STATE OF THE INDUSTRY: Strength of construction business will continue into 2017 and beyond

Utah’s commercial construction outlook remains bright — not only for 2017 but for the next several years, at least. That’s because Utah’s private and public entities, while embracing current architectural and building trends, are also constructing for decades ahead.

While there are serious challenges to overcome — think traffic, air quality and construction labor shortages — the current trends in commercial construction show that building planners are thinking about impacts and use 20 years from now instead of just a few years down the road. That vision can help keep Utah’s economy vibrant over the long haul and help insulate against severe contractions and their associated disruptions to families and communities.

Education

Virtually every institution of higher education is upgrading to provide a more appealing and robust learning and living environment for students, faculty and staff. From new academic buildings, medical campus facilities and utilities upgrades at the University of Utah to new student housing at Dixie State University and expanding Dixie Applied Technology College (DXATC), education leaders are equipping students for the workforce today and in 2040. Utah unemployment is 3.1 percent, and a skilled workforce is necessary to sustain long-term growth and healthy wages. The DXTAC, for example, is part of the state’s efforts to provide a skilled labor force to attract the kinds of businesses that can provide high-paying jobs to Southern Utah throughout the 21st century.

Infrastructure

The expansion at Salt Lake City International Airport is a perfect example of building for the future. The expansion will replace the airport’s aging passenger terminals, concourses and related facilities. But it’s not just a replacement — it was designed to be right-sized and flexible to accommodate future needs. The new airport will have state-of-the-art functionality and ease-of-use. The terminals will be far more efficient, eliminating terminal gate bottlenecks and allow airlines to get planes back in the air more quickly, meaning fewer delays for passengers.

According to the Salt Lake City Airport website, the updated airport has been designed to high environmental standards. A “Roadmap to Net Zero” is in development, which gives designers a plan for how the facility can ultimately be self-sustaining, in generating as much power as it uses.

Another example of forward thinking is the new Utah State Correctional Facility. This is not just the same old prison in a new location. It’s part of the Utah State Legislature’s and Gov. Gary Herbert’s sweeping and historic legislation to reform and reinvest in Utah’s criminal justice system.

A modern state correctional facility is needed to fully implement criminal justice reform. The new correctional facility will provide flexible space for treatment, rehabilitation and education and job-training programs that prepare inmates for a successful and lasting re-entry into society.

Likewise, technological innovations in security systems will allow for a more efficient management of the offender population.

The new correctional facility will also allow direct supervision whereby officers directly interact with inmates to address issues before they escalate. These modern supervision improvements have been shown to reduce violence in prisons, enhance programming and decrease sexual assaults.

Housing

In 2016, Utah home builders had their best year in nine years, yet single-family construction remains well below traditional expectations — even with high demand for single-family homes and rising home prices. At the same time, multi-family housing has seen an historic boom as some consumer preferences seem to be shifting towards renting. The downside is that housing costs have risen with no signs of slowing down. The good news for builders is that the demand for housing units of all types should remain high as the number of households in Utah continues to grow. And homebuilders’ reluctance to jump on the new home bandwagon will likely pay off down the road with more sustainable home appreciation values.

Retail

Retail construction should remain constant as new ground-up developments continue and other retailers absorb or repurpose inventory left behind by the departures of Macy’s, JCPenney, Shopko, KMart and Sports Authority locations.

Examples of new retail spaces include the just-underway Mountain View Village in Riverton, an 85-acre mixed-use development. It will create a new central gathering place in the Southwest valley. The project will consist of retail, restaurant, office, gym and hotel with a full luxury theater. Smith’s and Harmons continued to expand their locations over the past year, and Walmart has several new developments scheduled for this year and 2018.

Entertainment

Utah’s arts continue to grow, with the recent completion of the Eccles Theater, a Broadway-style theater in downtown Salt Lake City and the opening later this year of the Hale Centre Theatre in Sandy. The other type of theater — movie theaters — also continue to grow, such as with the recent opening of the Regal Theaters at The Crossroads of Taylorsville. New types of entertainment venues have recently been completed, including Top Golf in Midvale and several indoor climbing gyms across the state.

Industrial/Distribution/Manufacturing

Industrial vacancies are very low — around 3 percent. Economic development and government leaders have promoted the metropolitan Salt Lake area as “The Crossroads of the West” for decades, and many businesses are placing their stamp of approval with facility locations throughout the Wasatch Front and at other strategic locations in the state.

Ogden has become home to some of the most well-known brands in the outdoor recreation industry. ENVE Composites recently announced the construction of a new corporate headquarters and production facility. Other neighboring companies include Rossignol, Amer Sports, Scott USA and ICON Health & Fitness.

Salt Lake’s Westside is flourishing with new development. Net absorption of industrial space has averaged about two million square feet each year for the past six years, with UPS being the latest company to announce expansion with an 865,000 square-foot distribution hub. The potential of an inland port would only further stimulate growth in the market.

Around the state, information technology and software — as noted by the tremendous growth of companies along the so-called Silicon Slopes — and aerospace, advanced materials and medical devices are just a few of the industry clusters that are creating sustainable job opportunities.

Cedar City and St. George also continue to secure economic development wins with manufacturing facilities and distribution centers from expanding or new companies, which are taking advantage of lower costs of doing business and ready access to large markets just hours away on the interstate corridor.

Tenant Improvement

Tenants want different space than 20 years ago, when the big discussion typically centered on paint colors and flooring. Employees care a lot more about atmosphere, natural lighting, and collaborative space. Companies and employees want organic space with wood, stone and other natural accents. The desire for collaborative space has also led to the demise of the cubicle. Executives are moving from closed offices into the center of the building, opening the perimeters. There is tremendous demand for natural light — architects note that the spending for open light and windows is unprecedented.

Part of the open-office concept includes innovations like demountable walls so companies can easily change the space as their needs change.

Sustainability is also important to companies and employees, but interestingly enough, there is also greater demand than ever for parking spaces — up almost 20 percent from a decade ago, a trend that parallels closely the use of collaborative space — more people in the same space — as noted above.

The accelerated pace of construction and development must continue in order to keep up with the success of Utah’s economic growth. Though it is old news for Utahn’s, Forbes has named the Beehive State “Best for Business” for a number of years running, and the secret is out.

But with that growth comes a caution. Government officials, industry associations and business leaders must be thoughtful in the journey to the future. It involves everyone. It must include a look to the past to learn from mistakes. The baby boomers, generation x, generation y and the millennials all must come together to ask, “Where do we want to be in the next several decades?” — and plan for what will be. The future is bright.

Alan D. Rindlisbacher is director of corporate communications for Layton Construction in Sandy and former economic development director at the state of Utah, EDCUtah and the Salt Lake Chamber.