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Retail rents are rising and new property owners are moving in with their own visions for the future of Utah’s capital. And as a result, several iconic Salt Lake City businesses have been pushed to shut their doors and embark on an increasingly difficult quest to find new space.
The forces that have propelled them out in recent months have been sweeping across the city, impacting businesses as varied as the Tavernacle Social Club, Rico Brand Mexican products and Ken Sanders Rare Books.
All of them have recently announced new locations. But as the state continues to face breakneck growth that shows no signs of stopping, observers say the disruption to longtime local businesses isn’t likely to end any time soon.
“Salt Lake is no longer little Salt Lake,” said Kip Paul, vice chairman of investment sales for Cushman & Wakefield, a leading Salt Lake City real estate brokerage, of the new commercial investment that’s flooding into the city. “It has shifted into another gear, and I believe we’re in the second inning of the game. It’s going to keep going at a very robust pace.”
For some business owners and leaders, the changes to Salt Lake City’s downtown business district look a lot like gentrification — a process by which new investment in previously ignored areas can increase costs and drive out longtime residents and small business owners.
That’s what happened to Jorge Fierro, owner of Rico Brand Mexican products, who was recently displaced from the building he’d leased for 18 years at 545 W. 700 South, in Salt Lake City’s now rapidly growing Granary District. The property’s new owners announced they had other plans for it.
He sees the problem like this: Businesses like his make neighborhoods that were previously under-invested in desirable, which then brings in new capital investments. That then raises prices and displaces the very businesses that made the areas popular in the first place.
“Don’t take me wrong, it’s not that I’m crying whatsoever,” he said in a recent interview. “I know how economics works and I think it’s great. We need to develop these dead areas. But at the same time, I don’t think we have to do it at the expense of putting a small business out of business, either.”
Fierro, who is also a member of The Salt Lake Tribune’s nonprofit board, said he spent months searching for a new place that would fit both his business needs and his wallet. But he came up short again and again, and said he grew “very desperate,” at the prospect that the business he’d built from the ground up over two decades would have to close.
He eventually purchased a new space in the former Western Food Service building at 945 W. Folsom Ave. on Salt Lake City’s west side. And he’s aware that the presence of his business — which sells corn, beans and tortillas at dozens of stores across the state — could have the unintended consequence of gentrifying his new neighborhood.
So now that he’s back on his feet, he’s advocating for increased awareness of the pressures that are displacing businesses — and for more support from policymakers at the local and state levels.
“I think we need to prepare better and we need to figure out how we’re going to protect the small businesses while gentrification happens,” he said. “Because it’s not a matter of whether it will or not. It’s already here. We’re already being awakened by this economic monster.”
‘A double-edged sword’
Experts agree that the rapid growth facing Salt Lake City and the state at large is the driving force for changes in the city’s downtown business landscape, increasing the desirability of the capital city market and propelling new investment.
Paul, with Cushman & Wakefield, said he recently drove through the Granary District where Rico Brand was once a fixture and counted 95 projects under development “in that relatively small geographic area.”
“Ninety-five projects, I think, would be big for a large city,” he said. “I mean, that would be big for [Los Angeles] in my opinion, and to have that many projects in the works here in Salt Lake… that’s just amazing.”
The firm recently handled the sale of an aging retail shopping center in Salt Lake City located near a large apartment complex and received 17 offers, he said. The complex ultimately sold for $6 million over asking price, even though it needs “considerable investment” to modernize — an investment that he said will likely push rents up.
Paul said he owns some properties himself, and if a tenant doesn’t survive and moves out “the rents are increasing 25%, 30%.”
“So it is very challenging for the little local mom and pops to find affordable space, no question about it,” he added. “And I think that trend is just going to continue.”
Dee Brewer, executive director of the Downtown Alliance, a nonprofit that advocates for businesses in Salt Lake City’s central business district, noted the city is densifying. There are a handful of new apartment towers currently under development and the downtown population is expected to double over the next three years.
And while that will diversify the downtown economy and have other benefits, it’s also “sort of inherently gentrifying,” he said.
“If we’re building up, we’re building in space that was previously used for something else, so by definition that’s a re-gentrification,” Brewer said. “There are many opinions about whether that is a good thing. But the change is inevitable.”
Salt Lake City Economic Development Director Ben Kolendar sees the economic growth as a “little bit of a double-edged sword.”
On the one hand, he said, development can have a positive economic impact on the community, bringing in high-quality jobs and new amenities for residents. (New housing developments are also bringing much-needed apartments.)
On the flip side, Kolendar said growth can lead to rising costs or redevelopment that can change the “character” of the city as businesses are forced to relocate or sometimes even close their doors for good amid rising costs.
“You get some benefit but it comes with tradeoff,” he said. “And what we’re trying to do is, could we get the best of both worlds with this upside of economic growth? What are the things that we could consider that preserve our character and still capture those good paying jobs that are economically mobile, still grab those amenities that we all want to go to?”
“That’s the balancing act as a city that we strive to meet,” he added. “It’s tough.”
Preserving the ‘character of a community’
Troy Baldwin, owner and performer at the Tavernacle Social Club, thought it was the end of the road for his dueling piano bar when his landlords notified him over the summer that he needed to make way for a new 31-story apartment building.
The venue, located at 201 S. 300 East, had been an anchor of the downtown business area since it opened two weeks before the start of the 2002 Winter Olympics.
Baldwin said he spent nearly a year looking for a new space in the city that fit his business needs and also didn’t require expensive tenant improvements and high rent.
“A lot of the places that we were looking at that we really liked were under contract really quickly, so we just didn’t even get a chance,” he said. “And a lot of places we liked that were really too expensive were still getting taken up” by investors or businesses from bigger cities with more cash.
Four days before he had to be out of his old building, Baldwin said, he leased a space in the old Club 50 at 50 West Broadway. And as The Tavernacle prepared to reopen in December after a several month hiatus, he said he felt the journey had ultimately been positive for his business.
“It’s a huge upgrade for us as far as the venue is concerned,” he said, noting that it also came without a steep increase in rent.
Ken Sanders’ namesake bookstore will also soon get a new home, after he learned he would need to leave his iconic store at 268 S. 200 East to make way for a new downtown development.
Sanders’ presence downtown dates back to the 1970s, when he was involved in the city’s first psychedelic shop, Cosmic Aeroplane.
Upon announcing his new location at The Leonardo, the science museum across from City Hall downtown, Sanders noted that major cities used to have a low-rent district where bookstores like his could afford to open. Now, he told The Tribune, “there’s no low-rent districts in any downtown any more. They don’t exist.”
Salt Lake City leaders recently launched a study to better understand the impacts of gentrification on residents, especially in disadvantaged neighborhoods and minority communities.
Kolendar said he anticipates that analysis will also address challenges facing so-called “legacy businesses” and possibly provide recommendations for how to help them weather the coming storm.
One piece of that conversation, he said, is to explore whether the city could create or incentivize affordable spaces designated for businesses that have been an important thread in the fabric of the city for decades but that now may not be able to afford market-rate rents.
“I think the conversation, a lot of what you hear is [the] free market will decide who the winners or losers are and that should be the way that this is decided,” Kolendar said. “And I could see that argument, but with the caveat of there’s a consideration for character of a community as well to be sort of added to that.”
Kolendar said the city is also looking at ways to encourage property ownership among long-standing businesses in the community, so they’re less subject to fluctuations in the real estate rental market.
Some “enlightened developers” are taking initiative without government intervention and are providing affordable space for businesses on the ground floor of new apartment complexes as an amenity for residents, Brewer said.
“There are opportunities,” he said, “where a property owner can determine, ‘I’m going to make this ground floor space available at this rate because I know it will enhance the value of the rest of the property.’”
Brewer said he also thinks individual residents can help support local businesses as they face rising rents and other economic pressures.
“I think it is about shopping local; I think that is part of the solution,” he said. “If these businesses can generate the revenue to pay the rent, then they will stay where they are. You know, it comes back to those simple economics. So yes, absolutely. If there’s a business you love, spend your money there.”
Fierro, with Rico Brands, plans to push for government solutions.
He’d like the city to require those that redevelop an area and bring in new retail to maintain affordable rates for businesses. He’s also exploring the possibility of pushing legislation that would provide resources to businesses at risk of displacement as the state grows.
“I am going to do whatever is in my power,” he said, “and I encourage others to make sure that the west side of Salt Lake City doesn’t become another booming town for the rich and famous.”
Editor’s note • Jorge Fierro is a member of the board of the nonprofit Salt Lake Tribune.