bedroom with a roommate, quiet study space can be fleeting. Other attractive student amenities include barbeque and picnic areas, fitness rooms, basketball courts, bike and car parking, washers and dryers, nice big kitchens, and units with private bedrooms and bathrooms. When there's a unit with multiple bedrooms, each bedroom should lock individually. As is the rule in real estate, however, the key is location, location, location. "In our eyes," Nielsen says, "the number one need is proximity to campus. A five-minute walking distance is what we like." Grant Collard, CEO at Redstone Residential, Inc., agrees, but adds that high-speed internet is "a more desirable amenity than indoor plumbing." Redstone, a fully integrated student-housing firm in Provo, Utah, handles investments and management and does everything to control and support the social

32 | THE ADVISOR THE ADVISOR | 33 Utah Public Institution Enrollment

EACH COMPLEX DEVELOPS ITS Utah Valley University Salt Lake Community College “ natural culture. When people move out it's University of Utah Weber State University not usually because of the sticks and the Utah State University bricks but because of the social scene.

Growth Rate Grant Collard, CEO, Redstone Residential, Inc. 45,000 4.1%

aspect of its properties. "Each complex 4% develops its natural culture," Collard says. "When people move out it's not usually 35,000 1.5% because of the sticks and the bricks but Enrollment because of the social scene. They're looking 1% for a different social scene, and one project that's done that really well is Wolverine 2.3% Crossing. We have between 15 and 20 25,000 resident assistants. They'll go to Taco Bell, 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 grab a bunch of tacos, and help people have a good time. We also have a giant inflatable SOURCES: Utah System of Higher Education movie screen and we'll watch summer movies in the courtyard," he says. In Collard's mind, any modern, purpose- built student housing facility should have are our kids, not some random delinquents. I think cities, as well as citizens, a clubhouse, fitness center, and hot tub. need to listen to the universities." He's looking at Generation Z. That means Nielsen hasn't lost hope. "In Utah, I think it's going to grow in amenities need to shift focus from leisure sophistication. We're going to see more purpose-built, large student housing to wellness—things like mediation rooms, complete with all the amenities. The student population is exploding." yoga studios, and expanded fitness centers. Ten years ago, movie theatres and game INVESTMENT rooms were considered to be hot amenities. From an investor's standpoint, there are real perks to investing in student "Today's college student would rather housing. For one, stability. Students are pretty much guaranteed to move in workout than party super hard. Things are just before the school year and they're going to stay in place for the duration actually changing a bit," says Mr. Collard. of that year. Then, there's the stability of the university. Even if multifamily is going up or down, the micro-economy around a CHALLENGES university is independent of that, says Collard. In fact, the student housing While Utah's student housing market is market weathered the recession in both 2009 and 2010. still evolving and some newer projects are "Student housing was seen as recession-proof or almost countercyclical. catching up, Utah is still behind the curve. Student housing is so dependent on the micro-economy of the university Universities in Arizona, Florida, and Texas, and enrollment. A recession or a depression will probably not affect student for example, have been building massive housing very much whereas a dip in enrollment will have much stronger resort-style student housing communities effects." that leave Utah's outdated options in the In fact, the last several deals handled by Collard broke records for price- dust. "It's a competitive tool if you have per-bed. And the supply situation is still good. "[For] most universities in good student housing to offer," says Nielsen. Utah, we're seeing greater than 97 percent occupancy." And while Utah will inevitably see Collard's advice to investors is to do their due diligence—get out there growth in the student-housing sector, there and walk the building. will be pushback from local residents. "Is there going to be heavy renovations or construction that will increase Typically, people don't want student housing rents? It's very difficult to walk into a slam-dunk acquisition these days. developments in their backyard because There's going to be some heavy lifting to make those investments work they associate them with crazy students, in today's market. There's no substitute for getting on site, walking the excessive traffic, and raging parties. property and competing properties, and understanding how your property "Residents think it's going to be Animal would fit in the local market." House-style with students passed out in the As Utah fights to catch up in sophistication to markets where student bushes. We're actually seeing a decrease in housing is purpose-built and focused on the requirements of modern that sort of behavior," Collard says. "These students, the market will only grow more solid.

34 | THE ADVISOR THE ADVISOR | 35 POST-MILLENNIAL A NEW GENERATION OF CONSUMERS RETAIL ISN'T DEAD, BUT IT'S GOT TO KEEP INNOVATING IF IT GIVES BRICK-AND-MORTAR A BOOST WANTS TO STAY RELEVANT FOR THE EMERGING WORKFORCE.

BY LINDSAY BICKNELL

BY LINDSAY BICKNELL Long have retail headlines grimly anticipated the impending death of brick-and-mortar retail thanks to Millennials and their preference for shopping online. But there’s a new generation of consumers entering the workforce and changing the retail game. Generation Z—those born in 1996 or later—is expected to be much larger and have a much bigger impact on retail than their Millennial predecessors. And, as it turns out, Gen Z consumers prefer to shop in-store rather than online.

According to the US Census Bureau's 2018 3rd quarter report, ecommerce only accounts for less than 10 percent of actual sales. While Millennials still seem to be driving sales in digital marketplaces, Gen Z is influencing the physical marketplace in innovative ways. And if brick-and-mortar stores want to keep up, they need to facilitate an experience that is convenient, enjoyable and authentic—and it all needs to be driven by technology.

MAKE IT CONVENIENT The next wave of retail shoppers are what the Retail Industry Leaders Association calls the (R)Tech shopper: consumers who want to shop anytime, anywhere, in any way. For a long time, that meant exclusively shopping online. But online shopping has its share of drawbacks: inconsistency in online products, waiting days or sometimes even weeks for shipping and the hassle of mailing back returns. According to Steve Bowler, executive vice president and resident commercial retail expert at Colliers International, "(R)Tech shoppers know they can buy it online, they know they can have the product in two days with Amazon, but they've gotten to the point where they want it now." Why wait for a product to arrive when customers can order it on their phones and pick it up in-store the very same day? "What the [(R)Tech] shopper doesn't want to do is have to wander down the aisles to find the item they're looking for and then hope to have somebody there who Harmons Grocery at City Creek. Photo by Dana Sohm. can help them if they have a question," says Bowler. So the challenge is integrating the digital space with

36 | THE ADVISOR THE ADVISOR | 37 Younger consumers are increasingly seeking experience over products (% of total discretionary expenditure excluding cars)

$1.1 trillion $2.6 trillion $4.3 trillion $7.0 trillion

22% 25% 28% 32% Experiences 14% 18% 17% 16% Experiential Products Products 64% 57% 54% 52%

1985 2000 2015 2030f

SOURCES: Bureau of Economic Analysis; A.T. Kearney analysis5

MAKE IT AUTHENTIC Gen Z is, after all, a unique generation. Not only are they more socially conscious than generations past, but they're also more diverse, which makes them more curious and open to other cultures and customs. They want eco-friendly, socially responsible brands they can trust and high-quality products that reflect their individuality. "Gen Z is the 'I want to touch it, I want to feel it, I want to explore it with my friends the physical space—and doing it in a way that adds real "E-commerce is in the fabric of retail. It will and socialize in the space' generation," Solanki says. "We're going to see a resurgence value. And retailers have found many ways to do that: continue to be a factor. However, we do not anticipate of that craft specialty to create a tactile space people can engage with and customize." free WIFI, shopping apps, digital access to coupons that e-commerce will halt brick-and-mortar growth. And it isn't just small bookstores and boutiques. Chains are embracing this, too, and incentives, phone-charging stations, digital loyalty REI is a great example of a retailer adapting to embrace customizing the experience according to the community they're in and making their programs, and even store associates equipped with mobile components of e-commerce while utilizing the advantages customers feel special. devices so customers can check out anywhere in the of brick-and-mortar retail," says Stuart Thain, executive For example, large department stores like Macy's are shifting away from a brand- store instead of waiting in line. "Large mega-stores, like vice president of retail, land and investment at Colliers specific approach and moving more toward an open environment. Shoppers want to be Walmart or Lowes, are even working on an app that will International. able to try, design and customize products in the store, get feedback from their friends walk you through the aisles to the product you're looking Providing great customer service is just the start. and find something personally meaningful. What they purchase and wear must be in for," Bowler explains. Retailers are finding other creative ways to make the line with their individual values—it's not about a label or a brand. experience an enjoyable one—hosting in-store events, like MAKE IT FUN concerts or parties, building websites or apps that include MAKE IT WORK GEN Z IS THE 'I WANT TO But there's more to a good retail experience than just information about designers and trends, or providing The effects of these consumer attitudes are far-reaching. For example, adapting a space “ touch it, I want to feel it, I want to convenience. In the age of online shopping, a good in-store personal shoppers and stylists who offer advice and to feel unique can prove difficult, especially when the only space you have available is explore it with my friends, and socialize experience has become a brick-and-mortar must-have, suggestions. something like a former Walmart—a space that was designed to be recognizable. "It in the space' generation. We're going to especially for the (R)Tech shopper. Just like Millennials, Anjee Solanki, the national director of retail services hurts the future of retail to have this habit," Bowler says. "So we have to be conscious Gen Z shoppers are less interested in spending their money at Colliers International, explains that "the tech boom is, about the spaces we're creating." see a resurgence of that craft speciality on things and more interested in putting their money of course, tied to food. Retail space is now, too... Food is Gen Z is also influencing retailer brand and acquisition strategies. IKEA acquired to create a tactile space people can toward good experiences. And with the impact of social massively important." TaskRabbit so shoppers can hire "taskers" to help assemble their furniture. The engage with and customize. media, young consumers are more likely to be using retail Bowler agrees. "In a retail complex, it used to be we company Dormify sends college-age stylists to help students design their dorm rooms. space as social space, both in the real and virtual worlds. had an anchor tenant, a Walmart or a Dillard's. But now, Many other brands are changing and adapting to meet the needs of this influential Anjee Solanki, National Director of Customer service still comes first. Gen Z consumers that anchor tenant is actually food. It used to be that it generation. Retail Services, Colliers International are more likely to seek out a salesperson than was all about these national credit tenants, too"—like a One thing is for sure: "The traditional retail space isn't going anywhere. It's just Millennials, but the salesperson must be knowledgeable Red Lobster or an Olive Garden—"but that's not the case becoming more innovative," Bowler says. "And we have to keep innovating. Always and professional. And they don't want products to be anymore. They want something unique." keep innovating." out of stock.

38 | THE ADVISOR THE ADVISOR | 39 In the world of ecommerce, customers want two things: faster delivery times and cheaper prices. As companies compete along these two metrics, squeezed margins force new innovations in efficiency. “Your margin is my opportunity,’’ Jeff THE LAST MILE Bezos famously said, and Amazon has indeed pushed the envelope in developing a logistics model that sets the standard. LARGE TRUCK manufacturers OPTIMIZING DIRECT DELIVERY “ are worried about issues of liability, But the envelope can be pushed a lot further, and the so-called "last mile" represents BY JACOB ANDRA a fat-cutting challenge with plenty of opportunity. The last mile is "the stage of shipping safety, and regulatory risk, which that gets the product to the consumer's home," explains Josh England, president of may delay the arrival of autonomous trucking and logistics at the firm C.R. England. Shipping involves multiple "legs" or trucks for quite a while. segments, and the final one is the most expensive; efficiency factors such as economies of scale have dwindled, or disappeared altogether, by the time an item is en route to Josh England, President of Trucking one's doorstep. and Logistics, C.R. England

DISRUPTING THE LAST MILE Disruption—in any industry—occurs through one of two channels: better practices or better technology. In the race for last-mile efficiency gains, logistics companies innovate in both areas—and in the interplay between the two. Tech innovations can

40 | THE ADVISOR THE ADVISOR | 41 The ecommerce "pull supply chain"

Retailer owned or brand owned Last Mile (click & collect)

Line Haul Line Haul Last Mile Plant Mixing Distribution Stores (pick-up from store) Centers Centers

• Homes • Lockers Retailer's .com distribution center Last Mile Brand's .com distribution Line Haul center • 750 to <5 miles (subject to order lead Share of marginal time: 3 days vs. same day) • Parcel express trucks if next -3 days cost per mile • Unit or eaches picking to basket • Delivery vans, courier, drones push old concepts even further, while also bringing in totally new Experiences • Picking against consumer order if same or next day paradigms. Experiential Products • Can be located 750 to <5 miles Take route optimization, described by Brandon Harrison, C.R. from demand England's chief sales officer, as "the process of determining the most SOURCES: A.T. Kearney analysis efficient way to move a shipment within a freight network." Route optimization is nothing new: it involves balancing longstanding variables such as "length of haul, lane density, number of stops," and more. But new technologies like cloud computing, big data, and artificial intelligence can help process the necessary data points needed to better-optimize routes. Another old idea, load efficiency, involves "maximizing the AUTONOMOUS VEHICLES ARE ON THEIR WAY trucks and their surroundings, these sensors will gather tremendous Driver wages usage of capacity, both in the form of cube and weight." Harrison Human wages add significant cost to transport, so it's not surprising amounts of environmental data and "fleets will have insights into 39% & benefits explains how the concept and practice of load efficiency "enables that folks are looking to autonomous vehicles to cut costs and increase asset condition at a much more granular level." Meanwhile, cloud the industry to drive costs out of the supply chain" by making better efficiency. People make mistakes too, and eliminating human error computing "will enable the collection and storage" of the data use of "trucks, drivers, trailing equipment, and containers." As with could also make for a safer system. collected by the sensors, and machine learning will suss out patterns route optimization, new technologies allow better visibility into the While autonomous trucks seem futuristic, they are already with and connections that can inform better operational decisions. complex factors affecting load efficiency. us to a large degree. Harrison describes how "we currently have Blockchain, another much-discussed trend, which Farr says often trucks deployed in our fleet with partial autonomous features." These "feels like a solution looking for a problem," though "real use cases IMPROVING PICKUPS AND DROPOFFS include collision mitigation systems which help prevent "specific are beginning to emerge that may have a significant impact on the Uber's "Uber Freight" division launched its "Power Loop" concept types of accidents" such as "rear-end incidents." industry." He cites "smart contracts"—blockchain-based software Fuel costs 25% earlier this year. Power Loop appears to be another incarnation of However, Harrison expects it to take years, if not decades for that executes predetermined transactions when specific conditions a longstanding solution to the problem of unloading times. Many delivery trucks with fully autonomous capabilities to hit the roads. Mr. are met—as having the potential "for significantly optimizing and freight companies already participate in "trailer pools" that "enable England concurs. "Some prototypes are being tested," he says, before improving the interactions between shippers, brokers, and carriers." carriers to access preloaded trailers, cutting load time from hours adding that large truck manufacturers are worried about issues of Also, Farr acknowledges, blockchain may have a valid use in "high- Truck/trailer lease or to minutes." Harrison explains that "large carriers like C.R. England liability, safety, and regulatory risk, which may delay the arrival of value and high-sensitivity freight" where independent validation 14% purchase payments have long used trailer pools to help increase the efficiency of our autonomous trucks for quite a while. Still, England acknowledges of "chain of custody and freight condition is important." To date, trucks and drivers." that "others are more bullish, so maybe it will happen sooner." however, no existing software vendor with a blockchain offering The trailer pool idea is simple: a driver can drop a loaded trailer "seems to have significant momentum yet." Repair maintenance 10% and drive off with an empty trailer. "The customer unloads the trailer TECHNOLOGICAL ADVANCES FOR TRUCKING COMPANIES The world is increasingly shifting away from in-store shopping after our driver has departed," says Harrison. "When there's no trailer Rich Farr, vice president at C.R. England, sees plenty of disruptive to ecommerce, which equates to more last miles for logistics 6% $ Truck insurance premiums pool, the driver has to stay for a live unload"—waiting for the trailer to potential in buzzwordy technologies such as mobile computing, companies to fulfill. The combination of known (physical matter be unloaded—"rather than immediately going to the next pickup." machine learning, cloud computing, cloud services, artificial lugged from A to B) and unknown (new tech, unknown regulatory 5% ... Other It's easy to see the benefit of trailer pools. What is less clear is how intelligence, and the internet of things (IoT). landscape unfolding, etc.) factors brings a unique set of challenges/ Power Loop improves on the established trailer pool paradigm. " Uber, For example, the IoT/cloud computing/machine learning trifecta opportunities for the transport of goods. If one thing is for sure, it's SOURCES: American Transportation Research Institute, 2016. however, has already established itself as a canny and unpredictable will allow trucking companies to know what's occurring to their going to be an interesting ride. innovator; all that's left is to see how Power Loop evolves. fleets in real time. As sensors become cheaper and proliferate across

42 | THE ADVISOR THE ADVISOR | 43 COLLIERS INTERNATIONAL | UTAH

DIVERSE MANUFACTURERS ADD VALUE TO UTAH MEDICAL EQUIPMENT & SUPPLIES MANUFACTURING Manufacturing in the state of Utah is more than a $20 billion a year IN UTAH INCREASED BY industry. The manufacturing industry is one of the key growth sectors in the state's long-range economic plan. It makes up nearly 14% of state's economy, and employs more than 125,000 workers, nearly 8% of Utah's 27% workforce is employed in manufacturing. OVER 5 YEARS: 2011-2016 (&2120,&'(9(/2301(7 • There are manufacturing companies in nearly every sector imaginable. &25325$7,212)87$+ Manufacturing combined is the single largest payroll in the state, with the exception of government APPROXIMATELY • Computer and electronics products, including communication equipment, computer microchips and scientific instruments, make up Utah's leading 3,500 manufactured products. Ranking second is primary metals manufacturing, MANUFACTURING producing steel, aluminum and copper in the state BUSINESSES IN UTAH 87$+0$18)$&785(56$662&,$7,21 • According to the Economic Development Corporation of Utah, the state’s FREIGHT TRANSPORTATION IS VITAL TO UTAH manufacturing and distribution industry has experienced employment growth above 11 percent over the past five years. MANUFACTURING • In 2015, the trucking industry in Utah employed 21,519 people with an average annual salary of $43,980. EMPLOYS NEARLY • Forbes compared and ranked 373 metropolitan cities where manufacturing is • In 2015, the railroad industry in Utah employed 1,558 people with an average annual salary of $68,304. thriving, Salt Lake City ranked number 15. 8% • In 2015, the pipeline industry in Utah employed 272 people with an average annual salary of $106,704. OF UTAH’s WORKFORCE (65,%$2 • In 2015, the aviation industry in Utah employed 6,164 people with an average annual salary of $72,048. MANUFACTURING • In 2015, the warehouse and storage industry in Utah employed 9,680 people with an average annual salary of $41,568.

• Utah is a strategic hub for highway, rail/intermodal, pipeline and air freight operations that impact our businesses COLLIERS INTERNATIONAL | UTAH and quality of life. 22nd largest employer in 33rd largest employer in One of Procter & Gamble's Leading manufacturer and Utah by number of employees Utah by number of employees newest manufacturing sites marketer of disposable medical built in 2011, is located in Box devices used in interventional, • As a result, a large part of Utah’s economy is transportation and distribution oriented, and we have a major impact MEDICAL EQUIPMENT & (2017) (2017) DIVERSE MANUFACTURERS ADD VALUE TO UTAH Elder County diagnostic and therapeutic on national freight flow. SUPPLIES MANUFACTURING The world's largest automotive Focused on the development, Manufacturing in the state of Utah is more than a $20 billion a year IN UTAH INCREASED BY procedures, particularly in safety supplier (such as design, manufacturing and industry. The manufacturing industry is one of the key growth sectors in Currently produces paper cardiology, radiology, oncology, airbags, seat belts, steering integration of networked consumer products (Bounty critical care and endoscopy. the state's long-range economic plan. It makes up nearly 14% of state's wheels, etc.) with sales to all systems for communication, Paper Towels, Charmin Toilet economy, and employs more than 125,000 workers, nearly 8% of Utah's 27% major car manufacturers surveillance and reconnaissance Paper, and others) Headquartered in South workforce is employed in manufacturing. OVER 5 YEARS: 2011-2016 Jordan, Utah (&2120,&'(9(/2301(7 Significant manufacturing Global company with major $500 million expansion to the &25325$7,212)87$+ • There are manufacturing companies in nearly every sector imaginable. COLLIERS INTERNATIONAL | UTAH operations in Weber and Box operations in Salt Lake City, Utah facility over coming years was Manufacturing combined is the single largest payroll in the state, with the Elder Counties recently announced, and will COLLIERS INTERNATIONAL | UTAH also add up to 200 more jobs exception of government APPROXIMATELY MEDICAL EQUIPMENT & • Computer and electronics products, including communication equipment, DIVERSE MANUFACTURERS ADD VALUE TO UTAH SUPPLIES MANUFACTURING Develops multimedia and Manufacturing in the state of Utah is more than a $20 billion a year IN UTAH INCREASED BY 34th largest employer in 35th largest employer in computer microchips and scientific instruments, make up Utah's leading DIVERSEDIVERSE MANUFACTURERS MANUFACTURERS ADD VALUE TO UTAH MEDICAL EQUIPMENT & creativity software products COLLIERS INTERNATIONAL | UTAH 3,500. 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Utah by number of employees Utah by number of employees above 11 percent over the past five years.wheels, etc.) with sales to all systems for communication, northwest quadrant Jordan,temperature-sensitive Utah freight build an additional facility that • The trucking industry in Utah employed 21,519 built in 2011, is located in Box devices used in interventional, • As a result, a large part of Utah’sEMPLOYS economyPaper NEARLY Towels, is transportation Charmin Toilet and distribution oriented, and we have a major impact (2017) (2017) majorSignificant car manufacturers manufacturing surveillanceGlobal company and withreconnaissance major $500 million expansion to the for over 90 years will more than double their people with an average annual salary of $43,980. Elder County diagnostic and therapeutic Paper,4,000 totaland others)Utah employees with Headquartered in South operations in Weber and Boxon nationaloperations freight in Saltflow. Lake City, Utah facility over coming years was • In 2015, theUtah railroad workforce industry in Utah employed 1,558 people with an average annual salary of $68,304. The world's largest automotive Focused on the development, •procedures, Forbes particularlycompared in and ranked 373 metropolitan cities where manufacturing is 1,700 working at the company's Jordan, Utah SignificantElder Counties manufacturing Global company with major recently announced, and will Headquartered in West Valley safety supplier (such as design, manufacturing and Currently produces paper cardiology,thriving, radiology, Salt Lake oncology, City ranked number 15. $500packaging million center expansion to the • The railroad industry in Utah employed 1,558 operations in Weber and Box operations in Salt Lake City, Utah also add up to 200 more jobs City, Utah • In 2015, the pipeline industry in Utah employed 272 people with an average annual salary of $106,704. airbags, seat belts, steering integration of networked consumer products (Bounty critical care and endoscopy. facility over coming years was $68,304 Elder Counties 8%Ability to process 69,000 people with an average annual salary of . wheels, etc.) with sales to all systems for communication, recently announced, and will Paper Towels, Charmin Toilet OF UTAH’s WORKFORCE major car manufacturers surveillance and reconnaissance alsopackages add up an to hour 200 - more thanjobs Paper, and others) Headquartered in South (65,%$2 600 million annually • In 2015, the aviation industry in Utah employed 6,164 people with an average annual salary of $72,048.Develops multimedia and MANUFACTURING largest employer in • The pipelinelargest industry employer in Utah in employed 272 Jordan, Utah 34th 35th creativity software products Significant manufacturing Global company with major $500 million expansion to the & DISTRIBUTION LOGISTICS • In 2015, the warehouse and storage Utahindustry by number in Utah of employees employed people9,680Utah peoplewith by number an with average of anemployees average annual annual salary salary of $106,704 of . operations in Weber and Box operations in Salt Lake City, Utah facility over coming years was 34th largest(2017) employer in 35th largest(2017) employer in Develops multimedia and Elder Counties $41,568. creativityEmploys about software 613,300 products recently announced, and will Utah by number of employees • The OneUtahaviation of by the number largestindustry of refrigerated employees in Utah employedemployees 6,164 worldwide also add up to 200 more jobs (2017) trucking companies(2017) in • Utah is a strategic hub for highway, rail/intermodal, pipeline and people air freight with operationsan average that annual impact salary Employsour ofbusinesses $72,048 about 613,300. Onethe world, of the transportinglargest refrigerated employeesRecently an worldwidenounced plans to One of Procter & Gamble's Leading manufacturer and and quality of life. truckingtemperature-sensitive companies in freight build an additional facility that 22nd largest employer in 33rd largest employer in largest employer in largest employer in Develops multimedia and newest34th manufacturing sites marketer35th of disposable medical COLLIERS INTERNATIONAL | UTAH• The theforwarehouse overworld, 90 transporting years and storage industryRwillecently morin Utahe an thannounced employed double plans their to 9,680 Utah by number of employees Utah by number of employees Utah by number of employees Utah by number of employees creativity software products built in 2011, is located in Box devices used in interventional, • As a result, a large part of Utah’s economy is transportation and distributiontemperature-sensitive oriented, freight and we havebuildUtah a major workforcean $41,568additional impact facility that (2017) (2017) (2017) (2017) peopleHeadquartered with an average in West Valley annual salary of . Elder County diagnostic and therapeutic Employs about 613,300 on national freight flow. for over 90 years will more than double their The world's largest automotive Focused on the development, City, Utah procedures,One of the largestparticularly refrigerated in employees worldwide Utah is a strategic hub for highway,Utah rail/intermodal, workforce pipeline, and safety supplier (such as design, manufacturing and Currently produces paper cardiology,trucking companies radiology, inoncology, • Headquartered in West Valley airbags, seat belts, steering integration of networked consumer products (Bounty criticalthe world, care transporting and endoscopy. Recently announced plans to air freightCity, Utah operations that impact our businesses and quality of life. wheels, etc.) with sales to all systems for communication, Paper Towels, Charmin Toilet temperature-sensitive freight build an additional facility that major car manufacturers surveillance and reconnaissance Paper, and others) Headquarteredfor over 90 years in South will more than double their & DISTRIBUTION LOGISTICS • As a result, a large part of Utah's economy is transportation and distribution Jordan, Utah Utah workforce Significant manufacturing Global company with major $500 million expansion to the Headquartered in West Valley oriented, and the state has a major impact on national freight flow. LOGISTICS & DISTRIBUTION LOGISTICS operations in Weber and Box operations in Salt Lake City, Utah facility over coming years was City, Utah Elder Counties recently announced, and will also add up to 200 more jobs COLLIERS INTERNATIONAL | UTAH

44 | THE ADVISOR & DISTRIBUTION LOGISTICS THE ADVISOR | 45 34th largest employer in 35th largest employer in Develops multimedia and Utah by number of employees Utah by number of employees creativity software products COLLIERS INTERNATIONAL | UTAH (2017) (2017) Employs about 613,300 One of the largest refrigerated employees worldwide trucking companies in the world, transporting Recently announced plans to COLLIERS INTERNATIONAL | UTAH temperature-sensitive freight build an additional facility that for over 90 years will more than double their Utah workforce Headquartered in West Valley City, Utah LOGISTICS & DISTRIBUTION LOGISTICS

COLLIERS INTERNATIONAL | UTAH SHOOTING ON LOCATION

COMMERCIAL REAL ESTATE'S EXCITING (AND LUCRATIVE) ROLE IN FILM AND TELEVISION

BY HEATHER BEERS

When Meg Ryan and Tom Hanks’ characters finally unite in Sleepless in Seattle, the beloved 90s rom- com moment takes place atop the iconic Empire State Building. Some of Tom Cruise’s most harrowing stunts as Mission Impossible’s Ethan Hunt take place on skyscrapers like Dubai’s Burj Khalifa and Shanghai's Jin Mao Tower or climbing Dead Horse Point in Utah.

Whether in a starring role or part of the supporting cast, commercial real estate plays an important part in cinema. Especially in Utah's thriving film scene where local properties have had notable roles in over 1,000 movies, television productions and advertisements, according to the Utah Film Commission. The film industry's symbiotic relationship with the commercial real estate market has even brought additional revenue streams and notoriety to Utah.

46 | THE ADVISOR THE ADVISOR | 47 Notable Classics Filmed in Utah COME FOR THE VIEWS, STAY FOR THE LOCATION From 1940s John Ford westerns to HBO's current series, Westworld, Year Released which is heavily dependent on Utah's iconic scenery, Utah's vistas have long been famous as a cinematic backdrop. Jeff Johnson, a The Searchers 1956 Utah-based casting director, indicates the natural landscape may be 1968 an initial draw, but filmmakers quickly learn that Utah offers much Planet of the Apes more. "Filmmakers come here wanting the southern Utah look or Butch Cassidy And The Sundance Kid 1969 the mountains," says Johnson. "Then they find out they've got a city, small towns—there's an all-encompassing diversity for filming in Footloose 1984 Utah you can't get anywhere else." Marshall Moore, vice president of operations and marketing at Back To The Future 3 1990 Park City-based Utah Film Studios, affirms that Utah fills a variety of filmmaking needs. Prior to his role at Utah Film Studios, Moore The Sandlot 1993 served as the director of the Utah Film Commission for several 2002 years. Austin Powers He points out that towns like Magna have become a kind of National Treasure 2004 "backlot for Salt Lake City." With a population of nearly 25,000, Magna is just 15 minutes from downtown. At its center is a classic Gravity 2013 main street with storefronts that have been tailored for productions as different as the sunshine-bright Disney series Andi Mack, and Ian McShane's bleak cartel thriller, The Hollow Point. Documentary filmmakers also find Utah's places and landscapes But locations for perfect for filming don't end with Salt Lake City ideal for storytelling, including the recently released Hunt for the DOING BUSINESS WITH SHOW BUSINESS or our national parks, Utah's suburban areas have also hosted major Skinwalker, documentary filmed at the infamous Skinwalker Ranch Admittedly, it's not always easy for commercial properties to host a film film productions. The original Footloose featured a young Kevin near Vernal. or television production. If the space is occupied, tenants need to find MOST DIRECTORS LIKE TO Bacon dancing at Lehi Roller Mills. East High School was the setting Downtown Salt Lake is also an in demand location, according to alternate places to work (or keep impossibly quiet and out of the way “ film on location to get authenticity, for Disney's record-breaking High School Musical franchise and will Derek Mellus, production manager at the Utah Film Commission, during filming). to capture that real-world feel. But welcome film crews again for the musical's upcoming reinvention as with spots like 222 Main as a go-to location for interior shots Productions can also extend far beyond the actual space where the a Disney series. The old Provo high school, now vacant of students, is that's not always practical. of a modern office space. As for stunning exterior shots in a city director, cast and crew are shooting. They typically establish a base the setting for scenes in Dwight in Shining Armor, a new series for the environment, Mellus says the Natural History Museum of Utah camp adjacent, or near to the primary shooting location. Depending BYUtv family entertainment network. In Utah, the options for potential Marshall Moore, Vice President of "takes [filmmakers'] breath away when they first see it. The scale is on the size of the project, this can include a fleet of technical trucks, filming locations are endless. Operations and Marketing, Utah Film impressive. It can pose for something futuristic, or something ultra- cast trailers, catering services, as well as parking for cast, crew, and Studios modern." transportation vehicles. Just a few miles away, The Gateway entertainment center "has CONSTRUCTING THE SCENE ON LEASED PROPERTY So why make room for the sprawling, protracted distraction of a film been cheated as the Las Vegas strip," says Mellus. He added the "Most directors like to film on location to get authenticity, to capture production? You could say that it's all about the Benjamins. "Location contemporary City Creek Center, with its upscale ambiance and that real-world feel. But that's not always practical," says Moore. In fees can run about $5,000 a day for commercial property," says Moore. narrow streets, has attracted shoots for many car commercials. those instances, film crews often lease a warehouse for a few weeks or "For warehouses, leases that are month-to-month typically start around months to build a set and shoot their production. $12,000 a month for a basic office, warehouse, and parking combination." James Franco filmed several gripping scenes for127 Hours in a setting "There's also a sense of pride," adds Mellus. "Being able to see your that looks like an authentic canyon floor—but was actually a temporary location on the big screen, seeing the work you've put into your business Blockbusters Filmed in Utah sound stage built in a former Salt Lake City furniture warehouse. or home to have a certain look that's appreciated by a film director or For longer-term productions like the Warner Bros. series Everwood production designer is rewarding." Production Budget Worldwide Gross Year Released and several independent films, Moore says the "one place that has really For more than eight decades, Utah has built a strong reputation cracked the code in the film industry is Silver State. They're a textile throughout Hollywood and the international film community. The Transformers: Age of Extinction $210 Million $1.1 Billion 2014 business in South Salt Lake, and they have kept part of their warehouse state's concerted effort (including tax incentives and outreach by the space available to the film industry since about 1996.Andi Mack is using Utah Film Commission) continues to open the door for commercial real Pirates of the Caribbean: At World's End $300 Million $963 Million 2007 it right now." estate to take part in the business of show business. Independence Day $75 Million $817 Million 1996 At 91,000 square feet, Utah Film Studios is dedicated entirely to The site rentals can provide significant additional revenue streams supporting the film industry. The space has been home to several for property owners. And for many, the stardust left in the afterglow Forest Gump $55 Million $678 Million 1994 productions since it opened in 2015, including the ABC series Blood of the big lights is also a plus. After all, when A-listers like Reese and Oil, Jeremy Renner's crime drama, Wind River, and the Sundance Witherspoon are forever captured in front of the Utah State Capitol Indiana Jones and the Last Crusade $48 Million $474 Million 1989 Film Festival breakout, Hereditary. Yellowstone, Paramount Network's (which served as a doppelganger for the nation's Capitol in Legally series starring Kevin Costner, has recently returned to shoot a second Blonde 2), a little of that Hollywood glamour tends to rub off on the rest Dumb and Dumber $17 Million $247 Million 1994 season at the studios. of us.

48 | THE ADVISOR THE ADVISOR | 49 CLINICALLY SMART THE PROGNOSIS OF MEDICAL CENTERS TECHNOLOGICAL ADVANCES ARE CHANGING THE WAY WE DEVELOP MEDICAL REAL ESTATE. HERE'S HOW.

BY KASSI COX WHALE

Between the ever-evolving impacts of fee-service model that drives escalated medical healthcare reform and an increase in costs. "With the exception of trauma, critical, technologies that dramatically change the and acute needs, the old requirement for way we receive care, optimizing medical real traditional hospital beds is going away," says estate is becoming more complicated and Uriona. He explains that through technology, commercialized than ever before. patients can receive an immediate diagnosis to more common ailments such as sinus infections New medical centers continue to embrace or the flu. This changes the need for a doctor innovation and buck the norm. As individuals to be present in a physical space, which saves become more educated on how best to seek money otherwise spent on real estate. and receive health care, providers will improve "With so many new ways to communicate operations, enhance real estate footprints, and with patients, physicians don't necessarily need enrich overall service quality. to be present to identify and treat a medical "We, as a body of people, must start making issue," says Dan Ford, senior agent at Colliers preventative decisions about our health," International. "Quality service for immediate explains Tom Uriona, corporate real estate medical needs could cost upwards of $700, director at Intermountain Health Care. "A however, if you use technology, the average cost population-based model, can move healthcare is around $49. That is a significant savings." consumers toward doing just that. There will In particular, rural communities greatly be systems in place if people decide to take benefit from the expanded service capabilities advantage of what is available." of virtual visits. Doctors from larger cities can directly utilize technology to assist primary A NEW APPROACH care physicians in rural areas, mitigating Technology has become not only a facilitator to the need for Life Flight or extended travel. health care, but also a counter to an outdated Specialists can provide advanced assistance for

50 | THE ADVISOR THE ADVISOR | 51 Telemedicine $ Diagnostics, Prescriptions When to go: Non-acute symptoms of common illnesses Walk-In Clinic $ Diagnostics, Prescriptions, Preventive Care When to go: Non-acute symptoms of common illnesses, skin conditions, screenings, vaccinations Primary Care Physician THE COST $$ Diagnostics, Prescriptions, Preventive Care, Illness Treatment, Disease Management Referrals When to go: Non-acute symptoms of common illnesses, managing existing conditions, preventive care OF CARE Urgent Care $$$ Diagnostics, Prescriptions, Minor Injury Treatment, Illness Treatment When to go: Non-life-threatening conditions that need to be assessed the same day Emergency Room $$$$ Anything relating to triage, diagnosis and stabilization of a serious or critical injury or illness When to go: Life threatening symptoms, sudden-onset pain, acute injuries

surgeries, labor and delivery and many other sophisticated care needs dying on the vine. The cost of these types of operations is care, and certain facilities will be developed to facilitate that care. However, UTAH HEALTH that require the expertise of a specialist. incredibly high." He believes more and more physicians the future of medical services and care will be outpatient oriented, provided "Technology is driving the future of healthcare. It provides a point will work for "specialty groups or larger systems." by both bricks and mortar and virtual platforms." RANKINGS of entry into a system that allows the consumer options," says Uriona. "This new health care model has created a bigger shift to more affordable "This shift creates access to healthcare in a way like never before. OPTIMIZING FOOTPRINTS care in the form of outpatient and urgent care facilities," says Ford. "Within ST People refer to technology as a disruptor, but it is certainly positive. If Ford adds that about 70 percent of all emergency room the next couple years, we are going to see a lot more outpatient facilities, 1 LOWEST people don't have to step into a brick-and-mortar facility, that is great. visits are not necessarily emergencies, yet by going to the that still provide great care but will overall be more affordable for everyone." Prevalence of smoking It saves everyone money in the end." ER patients are hit with high bills for care. More urgent Strokes care facilities may reduce medical expenses by providing PLANNING FOR GROWTH TIGHTENING REQUIREMENTS additional options to patients, aside from just going to the It is difficult to predict exactly where technology and legislation will carry Cancer deaths Tech is not the only disruptor in the healthcare industry. Legislative ER. the development of medical centers over the coming years, but Uriona is Heart attacks reform has created an environment where local clinics and independent According to Ford, many healthcare providers have quick to point out that "planning for long-term growth is key." High blood pressure practitioners cannot afford to be on their own unless they conform to begun implementing the hub and spoke model. "A central Both Utah County and Salt Lake County will house well over 1.5 million Heart disease a hyper-specialized realm of care. Physicians now must identify cost hub offers tier-one inpatient care. These are the really big citizens within their respective communities in the near future. With saving measurements to make money and compete. In most cases, that hospitals." this incredible surge in population growth, healthcare providers along means joining larger medical groups and consolidating their practices. Spokes are typically smaller, ambulatory outpatient the Wasatch Front are analyzing available properties and land for future 2ND LOWEST "It used to be very independent. Doctors ran their own everything," facilities that provide focused care without the overhead medical use on a daily basis—sometimes planning for eight times current says Ford. "Now there is a significant amount of money coming in costs of the giant hospitals that usually house multiple density. Prevalence of chronic drinking from Medicare, which mandates that you be compliant with electronic specialists within one medical center. When necessary, "Utah is very fortunate," says Uriona. "We have some of the lowest High cholesterol record management requirements to get money." spokes can rely on the tools and resources found within healthcare costs in the country. Our service is comparable to some of the Diabetes In order for primary care physicians to afford the multimillion- their central hub. best quality care in Europe. There are obstacles on the broader range, and Heart attacks dollar software and systems that comply with new legislation, the The hub and spoke model not only lowers overall costs the biggest challenge to our market is growth. The good news is that we are medical industry is becoming accustomed to an entirely new way of but empowers doctors with the necessary support and all a group of innovators. We will continue to help people live as healthy of Preventable hospitalization building, buying, and investing in medical real estate. Uriona says less tools to deliver an amplified level of service and remain a life as possible." speculative space is being built and more specialty groups are building competitive in an increasingly difficult market. Uriona says SOURCES: Governor's Office of Economic Development to own. "Single practitioners with small building requirements are "there will always be a need for high end acuity inpatient

52 | THE ADVISOR THE ADVISOR | 53 DEATH, TAXES, REAL ESTATE REFORM HAS PRIMED THE INDUSTRY FOR RAPID GROWTH

BY EMMA PENROD

Given that President Donald Trump made his fortune in real estate, it shouldn’t come as a surprise that multiple provisions of the 2018 tax reforms stand to benefit commercial real estate directly, says Ian Prescott, a partner at the Salt Lake City-based CPA firm WSRP. And though the final details have yet to be worked out, those looking to buy, sell, or rent commercial space will likely benefit from broader tax cuts and deductions, as well.

Between the reforms and the current economic outlook, Blake Rigby, managing director at Colliers International, says the market seems to indicate that now is a good time to invest in real estate, regardless of whether buyers are considering short or long-term goals. "Were it me," he says, "I would be more prone to do things now than to hold off."

NEW REFORMS EXPAND OPPORTUNITIES Thanks to the bullish real estate market, Rigby doesn't expect that the new reforms will have a dramatic impact on dictating growth. But they could sway developers when it comes to deciding where they invest. One of the most significant reforms to come out of 2018 is the creation of nation-wide "opportunity zones." This provision allows state governors to use federal criteria to select census tracts in need of economic development and gift them special tax deductions. Developers won't be able to invest in these areas completely tax- free—but they could take advantage of significant savings.

54 | THE ADVISOR THE ADVISOR | 55 1031 LIKE EXCHANGE Preserves the exchange for real estate

CAPITAL GAINS Continues taxing real estate carried interests held for three years as capital gains. CORPORATE ALTERNATIVE TAX Repeals the corporate AMT.

ESTATE TAX Raises the exemption from $5 million to $10 million HISTORIC REHAB CREDIT 20 percent credit for the rehabilitation of certified OPPORTUNITY historic structures ZONES Incentives for investments in designated low-income communities

Traditionally, when a property's owners choose to sell, they have the taxes kick in and "stops a lot of transactions," Booth says. "They are estate, Booth expects to see many smaller companies with more the rise of telecommuting have yet to be realized. Retail is enjoying 45 days to reinvest the proceeds or risk paying sizable taxes on any sitting on millions of dollars in equity, and it stifles the economy." money in their pockets—giving them plenty of breathing room to a comeback, and what Rigby calls "the new Walmart model" has appreciated value of the building. And even if they choose to defer potentially invest in real estate of their own. digital retailers such as Amazon opening small neighborhood the taxes of the sale now, they'll eventually have to pay taxes on the TAX CUTS MAKE REAL ESTATE MORE AFFORDABLE "What we deal with is people who say, I need to put on a new warehouses and stores where customers can pick up their orders difference between the final sale price, and the value of the original While opportunity zones redistribute real estate investment, Rigby roof, I have to pay the mortgage, property taxes… at the end of the in person. Education, continues to expand its property footprint, property when they choose to exit real estate. believes the across-the-board tax cuts provided by the 2018 reforms will day, I can't afford to own real estate. I have to rent," Booth says. despite an explosion of online schools. But if the property's owners reinvest the proceeds of their sale into leave the commercial real estate sector with more money available to "With a higher operating income, they may have a little more "As long as you are growing and need talent, you've got to have an opportunity zone, which are now available in all 50 states, the tax rate explore new ventures. margin to maybe afford property." real estate," Rigby says. "Every time I go to a university they're paid on the proceeds of future sales decreases. To make the deal even Most developers and real estate investors operate as pass-through Rigby expects this effect to extend to corporations, as well, building more buildings. At what point does this prophecy come better, properties within opportunity zones are allowed to appreciate entities which, in the past, have been subject to tax rates as high as 39.6 thanks to sizable corporate tax cuts that "leave more in the coffers true? Because it seems like it's not really happening. Virtual has not tax-free. These benefits may spur economic development in previously percent, Prescott says. Those rates now top out at 37 percent, and in of the corporation to expand their business… If you have more come to fruition; in fact, it has gone backwards in some ways. disadvantaged areas by attracting new development, says Mr. Rigby. many cases, property owners may benefit from a new provision allowing savings, you have the ability to invest in infrastructure and expand Barring the possibility of an economic slowdown, Rigby believes In hot markets with low vacancy rates, the existence of a nearby them to write off the first 20 percent of their real-estate-related profits. your business sooner than you might have." commercial real estate will continue to follow an upward trend. opportunity zone may also solve a key problem for investors, says Jared While the write-off is subject to limits based on the value of any And these latest tax reforms, he says, "will positively affect the real Booth, a senior vice president at Colliers International and federal buildings on the property, Prescott estimates that being taxed on just 80 TAX REFORM ALSO BENEFITS CORPORATIONS estate industry." commercial policy chair for the National Association of Realtors. percent of their income will drop the effective tax rate to less than 30 But will corporations use their spare change to invest in real estate? When markets are tight, investors may have difficulty finding a suitable percent for most within the commercial real estate industry. Mr. Rigby certainly thinks so. property within the 45-day window. Opportunity zones may point them While that's still higher than the 21 percent corporate tax rate, Prescott "They've got to keep wages and benefits competitive," he says, toward new possibilities, which may, in turn, take the pressure off some believes the new 20-percent pass through will prevent many real estate "If you're going to grow a business and need more office space, you high-demand neighborhoods. ventures from pursuing incorporation. need to invest in real estate." Investors' fear that they won't be able to find a new property before But because the pass-through applies to industries beyond real So far, Rigby says, the prophecies about the death of retail and

56 | THE ADVISOR THE ADVISOR | 57 The Salt Lake City airport was built almost 50 years ago to One of the biggest priorities of the expansion is convenience. accommodate half as many travellers as it gets today. With There will be one central terminal and security checkpoint with over 24 million people coming and going each year, the airport separate arrival and departure levels. The airport will become easier is in desperate need of a facelift. However, the scope of SLC’s to navigate and gate areas will be more spacious than ever before. facility expansion goes far beyond essential upgrades, such as Travellers will also find more shops and restaurants, charging HIGH security, capacity and safety: travelers will see improvements in stations, twice as much parking and easy access to TRAX while AIMING convenience, functionality and efficiency — improvements that enjoying huge art installations that reflect local Utah culture and will have a major impact on the state for years to come. large windows that bring in natural light and highlight beautiful THE FIRST NEW INTERNATIONAL mountain views. A WHOLE REBUILD The new design will also be more efficient — reducing airplane AIRPORT IN THE 21ST CENTURY. A lot has changed since the 60s. SLC has become a true international bottlenecks and flight delays — and more sustainable, striving to travel hub. While some of the facilities have become obsolete and are meet LEED Gold rating standards from the U.S. Green Building BY KATHY STURZENEGGER AND BRYAN WELCH on the brink of falling behind in protocol, such as modern earthquake Council. safety standards, Salt Lake City has been preparing for this day for Such a huge project comes with a hefty price tag ¬— something to years. “The project has been on the drawing board for a while, as far the sum of $3.6 billion. However, SLC is one of the most cost-effective back as the 90s,” says Nancy Volmer, director of communication and airports in the nation with no debt and a large savings, so the entire marketing at Salt Lake Department of Airports. project is being funded by bonds and airline and passenger fees. But such a huge undertaking can’t just focus on the short-term, so Translation: no local tax dollars are being used for the expansion. And SLC’s new design will be flexible enough to meet the airport’s needs replacing aging facilities will keep costs low, so passengers can expect for decades to come. Volmer explains, “This a complete rebuild. a convenient and affordable travelling experience for years to come. This will be the first hub airport built in the 21st century. We are master planning. It will be something that the local community will be proud of.”

Major International Airport Expansions City Investment Completion Date LAX Los Angeles $14 Billion 2023

JFK New York City $13 Billion 2025

ORD Chicago $8.7 Billion 2028

SLC Salt Lake City $3.6 Billion 2024

EWR Newark $2.8 Billion 2022

58 | THE ADVISOR THE ADVISOR | 59 4.6% 19.7%

What are What are 6.2% non-aeronautical the income 39.4%

income streams 58.2% 56% streams for 8.4% for airports? airports?

7.6%

Parking and car rentals Airline-related operations such as landing fees and passenger charges Food and beverage spending Is non-aeronautical Retail From non-operating streams Property investment and rent

Other

UNIQUE ADVANTAGES RISING RETAIL pay the same price charged at store locations outside of COMPREHENSIVE IMPACT SLC is considered the 23rd busiest airport in North America Many of the physical barriers typically found within the airport. Local leaders, planners and developers have put a lot of time and the 85th busiest of over 17,000 commercial airports established airports simply do not exist at SLC. Available “Operating as a retailer at an airport is very challenging,” and resources into expanding the Salt Lake City Airport — worldwide. More than 340 flights depart daily to 95 nonstop land creates freedom to develop current and future facilities says Volmer. “It requires background checks for employees, and in doing it right. And not just the airport will benefit. As destinations. From an aeronautical logistics perspective, an with a comprehensive purpose in mind. For example, retail being open 24/7 and holidays, and even challenges getting the facility grows, so does development around the area itself. incredibly unique characteristic of SLC immediately stands concessions have been completely reinvented. products to the store.” However, the airport is building a Industrial development is exploding within the Northwest out when compared to other top-trafficked destinations: “Our team went through an extensive selection process solid list of experienced operators to populate its expanded Quadrant of the Salt Lake Valley. Logistics-heavy companies SLC has a substantial amount of room to grow. to get the right combination of local, regional and national retail space. such and Amazon and UPS are setting up major hubs within Located only four miles west of Downtown Salt Lake brands for those traveling through SLC,” said Bill Wyatt, Dozens upon dozens of new retailers will set up shop proximity of the airport. Heightened industrial real estate City, the airport currently covers nearly 20 square miles. executive director, Salt Lake City Department of Airports. within the new facility with a mix of local, regional growth has yet to account for any of the implications from Historically, it has ranked among the most accessible “We are thrilled with the outcome and I think our passengers and national brands. At the end of 2018, the airport the introduction of an inland port to the area. Not to mention airports in the United State. Direct access and a favorable will be excited with the combination of dynamic shops.” announced that leading companies such as Coach, Frye, the many employment opportunities that will be created in location remain key to SLC’s vitality, but undeveloped land Over 20,000 square feet of new retail concession space CNBC, Hip & Humble and MAC will open stores. Many the process just to staff the new facilities. really sets SLC apart from other global aviation hubs. will be added to the facility during Phase 1 and Phase 2 of local brands will showcase offerings as well, including The new SLC will change the way Utah does business. Volmer explains, “Salt Lake City is very lucky to have the expansion. The first phase of the new SLC includes Deseret News, Rocky Mountain Chocolate Factory and It will change the way that Utah residents interact with available land to build on. We are continuing to master plan, additions to the central terminal, the west end of two even Maverick, the largest independent fuel marketer in the world, and perhaps more importantly, how the world and looking to the future, there is even more room to build concourses, a parking garage and 20,781 square feet of retail the Intermountain West. interacts with Utah. an entirely new runway on the concourse, if needed.” With — with another 14,554 square feet of retail coming at the end an abundance of room and the flexibility to plan and build of Phase 2. with the future in mind, tremendous potential exists for all The airport will implement street pricing in shops aspects of the airport. located in the new facilities. This means passengers will

60 | THE ADVISOR THE ADVISOR | 61 COLLIERS OUR SERVICES

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$3.1B RECENT RECOGNITION TRANSACTION VOLUME “FAST 50” Utah Business

“UTAH 100” 2,321 Mountain West Capital Network TRANSACTIONS “ENTREPRENEUR OF THE YEAR” EY

“CEO OF THE YEAR” Utah Business 1,215 CRE LISTINGS “BUSINESS OF THE YEAR” UTAH COUNTY ST. GEORGE DOWNTOWN MILLROCK Utah Valley Chamber 111 SOUTH MAIN 6550 SOUTH 2100 PLEASANT 335 EAST ST. GEORGE STREET SUITE 2200 MILLROCK DR. GROVE BLVD. BLVD. SALT LAKE CITY, UT SUITE 200 SUITE 200 SUITE 302 84111 SALT LAKE CITY, UT PLEASANT GROVE, UT ST. GEORGE, UT 84770 “UV 50: #3 ECONOMIC ENGINE” 84121 84062 Utah Valley Business Q

62 | THE ADVISOR THE ADVISOR | 63 WE ARE ENTERPRISING THE WORLD OF COLLIERS Colliers International is an industry leading global real estate company with more than 15,000 skilled professionals operating from 500 offi ces in 69 countries.

Our entrepreneurial culture marries fi rst-in-class tools and resources with hyper-focused, local proprietary market intelligence and a knowledge-base of experts who understand the importance of building long-term relationships. We understand that our clients adapt to compete every day, and real Comprised of Revenue Managing estate strategy must evolve as a result. Our professionals take a progressive approach to advisory service, acting as trusted 15,400 $2.7B 2B partners with the expertise required to make correct real estate professionals (US$) (square feet) decisions for now and the future.

Colliers carries a legacy of excellence in service and reshaping the Utah skyline. From advising the state’s top developers on landmark projects to assisting the public sector in recruiting and retaining the top-level companies required to drive Utah’s booming economy, Colliers professionals have demonstrated an unparalleled capacity to deliver insight and execution across Established in Lease/sale transactions Transaction value a varied commercial spectrum. By hiring the best people, continually investing in a world-class platform, proprietarily tracking the market and identifying key innovations, Colliers , International remains dedicated to leading the Utah market as we countries69 68 000 $116B(US$) assist our clients in leading theirs. All statistics are for 2017, are in U.S. dollars and include affiliates.

64 | THE ADVISOR THE ADVISOR | 65 REASONS WHY TOP PROFESSIONALS ARE CHOOSING COLLIERS

- Colliers professionals think diff erently, share great ideas and off er thoughtful and innovative advice to accelerate client success. Last year, many of the Intermountain West’s top brokers joined Colliers. Find out why market leaders chose to be a part of our team, how they deliver results for clients and what makes them optimistic about commercial real estate.

Interview with Vic Galanis “COLLIERS PROVIDED AN overall economy, including the capital Executive Vice President UNPARALLELED LEVEL OF markets, is a must in commercial real SERVICE” estate. I now Why did you choose Colliers? Is there something that most excites “I WANT TO DO THE HEAVY have access to a larger group of you about the current state of Utah’s experienced brokers to extend my commercial real estate market? Being REAL ESTATE LIFTING SO reach in securing new clients and new to Utah, basically everything: CLIENTS CAN FOCUS ON servicing existing clients. a booming economy and a growing THEIR CORE BUSINESS” population, with still a vast amount of Now that you have joined our firm, opportunity within the entire state, and Second, the way we live and do business what do you think? My job is very surrounding states as well. gratifying because the results of is constantly evolving. As e-commerce continues to expand, that impacts both my efforts significantly improve the What is the most significant commercial profitability of my clients for years after industrial and retail, not to mention real estate trend that we should watch transportation. Infill real estate for the completion of a transaction. Colliers in 2019? In general, the continued support staff and resources have been “last mile” deliveries represents a key effects of aging baby boomers and the opportunity, as well as challenges as key in continuing the motivation that I increase of millennials, Gen X and Gen Z have for my work. communities and neighborhoods grapple consumers in the market place. There is with where these areas should be so much being studied and published on located. “MY JOB IS GRATIFYING BECAUSE MY this topic. This is easily one of the most EFFORTS IMPROVE PROFITABILITY transitional periods for hotels/retailers/ OF MY CLIENTS” Interview with Andy Wheeler, SIOR, restauranteurs in my lifetime. CCIM Senior Vice President

How do you plan to enhance Why did you recently join Colliers? opportunity to clients in 2019? The Colliers brand is very respected, Interview with Gwen Knight especially in industrial brokerage, which Increased client profitability achieved Senior Vice President through cost containment strategies, is my focus. Once I heard Colliers was workplace strategies, capital market entering the Utah market, I was very As a broker, what motivates you to do interested in becoming part of the team. strategies and location analytics. what you do? Without a doubt, finding real estate solutions for clients that help What is the most significant topic Is there something that most excites This platform will help us to continue and then providing them with proven to be very robust over the past them excel in their business. Helping you about the current state of Utah’s to grow our team and add depth and creative insights based off of sound five years, but there is still a lot of currently in Utah’s market? The clients employ real estate as a strategic unprecedented levels of growth for commercial real estate market? Utah’s additional services and expertise for market knowledge as to how we best money sitting on the sidelines in need asset for their company’s business industrial market continues to grow and our clients. fulfill those needs. of yield. Reasonably priced, high- businesses located in the state and growth is exciting. intermountain area and their need for attract world class companies from quality industrial commercial real estate around the world. It is a great time to be Interview with Rusty Bollow, MRED, investments are getting harder and additional real estate requirements to I want to do the heavy “real estate” “MY TEAM AND I WILL accommodate this growth. How this part of this dynamic market and business CCIM Senior Vice President harder to find, and therefore 2019 will be lifting so clients can focus on their friendly state. CONTINUE TO DELIVER a year for creativity. growth is fueling and reshaping the core business. My background in local real estate environment. What is unique about Utah’s EXCELLENT SERVICE BY development, finance, project and asset “It is a great time to be a part of market? The explosive growth we’ve LISTENING” Spec development will continue to management, and advisory services has experienced and will continue to flourish, and landlords / developers will enabled me to bring an added dimension this dynamic market” experience. Our multi-billion-dollar You recently made the switch to work hard to reposition their under- Interview with Nando Treviño as I work with clients in a brokerage Colliers, Why? In my 18+ year career Vice President | Hospitality & Retail airport expansion, the arrival of performing assets. We will also see land capacity. How do you plan to deliver enhanced UPS’ 850,000 square foot regional as an industrial real estate broker, prices continue to rise due to a lack of service opportunity and/or value processing facility, our potential for I have transacted a lot of quality high-quality available development sites. Now that you are part of the Colliers to clients in 2019? Ecommerce will an inland port, and our pro-business business with Colliers people, so team what sets this firm apart from What is the most significant commercial continue to change the industrial real government will undoubtedly lead the when I got the call informing me that our competitors? I quickly learned that real estate trend that we should watch estate landscape as the way people shop way to a very bright future for Utah. Colliers was coming to Utah and that the research, mapping and graphics in 2019? Two key things to watch: The changes the industry. they wanted me to help them grow of Colliers | Utah was far superior to first is obvious, and that’s the overall How are you going to set yourself their industrial platform within the that of competitors. Combine that with economy. We’ve been in an extended Now that you have been at Colliers for apart with clients? My team and I will Utah market, it was an easy yes. the vast amount of market knowledge growth cycle, and as most of us know, a while - what stands out to you? The continue to deliver excellent service to within the office, and globally, it’s clear I growth cycles don’t last forever. As platform encourages an entrepreneurial our clients by listening to their needs, What is going to be a significant made the right decision to join Colliers. the economy expands and contracts, spirit among the brokers, which is very communicating back to them our trend in 2019 for commercial real I also have seen that the leadership of real estate tends to follow. So paying important for my business pursuits. understanding of those needs so as estate? The industrial commercial the Colliers | Utah team is second to attention to the fundamentals of the to ensure our assessment is accurate, real estate investment market has none in the market.

66 | THE ADVISOR THE ADVISOR | 67 STATE OF THE MARKET

STATE OF THE MARKET

PROPERTY SECTORS Office

Retail

Industrial

Investment

Multifamily

Hotels & Hospitality

Mergers & Acquisitions

INFORMATION AND DATA SOURCED FOR THIS REPORT WERE PROVIDED Over the last 22 years, the Colliers International management team has delivered 20% annualized returns to shareholders. BY COSTAR, REIS, LOCAL STATE, AND ECONOMIC DEVELOPMENT ENTITIES Colliers International is a publicly-traded global commercial real estate services firm traded as CIGI on TSX and NASDAQ. (CITED AND NOTATED SPECIFICALLY WITHIN REPORT PAGES CONTAIN HEREIN), AND IN SOME CASES OUR OWN PROPRIETARY DATA. ©2018

68 | THE ADVISOR THE ADVISOR | 69 STATE OF THE MARKET UTAH OFFICE MARKET 2018 UTAH REPORT HISTORICAL VACANCY RATES DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY

10.81% STATE OF UTAH 2015 8.60% OFFICE 4.30% DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY Utah’s strong economic performance in 2018 year because many tenants chose to fill in four years of unprecedented growth. Office 10.92% is expected to secure its place as one of the the space they had set aside to absorb. The tenants expanding their footprints in Utah top-performing economies in the nation well Salt Lake County average asking rate across include: WeWork, iServe, and Rainfocus 2016 9.81% into 2019. Utah’s excellent business climate all classes of space was $24.48 PSF/year pre-leased space in the Innovation Pointe 7.40% and low cost of living have created a place full service. Available Class A office space building, which broke ground on 141,000 where companies thrive. However, the need decreased from $29.52 at the end of 2017 square feet of office space in 2018. Young 8.98% for a talented workforce combined with to $26.48 at the end of 2018. However, this Living broke ground on a 263,000-square- 2017 9.81% the demand for affordable housing are key decrease is not reflective of the market as foot project and Thanksgiving Station broke 14.52% factors that need to be addressed in order to a whole since rates fell anywhere between ground on two new buildings, reaching a total ensure continued economic growth over the $27 and $31 PSF/year full service. Instead, of 300,000 square feet. next few years. the decrease in asking lease rates was a Several high-profile speculative 10.82% result of the majority of Class A space in the developments announced in 2018 made 2018 9.04% SALT LAKE COUNTY market being fully leased and leaving only headlines throughout the year, with 9.29% Asking rates for office space in Salt Lake lower-end Class A space on the market. The 1,834,453 square feet of office space under County Office are expected to rise as overall Class B average asking lease rate construction in Utah County at the close of (%) an increased amount of supply reaches was $22.21, while the Class C average asking the year—over 639,788 square feet more 0 2 4 6 8 10 12 14 16 completion. Tenants will continue to absorb lease rate increase. than Salt Lake County. 2019 will be a year record amounts of Class A office product of adjustment as Utah County folds this new CONSTRUCTION ideally located along the I-15 corridor to construction into its office inventory and better capture employees from all counties future developments reach completion in the ABSORPTION RATES CURRENT SF UNDER CONSTRUCTION CURRENT SF COMPLETED along the Wasatch Front. The Salt Lake Utah’s excellent business year 2020. County office market grew by an additional climate and low cost-of-living “ DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY DAVIS/WEBER SALT LAKE UTAH 589,521 square feet in 2018, primarily in the have created a space for the DAVIS AND WEBER COUNTIES south submarket. Just in Salt Lake County technology industry to thrive. Davis and Weber Counties are working alone there are roughly 1,194,665 square feet From Fortune 500 corporations together to bolster the northern Utah DAVIS/WEBER SALT LAKE UTAH 280K 589K of space under construction scheduled to be to up-and-coming startups, economy and position themselves as completed by mid-2019. technology companies are contenders in the competition to lure new Net positive absorption rates in Salt Lake business to the region. These unified efforts flocking to the Silicon Slopes County have more than doubled in 2018— have already created strong economic growth and finding great success. 132K 1.4M 833K from 447,884 square feet at the beginning of in the Davis/Weber market. the year to 1,433,399 square feet currently. —David Eccles School of While office deliveries decreased over the Additionally, 68 percent of all buildings in Business last two years, the Davis/Weber office market 1.19M 743K Salt Lake County were pre-leased prior to grew by an additional 280,250 square feet 1.83M reaching completion. Many larger companies in 2018, primarily in Davis County. With no chose to locate in the southern portion of future office developments currently under 2016: $21.34 the county, such as Mountain America Credit UTAH COUNTY construction, Davis and Weber anticipate some LEASE RATES 2017: $20.91 2018: $21.74 Union, who absorbed over 320,000 square The Utah County office market experienced construction announcements by mid-2019. DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY feet of space at their recently completed an uneven performance across the region’s An increasing demand for quality Class A 2015: $17.98 2018: $19.98 2015: $22.40 location in Sandy. Or Pluralsight, who leased submarkets. At 833,876 square feet of office space in Davis and Weber Counties has over 348,000 square feet in Draper. Ivanti also positive net absorption, the northern led to an increase of $1.49 in overall asking leased 160,000 square feet of office space in quadrant posted the lion’s share of the rates, reaching $19.98 PSF/year full service $ South Jordan and Dealertrack leased over market’s 798,926-square-foot total. Asking at the end of 2018. Hill Air Force Base, the PSF 3 6 9 12 15 18 21 24 27 30 33 112,000 square feet of office space at 136 rates increased by three percent during the area’s largest employer, has managed Center in Draper. year, ending 2018 at $21.47 PSF/year full to attract several companies to the area Vacancy in Salt Lake County decreased service as an additional supply of newer with its defense and aerospace industries. slightly during the year, down from 9.81 office space became available in 2018. While Competitive lease rates in Davis/Weber SOURCES: Costar, CCIM, Fisher Center for Real Estate & 2017: $18.54 2017: $23.66 Urban Economics, Oxford Economics, PNC Financial Services percent at the close of 2017 to 9.04 percent at office activity in Utah County remained strong point to an up-and-coming office boom as Group, Real Capital Analytics, The Conference Board Economic the end of 2018. Subleasing space was less throughout the year, the pace increased affordable and available space in Salt Lake Forecast for the US Economy 2016: $18.32 2018: $24.48 of a major trend in 2018 as in the previous by year-end 2018, building on more than and Utah County becomes harder to find. 2017: $18.49 2016: $23.45

70 | THE ADVISOR THE ADVISOR | 71 STATE OF THE MARKET UTAH RETAIL MARKET

2018 UTAH REPORT HISTORICAL VACANCY RATES DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY

5.62% STATE OF UTAH 2015 6.01% RETAIL 2.62% DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY 5.21% 2016 6.27% SALT LAKE COUNTY UTAH COUNTY 26,000 square feet and IFA Country Stores 4.42% Salt Lake County continues to be a serious Utah County experienced slower retail leased over 23,000 square feet of retail attraction for major retailers relocating to leasing in 2018 than in the previous year. space. Additionally, Marshalls leased over 4.58% Utah. Retail asking rates increased by over Out of roughly 74,336 square feet of positive 18,000 square feet of retail space in Lehi. 2017 4.23% 12 percent throughout the year, ending net absorption, vacancy increased from As population growth in Vineyard and Eagle 3.37% 2018 at $19.43 PSF/year NNN. The increas- 3.37 percent in 2017 to 4.25 percent at the Mountain continue to outpace most cities es are primarily the result of new Class A end of the year. Over 440,000 square feet in the United States, retail growth should retail space in ideal locations becoming of completed retail construction came on continue throughout Utah County. 4.45% available. Several retail tenants paid high- the market in 2018 to meet the demand for 2018 3.29% er-than-average asking rates for the high- grocery store and quick-service-restaurant DAVIS AND WEBER COUNTIES 4.25% est quality new retail space in the Draper, expansion. Average asking rates decreased Vacancy in Davis and Weber Counties Riverton, Sugarhouse, South Jordan, Sandy, slightly, sliding 1.09 basis points to $18.80 reached 4.45 percent at the close of year (%) and downtown Salt Lake areas. PSF/year NNN. Landlords with older-gen- as developers wait to see what will happen 0 2 4 6 8 10 12 14 16 Various mid-sized to big-box tenants eration space are rehabbing and revitalizing to some of the vacant big-box space in the CONSTRUCTION have announced intentions to expand and their properties instead of lowering lease area. The former 90,000-square-foot Big locate in Utah. For example, CenterCal rates or offering large incentives to attract Kmart at Antelope Square is available as is CURRENT SF UNDER CONSTRUCTION CURRENT SF COMPLETED Properties has announced that Harmons, tenants. the former Macy’s location at Layton Hills ABSORPTION RATES TJ Maxx, HomeGoods, Kirkland’s, Old Navy, Mall. With large amounts of space like DAVIS/WEBER SALT LAKE UTAH Michaels, and PetSmart will be opening these available, new construction slowed DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY new stores throughout Riverton. Zara re- Utah consumers are feeling to only 18,000 square feet currently under 471K cently opened their first location in Utah at “ confident about the state of the construction. 212K 315K Fashion Place Mall, while Dave & Buster’s economy, setting record highs Lease rates in Davis/Weber increased by DAVIS/WEBER SALT LAKE UTAH opened their first Utah location at The in 2018 with the consumer four percent during the year, closing at 15K Gateway. Round 1 also opened their first confidence index. Expectations $16.89 PSF/year NNN. Vacancy decreased Utah location, leasing over 50,000 square from 4.58 percent at the close of 2017 to to see an increase in sales feet of space in The Shops at South Town. 4.45 percent in December 2018. Davis/ 224K 423K 74.3K As Salt Lake County retail in various for beauty, wellness, quick Weber counties experienced lower vacancy 18K submarkets trends toward continued service restaurants as well in malls and power-center space with the redevelopment, asking lease rates will as activewear, and fashion announcement of several new stores, such continue to rise—a noticeable theme along accessories categories over the as Best Buy—who is opening its first store 440K the Wasatch front as four out of six major next few months in over seven years in Davis County—Extra malls focus on updating and rebranding Space Storage absorbing their new location 2015: $17.26 their retail space. Speculative construc- in Layton, and Floor and Décor leasing over LEASE RATES tion will thus continue to decrease, with Over 315,000 square feet of retail space 58,000 square feet in the newly renovated DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY 2017: $17.20 2018: $19.43 only 471,657 square feet of retail currently was under construction at the end of the Family Center at Riverdale. underway. year, with 76 percent of that in Northern The Clearfield/Layton and North Salt Lake/ 2016: $15.35 2018: $16.89 With 423,757 square feet of positive Utah County. Significant new developments Woods Cross area are responsible for 90 net absorption recorded during the year, include The Ridge Shopping Center in Lehi, percent of the area’s population growth. $ it’s important to note that absorption 365 South Garden Lane in Pleasant Grove, While roughly 42 percent of retail space is PSF 2 4 6 8 10 12 14 16 18 20 22 rates do not include malls. Quick service The Plaza at Mill Town in Vineyard, and The located in Layton and Farmington, various restaurants accounted for the majority of Crossing in Saratoga Springs. quick-service restaurants are locating to absorption in Salt Lake County, including Trader Joe’s recently opened their main street in Ogden. These areas will Even Stevens, Pretty Bird, and Spitz, just to doors in Orem at University Place and continue to be an attractive and competitive SOURCES: Costar, CCIM, Fisher Center for Real Estate & 2017: $16.24 2018: $18.80 Urban Economics, Oxford Economics, PNC Financial Services name a few. Retail vacancy increased from Burlington Coat Factory leased over 39,000 location for future commercial develop- Group, Real Capital Analytics, The Conference Board Economic 2015: $15.05 2016: $19.94 3.37 percent in 2017 to 4.25 percent at the square feet of space in American Fork. In ment especially as the population continues Forecast for the US Economy 2016: $16.48 2017: $19.89 2015: 20.68 end of 2018. Provo, Target Corporation expanded by over to expand northward.

72 | THE ADVISOR THE ADVISOR | 73 STATE OF THE MARKET UTAH INDUSTRIAL MARKET

2018 UTAH REPORT HISTORICAL VACANCY RATES DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY

2.45% STATE OF UTAH 2015 6.85% INDUSTRIAL 2.86% DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY SALT LAKE COUNTY UTAH COUNTY DAVIS AND WEBER COUNTIES 3.01% High demand for industrial space Utah County’s industrial market continued Davis and Weber Counties’ efforts to draw 2016 5.08% persists throughout the Salt Lake to experience a need for quality industrial new industry to the area and encourage 3.44% County market. Due to a lack of available space throughout 2018. At the end of the growth are creating a healthy industrial 5,000–25,000-square-foot industrial space year, vacancy had declined to a mere 2.4 market in northern Utah. Ideally situated 2.89% in Salt Lake County, asking rates increased percent—offering little room for tenant along major trucking routes and railroads, 2017 4.32% from $0.58 at the beginning of 2018 to activity or net absorption despite roughly the Davis/Weber industrial market 4.60% $0.69 PSF/month NNN currently. Overall, 1,112,400 square feet of new product continues to be seen as a thriving location industrial asking rates decreased by only delivered to the market in 2018—the largest for business. $0.01 as a few larger second-generation amount of industrial space added to Utah Due to a lack of available industrial 3.82% industrial spaces with competitive rents County in over three years. Currently just space in Davis/Weber, vacancy rates stayed 2018 4.27% came onto the market. Lease rates in the over 718,000 square feet of industrial space relatively low. Despite more than 300,000 2.40% Salt Lake County industrial market closed is under construction with rumors that square feet of negative absorption (as the year at $0.48 PSF/month NNN. additional industrial parks are scheduled to Wayfair vacated its 489,000-square-foot (%) Astoundingly, vacancy continued to break ground in 2019. distribution facility in the late portion of 0 2 4 6 8 10 12 14 16 decrease by 1.16 percent less than in 2017, 2017 and early part of 2018), vacancy rates CONSTRUCTION closing the year at 4.27 percent. A record- reached 3.82 percent in December 2018, breaking 4.5 million square feet of industrial The Utah industrial market is only one percent higher than the previous CURRENT SF UNDER CONSTRUCTION CURRENT SF COMPLETED inventory space reached completion in Salt expected to increase well into year. ABSORPTION RATES Lake County in 2018, but this additional “ As logistic companies face consistent DAVIS/WEBER SALT LAKE UTAH 2022. Utah’s growing population space did not have an adverse effect on pressure to locate their offices near and increasing production, DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY vacancy. Just over three million square transportation infrastructure along the 3.45M feet of space is scheduled for completion consumer durable goods, north/south freeway, lease rates continue by the end of 2019, mostly in the northwest and the rapid growth of the to increase, expanding over a four-year 718K DAVIS/WEBER SALT LAKE UTAH submarket near the Salt Lake City airport, ecommerce industry are some high and reaching $0.69 PSF/year NNN 63K but this will not provide a significant amount of the key factors that will be currently. An ongoing lack of availability of relief to an ever-expanding industrial driving the continued growth. will continue to put upward pressure on sector. asking rates. 189K 43M 405K Leasing activity in Salt Lake County Major Davis/Weber deals include remained strong, while absorption rates the sale of the Carr Printing building in remained relatively unchanged—over three Leasing activity remained relatively Bountiful for $4.3 million, the sale of the 820K 1.11M million square feet of industrial space was unchanged throughout the year, with La-Z-Boy plant in Tremonton for $9.3 absorbed by December 2018. Proving the net absorption reaching 405,879 square million, and Crosspoint III LLC’s purchase 2017: $0.49 strength of the industrial market in Salt feet, slightly less than the 574,188 square of an industrial building in North Salt 2016: $0.47 2016: $0.49 Lake County, in the northwest quadrant feet of absorption in 2017. Additionally, Lake for $4.1 million. Hill Airforce Base, LEASE RATES 4.51M 2017: $0.55 2018: $0.69 alone, Sephora leased over 350,000 square lease rates reached $0.63 PSF/year NNN, one of the largest employers of the area, DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY feet of space, Packaging Corporation of contributes to the continued growth of close to where they fell during this same 2018: $0.48 2015: $0.52 America leased over 360,000, ESM Group time last year. With such low amounts aerospace and manufacturing. There Inc. leased over 156,000, Chase Industries of available space, Utah County poses a are three strong and growing industry Inc. leased over 155,000, George Webb major challenge to companies looking to clusters in Ogden: aerospace and advanced $ Sales Co. leased 173,000, and National expand or relocate. New major speculative materials, IT and software, and outdoor PSF .1 .2 .3 .4 .5 .6 .7 .8 .9 .1 0 .11 Tire Warehouse leased 194,000. Cover- developments will be announced during recreation. Limited construction in the near Pools Inc. also leased 95,000 square feet the first part of 2019, potentially helping term combined with continued economic of industrial space in West Valley City. balance supply and demand. growth should keep the economy in check. 2015: $0.40 2017-2018: $0.63 Sales activity also increased in 2018, with SOURCES: Costar, CCIM, Fisher Center for Real Estate & Urban Economics, Oxford Economics, PNC Financial Services JMK metro purchasing a building for $12.7 Group, Real Capital Analytics, The Conference Board Economic 2015: $0.45 million and RC Hunt Electric purchasing a Forecast for the US Economy 2016: $0.46 building in West Valley for $3.9 million.

74 | THE ADVISOR THE ADVISOR | 75 STATE OF THE MARKET UTAH INVESTMENT MARKET

CAP RATE BY TYPE 2018 UTAH REPORT (Wasatch Front)

APARTMENTS INDUSTRIAL OFFICE RETAIL OTHER

5.88% STATE OF UTAH 7.01% INVESTMENT 2015 7.01% DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY 6.88% 0.00%

Utah has solidified its reputation as a great 2017. Following that trend, the industrial of 7.4 percent. Other notable transactions 5.49% place to do business as it continues to sector achieved an individual cap rate of include the sale of 73,319 square feet of 7.25% outperform national averages in education, 6.02 percent—compared to 6.89 percent office space at the Gateway in Salt Lake 2016 6.97% employment, quality of life, job growth, the previous year—and accounted for 23 City, half a million square feet of space at and population growth. Utah’s business- percent of all transaction volume in 2018. the Centerville Marketplace, and 140,000 6.89% friendly environment and policies have Some notable transactions include the square feet of space at the Marketplace 0.00% brought many out-of-state companies and sale of the 675,000-square-foot La-Z- Business Park in Centerville. investors to the Wasatch Front as they look Boy plant in Tremonton for $9.35 million, Accounting for the smallest share of for a place to move, relocate, or place their the 228,577-square-foot Vivint Industrial investment transaction volume at just 12 6.02% assets. Complex in Lindon, the 112,138-square-foot percent, the retail sector achieved a 6.42 6.89% Specifically, Salt Lake City was ranked Colmena/Cardinal V facility in American percent average cap rate in 2018, just 2017 6.79% as one of the top cities in America for Fork, and 104,183 square feet of industrial slightly lower than the 6.48 percent cap 6.48% commercial real estate investment by space in Salt Lake City for $12.79 million, or rate of the previous year. The most notable 0.00% PricewaterhouseCoopers and the Urban $122.76 PSF. retail transaction of the year was the sale Land Institute in their “Emerging Trends of the West Valley Plaza, 105,000 square in Real Estate 2018.” Surpassed only by feet for $1.23 million or $11.75 PSF at an 6.11% Seattle and Austin, Salt Lake is the least encouraging 8.81 percent cap rate. Utah achieved record-breaking 6.02% populous city to ever break the top 10. As expected, multifamily properties investment transaction volume 2018 6.39% OVERALL CAP RATE Thanks to increased affordability and a high “ were the hottest investment of the 6.42% All property types (Wasatch Front) concentration of young, skilled workers, in both square footage and year, accounting for 42 percent of total dollar amount. The demand for 0.00% there has been a growing interest in transaction volume in 2018—more than 2015 2016 2017 2018 smaller cities and an increasing number of commercial real estate assets office and retail combined. Cap rates in the (%) out-of-state and institutional buyers who multifamily sector have been increasing 0 1 2 3 4 5 6 7 8 in Utah far outpaces supply, 2015 see a potential for high returns and future pushing cap rates down across over the last three years, reaching 6.11 growth. most product categories.” percent at the end of 2018 compared to 6.02 INVESTMENT VOLUME percent at the end of the previous year. As In 2018, Utah achieved record-breaking (Wasatch Front) 7.01% investment transaction volume in both more employers flood the state and recruit square footage and dollar amount. The top talent from across the country, rental 2016 demand for commercial real estate assets rates are rising, bringing high returns to Other in Utah far outpaces supply, pushing cap Individual cap rates in the office and investors. The Riverside Apartments in St. rates down across most product categories. retail sectors have also trended downward George sold for $13.2 million or $89,189.19 6.98% Despite tightening by the Federal Reserve, over the last four years. Cap rates for office per unit. At 104,822 square feet, that’s Retail 2017 investors remained bullish throughout the properties decreased from 6.79 percent $125.93 PSF and a cap rate of 6.35 percent. year, encouraged by low unemployment at the end of 2017 to 6.39 percent at the Utah is quickly becoming a sought-after rates and statewide job growth that end of the following year. The sale of office location for larger capital investors as high- Apartments 6.52% paying jobs and a low cost of doing business Office surpasses national averages. properties accounted for 20 percent of total 2018 The overall cap rate for all property investment transaction volume in 2018. bring a steady flow of skilled workers to types along the Wasatch Front has Situated on 4.5 acres at almost 130,00 the area, sustaining continued growth in all been steadily decreasing over the last square feet, the Automobile Association sectors across the state. 6.33% four years—currently at 6.33 percent Building in Clearfield sold for $25.3 million, compared to 6.52 percent at the close of or $195.41 PSF, at an impressive cap rate Industrial

SOURCES: Costar, CNN, Fisher Center for Real Estate & Urban Economics, NREI, Oxford Economics, PNC Financial Services Group, Real Capital Analytics, The California State University, Fullerton International Trade Forecast (Nov. 2017), PWC and ULI (Emerging Trends in RE)

76 | THE ADVISOR THE ADVISOR | 77 STATE OF THE MARKET UTAH MULTIFAMILY MARKET

2018 UTAH REPORT HISTORICAL VACANCY RATES STATE OF UTAH

DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY

6.15% 2015 7.54% MULTIFAMILY 12.15% Thanks to Utah’s business-friendly envi- UTAH COUNTY 330 units in 2018, with 2,548 units under ronment and position as a national top-per- Utah County has become an attractive construction and 418 completed. Construc- 6.21% former in job growth, population growth, possibility for companies looking to expand tion is concentrated in Provo and Orem and employment—even though Class A or relocate thanks to its business-friendly where renters make up a significant portion 2016 7.32% pricing reached a new high in 2018—mul- environment, expanding labor force, and of the population due to the two major 6.01% tifamily property in Utah is still considered low unemployment rates when compared universities in the area. These universities an attractive investment alternative when to West Coast competitors. Considered contribute to a growing and skilled labor 5.78% compared to its coastal competitors. one of the best places to do business in the force, which will continue to sustain healthy 2017 6.85% High-paying jobs are bringing a steady flow nation, Utah County has a hot job market in growth in Utah County. 5.52% of skilled workers to the area, supporting the tech sector and a deep pool of skilled and sustaining growth throughout the state. workers, pulling many high-paying jobs to WEBER AND DAVIS COUNTIES the area. Davis and Weber Counties have a healthy 5.18% SALT LAKE COUNTY Thanks to large amounts of recently economy deeply rooted in government, 2018 6.59% DAVIS/WEBER COUNTY With job and population growth that outpac- completed construction in Utah County, manufacturing, and trade. Solid employ- 6.56% VACANCY RATES SALT LAKE COUNTY UTAH COUNTY es national averages and shows no signs of multifamily vacancy rates actually increased ment growth and a robust sales volume stopping, Salt Lake County is considered to from 5.52 percent in 2017 to 6.56 percent ensure continued growth for the area as the VACANCY RATES RENT GROWTH ABSORPTION UNITS be one of the best locations in the nation to at the end of 2018, unlike other areas in the statewide population continues to rise. 0 2 4 6 8 10 12 14 0.0% buy multifamily real estate. The Salt Lake state where vacancy rates consistently go As expected, vacancy rates in Weber/ economy is healthier than it was before the down. However, thanks to fairly steady de- Davis are steadily decreasing—from 5.78 CONSTRUCTION 5.18% 4.89% 409 recession, helping to bring more investors mand, these new multifamily units are filling percent in 2017 to 5.18 percent currently. to the area from out of state. up quickly. While vacancy rates may fluctuate with CURRENT SF UNDER CONSTRUCTION CURRENT SF COMPLETED Vacancy rates in the Salt Lake County the addition of newly completed supply, SALT LAKE COUNTY multifamily market have been steadily demand remains steady, keeping vacancy DAVIS/WEBER SALT LAKE UTAH VACANCY RATES SALT LAKE COUNTY UTAH COUNTY decreasing for four years in a row, currently rates below the area’s historic average as Salt Lake County is considered VACANCY RATES RENT GROWTH ABSORPTION UNITS sitting at 6.59 percent compared to 6.85 to be one of the best locations in absorption keeps pace with deliveries. 5.89k 0.0% percent at the end of 2017. Continued job “ Similar to Salt Lake and Utah Counties, the nation to buy multifamily real growth coupled with steady migration to Davis/Weber multifamily lease rates have 2.54K 6.59% 3.39% 2,959 Utah will keep vacancy rates low, especially estate. The Salt Lake economy is been increasing over the last four years as large companies lure renters downtown. healthier than it was before the due to strong immigration throughout the 0K This steady migration to Utah also recession, helping to bring more state. Currently, daily asking lease rates sit enables landlords to charge higher rents, investors to the area from out of at $1.08 PSF/year, five cents higher than in UTAH COUNTY as renters come to Salt Lake from other state.” 2017. Strong rent growth can be attributed VACANCY RATES SALT LAKE COUNTY UTAH COUNTY markets where rent is much higher. Multi- to a combination of affordable housing and 381K family lease rates have been increasing over above-average median household incomes, VACANCY RATES RENT GROWTH ABSORPTION0.0% UNITS the last several years, reaching $1.29 PSF/ contributing to the development of high-end 418 year at the end of 2018. Though the median properties throughout the region. household income is higher than that of the On the other hand, daily asking lease Absorption in Utah County reached 6.56% 1.00% 330 national average, housing affordability is be- rates continue to rise. Much like Salt Lake 409 units in 2018, with 381 units under 450 coming an issue, creating a greater number County, Utah County is in the midst of an construction throughout the year. While 2015: $1.05 2016: $1.13 of renters than homeowners. immigration boom fueled by strong econom- most multifamily housing units are found DAILY ASKING RENT PER SF As such, most of the multifamily ic conditions that allow landlords to charge in northern Davis County, southern Davis DAVIS/WEBER COUNTY SALT LAKE COUNTY UTAH COUNTY 2018: $1.08 2017: $1.11 construction in Utah is happening in Salt higher rents. Lease rates reached $1.18 County is home to most of the multifamily Lake County, with rates increasing across PSF/year in 2018, slightly higher than $1.11 construction in the region. Development 2017: $1.03 2015: $1.12 2018: $1.29 the state. There are 5,890 units currently in 2017. A statewide labor shortage seems to will continue as Davis/Weber keeps pace under construction with 450 completed. be the primary pain point for employers who with the growing demand for housing felt $ Absorption reached 2,959 units at the end strive to attract talent with higher wages. throughout the state. 1. 35 of 2018. As investors actively pursue high- Expect to see raising lease rates throughout PSF .15 .30 .45 .60 .75 .90 1.05 1.2 0 1.50 1.65 end new construction, expect to see the the region for the foreseeable future. development of new, high-rise apartment As highly-skilled workers flood the area, communities and no signs of slowing in the construction is increasing throughout the 2016: $0.99 2018: $1.18 current development boom. county. Absorption in Utah County reached SOURCES: Costar, Apartment List, Freddie Mac, Multifamily Executive, National Association of Realtors, NMHC, NREI, PNC Financial Services Group, Real Capital Analytics, Rental Housing Journal 2015: $0.95 2016: $1.19 2017: $1.23 THE ADVISOR | 79 STATE OF THE MARKET STATE OF THE MARKET

2018 UTAH REPORT 2018 UTAH REPORT HOTELS & HOSPITALITY M&A

Hotels continue to be an attractive encouraging investment in the HOTEL INVESTMENT 2018 turned out to be a best-ever year for small business asset class for investors, approach- region. Independent and economy PROSPECT TRENDS transactions. By the third quarter, BizBuySell.com—the ing an average occupancy of 66.2 chains in the $1–10 million range largest online marketplace for business transactions excellent percent by the end 2018. With are highly sought after, providing —showed a 7.7 percent increase in the number of approximately 16,300 hotel rooms opportunities for investors to achieve good transactions over the same period in 2017. A healthy under construction and an additional attractive returns on their investment economy created a win-win situation: owners captured 12,300 scheduled to break ground capital. Out-of-state institutional top-dollar for their thriving businesses while buyers had fair within the year, the Rocky Mountain groups continue to allocate capital to access to a substantial pool of acquisition candidates. region showed a 1.7 percent increase both midscale and upper-midscale Those buyers and sellers also came much closer in DEAL COUNT ON PACE FOR THIRD in supply in 2018 to meet rising properties. Solid economic growth their assessments of the value of those businesses—on demand, just short of the 2 percent and job creation for the region poor average, a business is selling for 93 percent of its asking CONSECUTIVE YEARLY DECLINE increase nationally. Hotel cap rates translate into multiple interest price. NORTH AMERICAN AND EUROPEAN M&A (#) BY SIZE have continued to rise since 2015 but generators that are a key component 2005 2007 2009 2011 2013 2015 2017 2019 In the lower mid-market (companies valued at less have recently compressed and stead- to increases in occupancy and ADR. than $100 million), the deal-making pace slowed in the 30,000 $5B ied as investor confidence increas- Economic indicators moving first three quarters of 2018 but still covered the lion’s Overpriced Fairly priced Underpriced $1B-5B es — even as the financial markets forward point toward continued share of transactions. IT, healthcare, and business-to- 25,000 fluctuate. While investors are hotel industry growth, supported OPINION OF CURRENT consumer deals are the most active sectors. $500M-$1B concerned about development and by an increase in business, travel, HOTEL PRICING The Mergers & Acquisitions group at Colliers $250M-$500M acquisition costs, there are opportu- discretionary spending, disposable Limited-Service International followed the trend, logging a strong 20.4% 41.0% 38.6% 20,000 nities in the Rocky Mountain region income and increased household Hotels performance in both transaction volume and dollar value. for repositioning and soft branding net worth. In addition, full-service No one segment dominated, with completed transactions Under $100M Midscale Hotels 21.2% 74.1% 4.7% tired assets. Investor confidence is hotel investments continue to attract in the automotive, healthcare, manufacturing, retail, and 15,000 fueled by strong operating funda- national and international investment technology sectors. Upscale Hotels mentals and steadily increasing ADR groups to the region as many full- 38.6% 57.8% 3.6% (average daily rates). As the market service hotels have not participated 10,000 Luxury Hotels 54.8% 41.7 3.5% cycle continues to remain strong, in the fundamental increase in investors should continue to identify valuation. A healthy economy will 0% 20% 40% 60% 80% 100% new opportunities with a guarded continue to encourage investors SOURCES: Emerging Trends in Real Estate 2019 Survey 5,000 and more sharpened approach to to enter the market, though they Note: Based on U.S. respondants only. their underwriting and due diligence should perform detailed analysis and 0 when valuing a project. research of the construction pipeline Buy Hold Sell 2010 2011 2012 2013 2018 2015 2016 2017 2018 Tourism and business travel keep and current inventory prior to demand for hotel acquisition and investing. Hotels will remain a solid HOTEL BUY/HOLD/SELL SOURCES: Pitchbook Q3 2018 M&A Report development high within the Rocky investment from an acquisition and RECOMMENDATIONS Mountain region. Every state within development perspective, although the region except Colorado reported investors should be cautiously Midscale Hotels 23.4% 47.9% 28.7% an increase in occupancy, a trend guarded and extremely selective Limited-Service 20.5% 41.0% 38.6% that appears that it will continue for the latter stages of the hotel Hotels with steadfast recreational and investment market cycle. business travel to the Rockies. These Upscale Hotels 18.0% 52.7% 29.3% gains in occupancy will continue to 12.5% 45.2% 42.3% put upward pressure on ADRs and Luxury Hotels RevPAR (revenue per available room) Sources: 0% 20% 40% 60% 80% 100% as supply growth remains steady, PwC, ULI, Real Capital Analytics, STR

SOURCES: Emerging Trends in Real Estate 2019 Survey. Note: Based on US respondants only.

80 | THE ADVISOR THE ADVISOR | 81 INFORMATION & SUCCESS

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