Published on November 18th, 2014 | by UC&D Magazine0
When it comes to retail construction trends in the Beehive State, the immediate future’s so bright that Utah firms working in the commercial development sector might need to wear shades.
By Doug Fox
That outlook is heavily influenced by a pair of game-changing mixed-use development projects currently under way, but also buoyed by aggressive expansion plans of additional companies and restaurants looking to strategically meet the needs of a growing population base.
The two main landscape-altering projects include the Cottonwood development in Holladay and the burgeoning @geneva buildup at Vineyard in Utah County. Both developments are expected to have tremendous long-term impact for residents in regard to living
arrangements and employment, as well as improved entertainment, dining and shopping options.
The enthusiastic expansion philosophy for the next few years also
extends to the marketplace (where Smith’s Food and Drug is planning new stores and renovations to existing locations),
the dining arena (Georgia-based Zaxby’s opened its first Utah location in Ogden in February and already has plans for 18 in-state locations in the next several years, while nine new Popeye’s locations were announced earlier this year by franchisee Z&H Foods, UT, Inc.), entertainment venues (Larry H. Miller Megaplexes are planned for both Cottonwood and Geneva) and the biggest of the box centers (a regional distribution warehouse for Cabela’s that will serve much of the West).
“The mantra in the retail industry seems to be flexibility,” said Tim Gladwell, Vice President of Ogden-based R&O Construction.
R&O not only does extensive work with Smith’s, but also currently has several other retail projects in progress as well as housing construction at the Geneva site.
“Retailers are really watching what consumers are doing with online shopping and convenience,” Gladwell said. “It will be interesting to see the shifts that happen in big box grocery and retail. The consumer wants it faster, easier and better.”
Let’s take a closer look at some of the retail projects now in development, how they may affect trends in the state over the next couple years and several of the companies making it all happen.
Heavy is the head that wears the top-ranked hard hat when it comes to making decisions that are expected to radically transform a sleepy little town along the shore of Utah Lake into a bustling transportation hub, and a community with the space for 25,000 new residents and approximately 20,000 jobs.
So, what is it like to shoulder that kind of planning responsibility as it relates to the town of Vineyard generally and the @geneva project specifically?
“It is both exciting and daunting, but I feel we have assembled a great team and have sold land to some quality vertical developers who believe in the importance of this project almost as much as we do,” said Stewart Park, Project Manager from Sandy-based Anderson Development, which is spearheading the @geneva project. “It is a big responsibility to know that this project will have such an impact on the heart of Utah County.”
The massive project encompasses 1,700 acres, said Park, and at completion will feature multi-family residential, townhomes, single-family residential, office, retail, industrial, a town center, a lakefront development and a university campus.
Park pointed to the Lakefront parcel and the Town Center as the two most unique aspects of the development.
“Lakefront property – or any waterfront land – is in high demand almost anyplace you can find it in the country,” Park said. “This project offers not only lakefront, but spectacular views of the mountains from the lake. The Town Center is planned to be the downtown of the central part of Utah County. Neither Orem nor Provo have a workable or real downtown area.
“Not only are we planning this as a critical part of the project, the Town Center is part of a true intermodal hub – Frontrunner, future light rail and bus service all in one spot. Public transportation is where things are moving and the fact that a university campus has the intermodal at its hub is critical to their success as well as ours.”
With every challenge, said Park, comes an opportunity. He cited the removal of concrete from “virtually every parcel and in every roadway” of the former steel mill site as being the biggest obstacle facing the project to date.
The developers have run into deep concrete tunnels, along with everything from simple concrete pads to 40-ft-deep basements.
“The benefit here is that we are reusing, recycling and re-purposing the concrete by crushing it into a product that can be used for fill, road base and other aggregate material needs. This requires a fluid planning process to work around these foundations, such as building placement, parking lot areas and most recently Mill Road, the main north/south corridor through the project. The road required some realignment and needed to be raised to avoid expensive removal of a major concrete foundation.”
According to Park, 65% of the project is either sold or under contract. Due to some of the remaining environmental issues, he expects it will take another four to five years before everything is sold.
“The last economic downturn took a toll on us and probably set us back three or more years,” he said. “The whole project is likely 12 to 15 years off, taking into consideration the current aggressive and healthy business climate.”
In addition to the vision of management and ownership, Park also praised the Vineyard community itself with coming around to the project.
“That support (from Vineyard) was not always available,” Park said, “but to the credit of this group of lifetime residents and leaders embracing the inevitable growth,it has contributed to what I believe will be the most successful and perhaps last big master-planned project in Utah County.”
New Life for Cottonwood
The Cottonwood project is essentially a total transformation of the former Cottonwood Mall area – which was torn down in 2008, save for Macy’s. The 57-acre mixed-use development has already inked deals with Larry H. Miller Megaplex as its entertainment anchor and Smith’s Food & Drug for a 78,000-SF shopping store.
The Smith’s deal was announced in July and immediately hailed as a major milestone by Dallas-headquartered Howard Hughes Corp., which is handling the redevelopment.
“This is a pivotal first step in delivering a vibrant, open-air setting where people will enjoy the opportunity to live, work, shop, dine and play,” said Grant Herlitz, President of the Howard Hughes Corp., in a press release.
The corporation has since announced deals with Megaplex Theatres for a 10-screen, 2,300-seat entertainment venue – which also will include an IMAX screen, along with state-of-the-art digital projection and audio systems – and Ivory Homes, which will be the master residential developer.
The Megaplex is still in the design phase, said Blake Andersen, president of Megaplex Theatres, since it is tied to other construction progress in the Cottonwood development.
“The Megaplex Theatres at Cottonwood will be integrated into part of the main retail area,” said Andersen, noting that it is similar to how the Megaplex at Valley Fair is tied to the mall. “So the timing for that project is directly tied to the completion of the primary shopping area at the new Cottonwood development.”
Megaplex Theaters according to Andersen, is expecting to bring nearly 100 full-and part-time jobs to the Cottonwood site.
Of the redevelopment’s 75 acres approximately 620,000 SF will be devoted to retail and entertainment expansion.
The project calls for 600 residences – with both for-rent and for-sale options – ranging from apartments and condominiums to townhomes, cottages and luxury homes.
“These new residences will offer a wide range of options that appeal to those seeking a vibrant, urban community lifestyle that are in great demand, but have not been seen previously in Holladay,” stated Herlitz.
Aggressive Expansion for Smith’s
Salt Lake-based Smith’s Food and Drug – a division of Cincinnati-based The Kroger Company (second largest retailer in the U.S. behind Wal-Mart) – has aggressive expansion plans for the state of Utah over the next two-plus years, with an estimated $100 million of new construction activity planned for the Beehive State, according to VP of Corporate Development Steve Sorenson. He said the company is focusing on building new 123,000-SF prototype Marketplace stores, which are nearly double the size of 66,000-SF “regular” stores the company was building seven years ago, in addition to significant renovations of existing stores.
Smith’s fuel centers are another key aspect of the firm’s expansion plans. There are currently 47 Smith’s stores in Utah, 40 fuel centers, and two “C” stores.
“It’s a good economic time in Utah and this new construction is part of Smith’s commitment to the market in Utah,”said Sorenson. “We see Utah as a great place for growth. There is a influx of new businesses, growth in the high-tech industry, and an excellent quality of life. It seems to me that more and more companies are looking to come here. We spend a lot of time in the field along the Wasatch Front monitoring housing growth and where we need additional stores. More people put more pressure and demand on Grocery stores.”
There are currently five Smith’s stores either under construction or planned to break ground in 2015. They include four new Marketplace stores and a 78,000-SF store in the aforementioned Cottonwood development. Sorenson said five existing Smith’s stores also will undergo significant renovations in 2015-16, ranging from $3 million to $10 million.
The new Marketplaces are located in North Ogden (slated to open in November), West Jordan (December opening), Kaysville (out for bid first week in October), and West Point (anchor tenant in a 27-acre development planned by Wright Development Group of Layton; slated to break ground in Spring 2015).
Smith’s has also made a concerted effort in recent years at increasing store efficiency and sustainability. Among the company’s “green” efforts include replacing all lights with LED lighting, installing motion lights on frozen aisles, dairy coolers and lounge areas, more sky lights, and even solar panels.
Smith’s Construction Manager Roger Gough said three stores currently have solar panels – two in Albuquerque, and one in Los Alamos, New Mexico – while all new stores are being designed with the ability to add solar panels in the future, when it becomes less cost-prohibitive. Smith’s has been making strides on effectively reducing energy consumption since 2000.
“We have more Energy Star-approved stores within Smith’s than any other Kroger store,” said Gough. “We’ve been steadfast in that. We have over 100 stores in the pipeline that are either approved, or are in the process of being approved.”
“For us, it’s gotten to the point where saving energy is not only good for the environment, it’s good business,” said Marcia Gilford, Vice President of Public Affairs for Smith’s. “We are making a huge investment in this community. The way we do business is changing and it may have a future impact on store design.”
Sorenson said he expects Smith’s will continue its plans for expansion throughout Utah even past 2016, with the assumption that the state will continue its economic resurgence well into the future.
“I see similar numbers coming out in ’17, ’18, ’19, and ’20 for Utah,” he said. “It will be dependent on continued housing and job growth.”
Some changes that have been implemented at Smith’s in other states will soon be showing up in Utah, said R&O’s Gladwell.
“Murray’s Cheese is the oldest cheese shop in New York City, and the nation’s leading cheese,” Gladwell said, noting that it made its Smith’s debut at the new Los Alamos store. “Murray’s Cheese will be brought to three Smith’s locations in Utah by the end of October – Sugarhouse, the downtown Marketplace and Park City.”
Megaplex Rolling On
According to Andersen, Megaplex Theaters, founded in 1999 by the late Larry H. Miller, has nearly tripled its number of total screens in the past five years and continues to look at opportunities for strategic growth.
The two new Megaplexes at Cottonwood and Geneva perfectly fit into that philosophy. The Geneva Megaplex is expected to open in the early spring of 2015. An anticipated opening for the theaters in Cottonwood is undetermined at present, since it is pegged to the completion of the larger retail site and the size and scope of the overall project.
“The Megaplex development team continues to investigate new opportunities for expansion within Utah and outside of the state,” said Andersen. “The state of the economy certainly impacts our guests’ ability to frequent Megaplex Theaters. We’re thrilled that movie going is still one of the most affordable out-of-home entertainment opportunities that families enjoy. Our team works hard to ensure the greatest value and experience possible for our guests.”
In addition to brand new projects, Megaplex Theaters is also in the midst of a nearly $1 million renovation of its property in the Gateway in downtown Salt Lake City, as well as on-going renovations at Jordan Commons (the company’s original location), and improvements at acquired locations in Logan, Cedar City and St. George.
As for expansion, Andersen said the project devlopment team looks for several key factors when choosing a new location. Those factors include population growth and demographic trends, long-term economic impact to the company and community, and adherence to the founding principles of the miller group Companies.
When it comes to selecting companies to build its theater complexes, Andersen said trust and innovation are important factors.
“As a leader in the entertainment industry, Megaplex Theaters relies heavily on trusted relationships with long-term partners who understand our commitment to core principles of quality and service established by Larry and Gail Miller, and continued today through the rest of the Miller organization,” Andersen said. “We also look to innovative companies that bring a fresh perspective to our industry and take the time to understand the driving forces behind Megaplex Theaters’ brand.”
Big Utah Plans for Zaxby’s
Zaxby’s restaurants are currently hatching all over Utah. The first diner in Utah opened just nine months ago in Ogden, and the fifth is set to begin serving its trademark chicken fingers and wings in October in Lehi. Utah co-licensees, Ryan Howes, Mike Cummings and Jeff Howes have an intensive plan to dot the state with an array of restaurants in the next several years.
“Our decision was based on a thriving Utah economy, the opportunity to open locations in a concentrated market with a lot of commercial growth and a solid workforce,” said Ryan Howes. “It is our intention to have 10 stores in operation in Utah in the next eight months, with a total of 18 over the next three to four years.”
So far, all the Zaxby’s in Utah are the same size – 3,600 SF, with seating for 70-80 guests.
“Zaxby’s building sizes in the rest of the country vary,” said Howes. “We feel our design and size is the best fit for the typical acre pads we have been building on and searching for.”
According to Howes, the available labor pool in Utah was a huge factor behind the dynamic growth plan.
“There are plenty of great people in the state looking for solid long-term jobs, even in Utah where the economy has started to heat up. We are committed to finding these great people and paying a fair wage,” said Howes, noting that the company plans to start hourly employees at $10 per hour and pay managers above what the market dictates. “More than the economy, the labor pool in Utah has been the engine that allows us to grow at the pace we have.”
Howes said his team encourages contractors to reach out if they would like to be considered for an upcoming project.
“In this business, you get what you pay for,” he said, “so we do not look solely at the lowest bid. We like to see a proven track record of superior work that is completed on time and on budget.”
Cabela’s on Target for July Completion
In July, outdoor retail giant Cabela’s began construction on a $50 million distribution center in Tooele. Construction on the 600,000 SF building is on schedule and expected to be fully operational by its target date of July 2015.
“Cabela’s is in retail expansion mode,” said Nathan Borowski, Communications Specialist at the company’s Sidney, Neb., headquarters.
The company debuted 14 new stores across North America this year, said Borowski, and has announced plans to open an additional 15 locations over the next two years.
“As Cabela’s continues to grow, the need for an additional distribution center became a priority to ensure we can continue to serve our customers while meeting Cabela’s standards of legendary customer service,” he said. “The construction of the Utah distribution center was a strategic decision to expand our supply chain to support Cabela’s Western store locations and customers.”
It is expected that the distrubution center will create approximately 200 full-and part-time jobs, most coming locally, Borowski said.
Cabela’s opened its 150,00-SF retail store in Lehi in 2005, and it has been a popular destination for hunting, fishing and camping enthusiasts.
“Utah embraces the outdoor lifestyle and has been very loyal to Cabela’s through our Lehi store as well as our online and catalog businesses,” Borowski said. “These factors made us confident the state would gladly welcome the new distribution center in Tooele.”
Big-D Construction of Salt Lake City was selected as the construction manager/general contractor for the build. Borowski said Big-D was one company on a select list of qualified regional and national contractors that were interviewed for the project.
“Our CM/GC’s are required to competitively bid the project to obtain both quality subcontractors and best value for our projects,” he said. “The subcontractor field consists of both local and national subcontractors. This is the same process Cabela’s uses on new store construction builds throughout the U.S. and Canada.”
Retail Growth a Positive Sign
All of this commercial/retail growth is a good sign for firms with long footholds in this market.
In addition to the Smith’s Marketplace in West Jordan, R&O is currently involvd in a variety of other retail projects. Some of the include Ulta and Bed Bath and Beyond at the Valley Fair Mall, Good Earth in Spanish Fork, Joanne’s in Spanish Fork, Love’s Travel Stop in Salina, Chick-fil-A in Ogden, Sprouts in West Jordan, and Harmon’s in St. George.
“The commercial/retail market was affected dramatically by the downturn in the economy that started late in 2007. Even though Utah was not hit as hard as other states, like Nevada and Arizona, we did see many projects put on hold and all spec building stopped,” Gladwell said. “With new national restaurant and retail chains coming to Utah, the growth of established retailers and new grocery stores being built, we are cautiously optimistic about the future. New construction will continue at a more reasonable pace than it was 10 years ago.”
Perhaps the biggest consequence of the earlier economic downturn wasn’t on construction projects themselves, but on how those conditions affected the work force.
“Many people left the industry as the construction jobs disappeared,” Gladwell said. “Our biggest concern (now) is the growth of our work force. We need to encourage younger employees to join the construction industry. Without continued growth of our skilled work force, we will face significant increase in costs of buildings and longer construction durations.”