’s Economy A monthly report produced for CUSHMAN & WAKEFIELD/Commerce, by Jim Wood, Senior Ivory-Boyer Fellow at the Kem C. Gardner Policy Institute, To receive an electronic version of this report, please subscribe at: www.comre.com/subscribe

ISSUE 129 FEBRUARY 2016

NONRESIDENTIAL CONSTRUCTION MURRAY TO AMERICAN FORK

Cushman & Wakefield/Commerce comre.com FEBRUARY 2016 Utah’s Economy, Issue 129, February 2016 10000 FIGURE 1

9000 Last year was a surprisingly strong year for nonresidential construction in Utah. The 8000 value of permit authorized, nonresidential construction was up thirty-seven percent, 7000 to $2.0 billion, the fourth highest year ever Figure 1. But the 2015 value does 6000 carry an asterisk—the unexpected surge in 5000 nonresidential value was due in part to a pair of large energy related projects. The 4000 $216 million expansion of Holly Frontier’s oil refinery, in Davis County, was the single 3000 largest nonresidential project in 2015, 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 doubling its daily capacity from 30,000 to 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 60,000 barrels. Solar farms in Beaver and Iron Counties also added another $200 construction hit its second highest year development reflects weak retail sales. million in nonresidential value. These large ever, surpassed again by 2007 ($457 Consumers have cut back on spending, energy projects were reported as industrial million) Figure 3. The demand for office and sales have cut into traditional construction and helped drive the value of space has grown significantly in recent retail sales. Since the financial crisis began this sector to a near record level. In 2015, years, as Utah’s professional, scientific and in 2008, the retail sector has had seven industrial construction totaled $485.1 technical services sector, and administrative years of relatively low construction—less million, just below the 2007’s all-time high and support services sector have added a than $200 million annually. For the fourteen combined 40,000 jobs since 2010. These consecutive years prior to the crisis, of $497 million (inflation adjusted)Figure 2. two sectors are heavy users of office space. construction of retail buildings was at, or The office sector also had a very strong above $200 million Figure 4. year. Valued at $424 million, new office Construction of retail buildings in 2015 did not fare as well. Reduced levels of retail The heart of new office and retail construction is concentrated, and easily noticed along both 600 FIGURE 2 sides of I-15, between Murray and American Fork, particularly near Thanksgiving Point 500 and the Timpanogos Highway exit. Lehi leads all other cities along that corridor, with $120 400 million of new office space. Lehi’s availability of large, developable tracts of land with 300 close proximity to I-15 is the primary draw for new and growing businesses. In recent 200 years, no other city, from Lehi to has had such a wealth of available, 100 undeveloped commercial property along I-15—enough land, even to allot 200 acres 0 to the 7,700-yard Thanksgiving Point Golf

0 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 2 1 3 1 4 1 5 Course—indeed, some very high priced 9 5 9 6 9 7 9 8 9

1 9 1 9 1 9 1 9 1 9 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 recreational property. 500 operations. The remediated site became FIGURE 3 available about the same time the 2008 450 financial crisis ended. An improving 400 economy, combined with the availability 350 of a large tract of land near I-15 (one mile

300 west) made for very attractive development opportunities, including new office 250 headquarters for local companies. 200

150 Each city ranked in the top-five in retail construction is located along the twenty- 100 mile stretch of highway, between Murray 50 and American Fork—Sandy City led, with

0 $40 million in retail investments, followed

9 5 9 6 9 7 9 8 9 0 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 2 1 3 1 4 1 5 by South Jordan’s $27.7 million. Growth is

1 9 1 9 1 9 1 9 1 9 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 very strong for a number of reasons—both office and retail development are closely The opening of Thanksgiving Point Midvale and Sandy, two more cities along associated with population densities, and nearly twenty years ago pioneered Lehi’s the Murray to American Fork corridor, also nearly one out of four Utahn’s live in the south development along I-15, but perhaps more rank in the top five in office construction. half of Salt Lake County, and north half of important was Micron’s 1995 announcement Midvale’s $82 million in development is Utah County. Last year, nearly forty percent to build a $1.3 billion semiconductor plant on concentrated on a 450-acre site at Bingham of all new, statewide residential construction a 2,100-acre parcel of land, east of I-15 in Lehi. Junction. Sharon Steel operated a smelting was located in this corridor, along with half The 2.3 million square foot semiconductor and ore milling plant on the property for of all new office and retail construction. The plant was completed a few years later— nearly seventy years, requiring severe concentration of commercial and residential soon thereafter, much of it mothballed, due remediation through the EPA’s Superfund activity is bound to intensify, particularly as to a 2002, 2003 downturn in the micro- program, after the company ceased its Utah’s 700-acre State Prison site develops chip market. In 2006, Micron joined with over the next decade. to form IM Flash, using the Lehi plant to produce flash memory products—the $450 initial stirring of development north of SR- FIGURE 4 $400 92, recently dubbed Utah’s “Silicon Slopes.” High-tech companies like Adobe, eBay, $350 Xactware, and others have all gravitated $300 to the area in recent years, including the $1.5 billion ’s Utah $250 Data Center in Bluffdale. The mission of the $200 data center is very high-tech and classified, and includes storage of massive amounts of $150 communications data for the U.S. Intelligence $100 Community, a federation of sixteen U.S. $50 intelligence agencies. The facility has added to the high-tech base and infrastructure of $0

Silicon Slopes. 9 5 9 6 9 7 9 8 9 0 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 2 1 3 1 4 1 5 1 9 1 9 1 9 1 9 1 9 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 170 South Main Street, Suite 1600 Salt Lake City, Utah 84101

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