City Creek making downtown where 'people want to be'
Two years after the first City Creek condo units were put up for sale, it's clear the LDS Church's latest step into the Salt Lake City residential real estate market has spawned new interest in downtown living.
What isn't clear is how that interest is translating into sales. City Creek Reserve, the real-estate arm of the church that developed the 425 condo units in three buildings in the massive retail, restaurant, residential and office project, declines to say how many have been sold. Nor will it tell whether the original asking prices, which ran from $145,000 to north of $1.5 million, are holding up.
"Condominium sales are steady. â¦ We are seeing increased interest in City Creek's condo properties as recovery in the [wider Salt Lake County] residential real-estate market brings prospective buyers off the sidelines," spokesman Dale Bills said in a pair of emails.
There are some hints. In the three ZIP code areas of downtown that encompass the City Creek condos, sales increased to 140 units last year from 122 units in 2011 just shy of 15 percent. And although the median price of the units that sold last year fell by 3.7 percent, to $173,800, the average price rose 2.8 percent, to $202,828. That suggests some units fetched high prices.
But nobody really knows. Residential and commercial real-estate experts around the Salt Lake Valley are fascinated with City Creek. The 20-acre development is one of Utah's biggest-ever commercial real-estate projects. But given that its owners keep most information private, it's hard to pin down many details about the pace of condo sales. Instead, they rely on their knowledge of the market. And if the occasional small piece of practical information comes to their attention, they latch onto it.
"Steady, to me, is no signs of concern. Steady is an optimistic sign," Dave Frederickson, president of the Salt Lake Board of Realtors, said of Bills' characterization of the nature of the sales.
Babs De Lay, a real estate agent who specializes in downtown sales, said the condo market is "strong," helped by a tight supply of units for sale. "I'm sure [City Creek's] sales have picked up because there is no inventory to buy from," she said, adding that prices for the units seem to have held up because the area is so desirable to shoppers and would-be urban dwellers.
"The condos have provided more people on the streets who go out to dinner and ride TRAX," De Lay said. "Some of them have even ventured out to local businesses and are beginning to support local merchants outside of the mall. â¦ People are buying again, and renters want to live where there is light rail to get to school, work or [to] friends and fun."
Many of the renters De Lay referred to are people who have leased units in City Creek Landing Apartments, a rental community above the retail stores on the City Creek West block, west of Main Street. It contains 111 units on the north and south sides of the galleria, under the retractable roof. Bills confirmed speculation that all are occupied.
"They are fully leased at competitive rates," he said.
Lance Pendleton has lived at City Creek Landing Apartments for a year with his wife and young son. The waiting list to get into an apartment is "30 to 60 people deep," he said. Demand is so strong that City Creek Reserve has leased some condo units in the Promontory on South Temple (now called 99 West) and The Regent at City Creek towers, betting that the tenants will buy their units after they are sure they like living downtown, said Pendleton, a real-estate agent with commercial broker NAI West.
That is his strategy. After living downtown for a year, observing the demand for living space and noting how well condo prices have held up, Pendleton has decided to buy a condo. He and his family will live in it until they outgrow it. When that happens, they will move somewhere else, possibly within City Creek, and lease their unit.
"I love it," he said. "It's great, the fact that you can go down [to the shops and restaurants] once you are home from work. We can walk to all our favorite restaurants in good or bad weather."
The success of the apartment component of City Creek suggests that apartment construction, which has been lively in Salt Lake City for several years, may not slow down soon.
"As someone who is very active in the multifamily market, we observe that their rental product is performing spectacularly well," said Dan Lofgren, CEO of Cowboy Properties, a residential developer.
"Every indication to us is their product is experiencing exceptionally high demand and producing high rental rates. To me, that's just the market telling us people want to be there. They want to be in the middle of the activity. That's clearly an activity center. It's filled with energy and excitement, and it's a great place for people to live," Lofgren said.
Cowboy Properties has developed numerous apartment projects in Salt Lake County, including three in the downtown area Liberty Metro Apartments, Liberty City Walk and Northgate Apartments at The Gateway. A fourth project, on 500 West between South Temple and 100 South, got under way late last year.
"We are active in downtown, and we look to be active in downtown," Lofgren said.
Office space is the third component of City Creek 1.7 million square feet of it in eight buildings. All, with the exception of the 35,000-square-foot Kirton McConkie Building and 32,000 square feet added to the bottom floors of the KeyBank Tower, were constructed long before City Creek was built. Again, Bills won't say exactly how much is leased, except to say "our office space occupancy is at above market rates."
At the end of 2012, the office vacancy rate in downtown Salt Lake City was 18.4 percent, highest of any of the office markets in the county, said Casey Mills, vice president of commercial real estate firm NAI West's office division. If the economy were in better shape, downtown vacancies would be 10 percent to 12 percent, he said.
Much of the space emerged when Questar Corp. moved out of its old headquarters on the southwest corner of 100 S. 200 East to a new building at 333 S. State St. The Wells Fargo building on Main Street has about 80,000 square feet of empty space. The FBI is moving from downtown to a building constructed for it west of Salt Lake City International Airport. Downsizing by several law firms during the recession also has contributed to the surplus.
By contrast, office vacancies in suburban areas are much lower, especially in the southern part of the county, commercial real estate agents say. Parking is a big reason, said Greg Gunn, senior vice president of Coldwell Banker Commercial. Downtown tenants typically are allotted two parking spaces per 1,000 square feet of office space, at a cost of $60 to $120 a month per space.
By contrast, parking in suburban office parks is free, and tenants are given twice as many stalls for every 1,000 square feet of office, Gunn said.
Downtown, from its apartments and condos to office space and retail activity, City Creek's impact on Salt Lake City hasn't played out fully, several real estate experts said.
"It has made downtown very desirable, and it feels very desirable and alive," observed Coldwell Banker agent Angie Domichel Nelden.
Residential and office components of City Creek
Owner • City Creek Reserve, the real-estate arm of The Church of Jesus Christ of Latter-day Saints
Condominiums • 425 units in three buildings: 99 West (formerly Promontory on South Temple), The Regent at City Creek, Richards Court
Apartments • 111 units in City Creek Landing Apartments
Office space • 1.7 million square feet in eight buildings: Deseret Book Building, Gateway Tower West, Zions Bank Building, Kirton McConkie Building, World Trade Center at City Creek (formerly Eagle Gate Tower), KeyBank Tower, Social Hall Plaza, First Security Building.