Downtown density making it tough to maintain retail space in new landscape
A new report released by Mountain West Commercial Real Estate shows that retail space in downtown Salt Lake City is undergoing a transformation as the area continues to densify. The study found that market-wide, older one- and two-story retail buildings are being demolished and replaced with multifamily developments, many of which incorporate retail space into the ground floor of the development.
“The shift to mixed-use retail space is experiencing varied success, and developers will need to make important considerations to ensure retail spaces thrive in the changing landscape,” study authors said.
According to Andy Moffitt, senior commercial real estate specialist at MWCRE, “Developers should proactively plan retail spaces to reduce retrofitting costs and consider parking, tenant mix and neighborhood consumer needs.”
Moffitt cited Salt Lake City’s Granary District and Post District as examples. These areas now include 580 apartment units, over 55,000 square feet of retail space and 144 on-site retail parking stalls. BCG Holdings and the Lowe Property Group, the developers, prioritized retail parking to boost foot traffic.
To encourage the trend, the recently passed Downtown Heights and Street Activation Ordinance in Salt Lake City encourages more ground-floor retail in various zones and areas throughout the city, signaling Salt Lake City’s intent to include more retail elements in development.
MWCRE’S study found that, since 2018, more than 450,000 square feet of retail space in downtown Salt Lake City (600 North to 1300 South and I-15 to 1300 East) has been demolished, primarily consisting of one- and two-story buildings with an average year built of 1952. In the same period, 293,680 square feet of new retail space has been added, with 97.2 percent of the total square footage being added in mixed-use developments.
The report also says that pre-2018 retail spaces have a 4.5 percent vacancy rate, while those built from 2018-2022 face an 18.6 percent vacancy rate, highlighting the challenges mixed-use retail landlords face in attracting and retaining tenants compared to traditional retail landlords. Retail tenants, primarily food and beverage businesses, occupy 58.6 percent of the leased space in the new developments added since 2018.