Salt Lake City Market Analysis

SALT LAKE CITY METROPOLITAN AREA REAL ESTATE MARKET STUDY AS OF FALL 2020 PREPARED BY PEYTON FRASER SMYTH FOR INVESTMENT COMMITTEE XYZ REAL ESTATE INVESTMENT TRUST

Photo by Jay Dash

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CONTENTS

1. METROPOLITAN AREA OVERVIEW I. II. III. IV. V. VI. VII. VIII.

Geographic Conditions Regional Conditions Transportation Culture + Recreation Climate + The Environment Public Works + Utilities Quality of Life Economic Development

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2. ECONOMIC + DEMOGRAPHIC ANALYSIS

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3. MARKET ANALYSIS

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I. II. III. IV. V. VI. VII. VIII.

I. II. III. IV. V. VI. .

VII. VIII. IX. X.

Introduction Population Households Employment Trends Labor Force Industry Employment Wages Industry Analysis

Introduction Inventory Vacancy Asking Rents Construction + Absorption Submarket Analysis a) Murray b) Davis County c) Central Salt Lake City d) Midvale/ Sandy e) Northwest Salt Lake/ Airport f) South Salt Lake/ Cottonwood g) Southwest Salt Lake h) Weber County i) West Jordan j) West Valley City`

54 55 55 56 57 59

Submarket Overview + Performance Equilibrium + Capture Analysis New Projects Market Conclusion

70 71 72 73

3. OUTLOOK: MARKET + PRODUCT RECOMMENDATION I. II. III.

37 39 42 45 46 48 49 50

Metropolitan Market Recommendation Submarket Recommendation Critical Assessment

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LETTER OF TRANSMITTAL

6 October 2020 Peyton Fraser Smyth PFS Real Estate Advisory Group 1 Main Street Salt Lake City, Utah

To whom it may concern, Per our agreement, our team at PFS Real Estate Advisory Group is pleased to formally extend the Fall 2020 Salt Lake City Metropolitan Area Real Estate Market Study to XYZ Real Estate Investment Trust. The enclosed study has been prepared for your group in order to most successfully inform your decision to invest in the Greater Salt Lake City area’s thriving multi-family market. Please note that are restricted.

Sincerely,

Peyton Fraser Smyth, President PFS Real Estate Advisory Group

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EXECUTIVE SUMMARY

The Salt Lake City metropolitan area boasts a vibrant, diverse community with a favorable business climate, strong employment and job growth, world-class recreation, and a bustling development of its future in an effort to ensure smart growth, economic vitality, quality of life, and environmental stewardship. Thus, it comes as no surprise why this city was recognized by fDi magazine as one of the 2019/2020 top 10 American cities of the future.

with considerable growth potential. The Wasatch Front region is expected to experience an incredible amount of population and job growth over the coming decade, fueling a steady demand for real estate for years to come. The rapidly emerging life sciences and tech sectors are projected to continue to introduce hundreds of high-paying jobs each year, as more and more major corporations flee the high costs of Silicon Valley for the more tax-friendly landscape of Salt Lake City – a trend that has led the area to become regarded as “Silicon Slopes”.

As the following report reveals, the many conditions underlying Salt Lake City’s impressive market trends indicate a stable market that is well-supported by robust regional economic performance as well as community prosperity. Furthermore, this market has demonstrated notable economic resilience in light of the ongoing COVID-19 coronavirus pandemic, which serves as a testimony to challenges that await. As a result, this metropolitan area is well-positioned among national markets

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METROPOLITAN AREA OVERVIEW 6

LOCATION MAP

SALT LAKE CITY METROPOLITAN STATISTICAL AREA

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METROPOLITAN AREA OVERVIEW

I. GEOGRAPHIC CONDITIONS Overview

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he Greater Salt Lake City Metropolitan Area of northern Utah is located within the Great Basin of North America, which is the most expansive contiguous area of endorheic watersheds, in other words, a drainage basin with no river outlet to an ocean. Several ecoregions The greater Salt Lake City area in particular is situated within the Moist Wasatch Front Footslopes, ecoregion 13f of the Central Basin and Range This long and narrow stretch of land follows a north-south axis along the western front of the Wasatch Mountain Range at the western edge of the greater Rocky Mountains. To the West, this region transitions into the Salt Deserts, Wetlands of Great Salt Lake, and Shadscale-Dominated Saline Basin ecoregions, which is largely arid and flat with high salt and alkali soil content.

Urban development in northern Utah has been informed and guided by the unique geographic constraints of the landscape - largely limited to the more stable environmental conditions of the Wasatch Front region. Wasatch Front is a contiguous linear corridor of urban and suburban communities that spans for 120-miles from North to South along the front foot slopes of the Wasatch Mountain Range and accounts for roughly 80% of Utah’s population. As indicated in map 1.5, this region Utah, from north to south, respectively.

Wasatch Front Area

Wasatch Front Region

Eco-Regions of Utah. Source: USGS

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METROPOLITAN AREA OVERVIEW This area of Utah is set within one of North America’s most lively geomorphic histories. As a result, this region offers many varieties of minerals and sediments and boasts a number of diverse landscapes, including temperate forests, freshwater and saltwater lakes, mountains, streams, arid desert and salt flats.

Aside from their inherent natural beauty interesting geologic history, these unique physical geographic conditions of the Salt Lake City metropolitan area present several advantages in facilitating the growth of a rapidly expanding community.

As with much of the American West, the Salt Lake City region’s rich geologic history presents a vast variety of valuable renewable and non-renewable resources, from productive timberlands and mountain streams to natural gas and gold.

Access to these resources have largely contributed to, if not constituted, the foundation of Utah’s economic growth. For example, gold exports were valued at nearly $9 billion USD in 2019 according to the US Census Bureau, accounting for 51.5% of Utah’s total export value, ranking in as the state’s number one export. Further, the natural resources and mining sector have demonstrated consistent, positive growth over the last 20 years, with a growth rate of 22.5% since 2001. These trends indicate

I. GEOGRAPHIC CONDITIONS Growth: Advantages and Disadvantages Aside from Salt Lake City’s land-locked geography, the region is also bounded by a series of mountain ranges, lakes, and uninhabitable desert area. As a result, outwards development and land area, north and south of the city. As the region’s population have struggled to determine a solution to their growing pains without stimulating an increase in housing costs and pollution.

Moreover, the region’s weather patterns also present a challenge as the metro area continues to expand. As a result of natural fluctuations in seasonal climate, temperature inversions prevent normal dissipation, sequestering polluted air during the winter months. Consequently, the air quality of the Salt Lake City metropolitan area was ranked 7th for the worst 24-hour particle pollution by the 2019 State of the Air assessment. This presents already strained by current population numbers, increasing that number within existing boundaries would inevitably translate to and creative household energy solutions are introduced.

growth factor.

In addition to natural resource commodities, the area from the Wasatch Canyon and mountain streams. With the completion of the Jordan and Salt Lake City Canal in 1882 and the Provo River Project in the 1950s, the region is able to provide enough clean, natural potable water to accommodate its growing population as well as to irrigate its productive agricultural industry through exchange contracts between private and public landowners. This is an exceptional advantage compared to the many water-stricken communities that dot the arid landscape of the American West.

Furthermore, the vast array of natural geographic features has also provided the region with several options for recreational activity, including world-class skiing, hiking, and camping. Unsurprisingly, as a result, Salt Lake City was selected to host the 2002 Winter Olympics, which greatly stimulated Utah’s economy, generating net revenues of $76 million USD from 1996 – 2003 after consideration of associated local and state costs and expenses. While the event did not substantially alter the course of macroeconomic growth indicators beyond the event, it did, however, expedite infrastructure investments such as mass transit, which have fostered a more seamless transition of growth. Despite the Olympic event, Salt Lake’s accessibility to popular ski resorts, national parks, and other recreational opportunities continues to stimulate a multi-billion USD state tourism industry, with 6.5% and 23.6% annual growth from 2017-2018 in estimated traveler spending and Utah skier visits, respectively.

While the physical geography of the Salt Lake City and popularity among outdoor adventurists, it is also one of the region’s largest constraints, particularly with respect to growth.

To begin, consider geographic conditions discussed previously such as the watershed, mountain ranges, lakes, and arid desert landscape, as well as weather patterns.

Being located within the great basin - the largest endorheic watershed in North America - the region’s waterways, which originate atop nearby mountains, have no tributaries or outlet. This means that Salt Lake City is not serviced by any navigable waterways and does not feature a port. While the gold rush and completion of the transcontinental railway opened up trade networks, supplying the area with a consistent stream of income, global trade options were historically limited, which, until recent global expansion, prevented the region from sharing the vast economic growth typical of America’s more strategically located cities.

Salt Lake City Salt Lake City MSA

Salt Lake City Municipal Boundaries

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS

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Tooele Counties, with a population of 1,232,696 people and physical area of 7,684 square miles. Salt Lake is one of only two major metropolitan areas in the Great Basin, with Reno, NV being the second and smaller of the two. Until 2005, the Salt Lake City MSA was combined with Area. Today, the Salt Lake City metropolitan area, together with the Provo-Orem MSA, Ogden-

2,641,559 people, which ranks it as the 22nd most populated CSA in the country. [It] is more commonly known as the Wasatch Front Region governed by the Wasatch Front Regional Weber, Tooele, Box Elder, Salt Lake, Davis, and Morgan counties. The primary objective of WFRC is to engage and assist the counties with regional issues like growth and transportation planning, as well as to coordinate local efforts with state and federal agencies.

REGIONAL CONDITIONS 10

METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS

SLC MSA: TOOELE COUNTY Tooele County is located approximately 30 minutes from Salt Lake City, stretching from the Oquirrh Mountain Range, which delineates the western border of Salt Lake County, west to the Nevada Border. While Tooele is the second largest county in Utah and encompasses nearly 7,000 square miles, accounting for roughly 90% of the Salt Lake City MSA’s total land area, it only represents less than 1% of the metropolitan area’s population, an estimated 72,259 people in 2019. Most of the county is uninhabited, with just over 50% of the county’s population living in the city of Tooele, the county seat, and another 40% residing in the neighboring towns of Erda and Grantsville.

This is largely due to geographic conditions, as the county’s landscape is primarily a vastly arid expanse of the Great Salt Lake Desert with several mountain ranges along the southern region and approximately 40 square-miles of salt flats.

The land was controlled by the Goshute Native American tribe until a treaty was signed in 1865 just after valuable precious metals were discovered in the area. This led to the Rush Valley Mining District established

by US soldiers resulting in the settlement of two new mining towns, Ophir and Lewiston, which are now both ghost towns. While mining continued throughout the twentieth century, two new major military bases – Wendover Air Force Base and Tooele Army Depot – promoted most of the county’s activity. Today, the majority of Tooele’s economic activity is related to private hazardous waste disposal operations. Unlike Salt Lake, agriculture in Tooele County is limited due to a lack of irrigation sources.

2020 Regional Centers

Tooele

Salt Lake City Salt Lake City MSA

Location Context

Tooele County Courthouse

SLC MSA: SALT LAKE COUNTY Salt Lake county was originally settled in 1847 by Mormon pioneers in what is now Salt Lake City proper. While the landscape was starkly arid like Tooele, the propinquity to Wasatch Range provided accessibility to mountain streams of potable water sources to be used for extensive irrigation networks that were necessary to sustain crops. Mining and mineral extraction served as the primary industry of the region, bolstered by the completion of the transcontinental railway in 1869. With the railway came an influx of immigrants as well as the emergence of new trade networks and commerce possibilities, and by the turn of the 20th century the area’s economy began to diversify. Public transit trolleys, industry, and military success further propagated the conception of a cosmopolitan society.

Today, the county of Salt Lake encompasses 807 square miles of land in the Salt Lake Valley, east of Tooele. In 2019, the estimated population of the county was 1,160,437, making it the 37th most populated county in the US, with a population density of 1,564 per square-mile – a stark contrast to the 10 people per square-mile density of Tooele. The initial settlement – Salt Lake City – has persisted as the state of Utah’s largest city and metropolitan area. Inevitably, as a result, Salt Lake county accounts for the vast majority of economic activity within the MSA.

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS Major Metro Cities Overview

WEST VALLEY CITY West Valley City, incorporated in 1980, is a Salt Lake City suburb and the second largest city in Utah, located on the west side of central Salt Lake County with an estimated 2019 population of 135,255 and corresponding population density of approximately 3,814 people per square-mile.

The city’s formative years were characterized by successful agricultural pursuits. Formerly four separate unincorporated communities – – the region merged when it became incorporated shortly after rapid growth in the 1970s. West Valley City is now home to several companies such as USANA Health Sciences, CR England, and Backcountry. com. The city’s largest employer is Discover Financial with 4,200 employees. In 2011, West acre downtown redevelopment plan known as Fairbourne Station, which will feature civic buildings such as a new government center, city hall, and civic center, in addition to a series

Salt Lake City West Valley City

South Salt Lake Millcreek

Holladay Murray

Taylorsville

West Jordan

Grantsville

Tooele

East Millcreek

Midvale

Cottonwood Heights

Sandy

South Jordan Riverton

Draper

Bluffdale

WEST JORDAN The rapidly growing West Jordan suburb was incorporated in 1948 and is located in central Salt Lake Valley on the west side of the Jordan River. West Jordan has an estimated 2019 population of 116,482 and corresponding population density of approximately 3,600 people per square-mile. Settled in 1848 with mining, mills, and agriculture providing the economic foundation, West Jordan has since transitioned into a regional center of its own. Several large companies are headquartered here, including Cyprus Credit Union, Lynco Sales, SME Steel, and Mountain America Credit Union. The city also includes a major hospital, Jordan Valley Medical Center, as well as a regional airport and a Salt Lake Community College satellite campus. Located along the lower eastern slopes of Oquirrh Range, the Welby, Copper Hills, and Jordan Hills neighborhoods are among the most rapidly expanding regions of the West Jordan. Furthermore, Jordan Hills, situated along the highway 154 corridor in the heart of West Jordan, is a 500-acre mixed-use master plan SANDY The city of Sandy, located in the southeast of Salt Lake County at the base of the Wasatch Mountains, was incorporated in 1893 and presents an estimated 2019 population of 96,380 and corresponding population density of approximately 4,000 people per square-mile. The early development of Sandy revolved around mining operations until their failure in the 1890s at which point the city transitioned into an agricultural community with strong religious and family values. In the 1960s, as more and more urban residents of Salt Lake City migrated to areas outside the city, Sandy became spatially overwhelmed by population growth, which ultimately resulted in the organic development of local pocket communities that today remain characteristic of the area. While still recognized as a local and family-oriented community, a lively commercial center has developed along State Street.

Mountain American Exposition Center, Rio Tinto Soccer Stadium – home to Real Salt Lake and Utah Royals FC soccer teams – and Shops at South Town shopping mall. Perhaps the most notable is the emerging center of the Cairns – a 25-year redevelopment pipeline for 1,100 acres of downtown Sandy, transforming the area into a resort-style city center.

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS County Seat Overview

Salt Lake City Salt Lake City MSA

SALT LAKE CITY Salt Lake City proper, founded in 1847 by Mormon pioneers, accounts for 110 square miles of the northeast corner of Salt Lake Valle, at the top of Salt Lake County. The city presents an estimated 2019 population of 200,567 and corresponding population density of approximately 1,818 people per square-mile. Salt Lake City is the county seat of Salt Lake County, the capital city of the state of Utah, as well as the state’s largest city and economic core of the metropolitan area. Initially in 1847, the city was named Great Salt Lake City after nearby Great Salt Lake, however it was reduced to Salt Lake City by the 17th Utah Territorial Legislature in 1868.

Salt Lake City, of course, largely shares the same aforementioned historical account of Salt Lake County. The city flourished throughout the late nineteenth and early twentieth century due to successful mining operations as well as growth and trade opportunities made possible by the completion of the transcontinental railway in 1869, and again Mormon immigrants due to its serving as the headquarters of The Church of Jesus Christ of Latter-day Saints. As a result of a robust natural resource commodities market and steady immigration, the city’s population tripled between 1900 and 1930.

However, like many American cities, despite its twentieth century progress the urban environment of Salt Lake City suffered from urban flight and suburban expansion, which commenced in the 1960s and continuing through the

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS City Planning Division Master Plan Neighborhood Areas

The Avenues • First surveyed in 1850, the Avenues neighborhood East Bench • The neighborhood of East Bench is a primarily affluent residential community at the base of Wasatch Range to the east like road pattern. The neighborhood is often perceived today as a younger, more progressive, “artsy” community of young professionals eastward direction. Neighborhoods of southern East Bench include in search of culture and propinquity to the downtown central business Holladay City, Cottonwood Heights City, East Millcreek, and Granit. district. Since 1980, the Avenues has been a registered historic The north end of the community is bounded by the University of Utah district by the National Register of Historic Places. The streetscape campus. is lined with small to large size houses in the Queen Anne, Arts and Crafts, and various revival architectural styles.

Sugar House • The Sugar house neighborhood is located south of East Bench on the grounds of a former prison. Today it is considered Capitol Hill • The Capitol Hill neighborhood, a name coined from the to be a chic area with a vibrant nightlife scene including sports pubs, location of the Utah State Capitol perched atop a hill at the heart breweries, and trendy cocktail bars as well as open spaces such as of the community, is a relatively small area overlooking downtown Sugar House Park and Hidden Hollow Nature Walk. The southern Salt Lake City. It is considered by most to be one of the most portion of Sugar House features performing arts venues and unique architecturally diverse residential areas in the state including several shopping scene. notable historic landmarks.

Northwest Community • This area of Salt Lake City is northwest of Central Community, East Central • Central Community is a broader downtown between the interstate 215 corridor that serves as the downtown area encompassing eight smaller “pocket” neighborhoods. east boundary of the Airport area and the interstate 15 corridor The area is often regarded as the main urban core of commercial and residential activity in Salt Lake City. East Central, composed of North largely been characterized by undesirable existing conditions of East Central and South East Central, is recognized as a trendy area vacant underutilized properties. According to the city’s Northwest with eclectic pubs and clothing stores, a community garden, and an Community Masterplan that was adopted in 1992 and updated in City Creek • This Salt Lake City area references the Memory Grove neighborhood and public spaces surrounding City Creek Canyon, a 10-mile linear urban park that follows city creek from the top of City Creek Canyon into the city’s central business district. City park canyon features a small collection of historic homes along canyon back to the founding of the city. The creek and canyon terminate at City Creek Center, a large high-end shopping and entertainment development in the city center at the intersection of North Temple and North State Street Downtown • The downtown community is recognized as the oldest district in Salt Lake City. Downtown includes Temple Square, which is the site of the popular Salt Lake Temple as well as the original grid from which the city was laid out. Main street represents the heart of the community, with City Creek Center stretching across its axis.

Main street also served as the original business district of Salt Lake City.

that maintains a public aspect.

Northwest Quadrant • The Northwest Quadrant planning district refers to the large area of land to the south and west of the airport region and extends Northwest to the western end of Salt Lake City limits, encompassing the entire western wing of the city. The area presents nearly 28,000 acres of land representing about 40% of the total area of Salt Lake City, of which 9,000 acres is undeveloped, making it one of the largest undeveloped pieces of land along the Wasatch Front. Strategically located within easy access to major transportation networks and nodes, the city hopes to seize the area as an opportunity to create one of the most economically diverse and sustainable areas in the city.

Salt Lake City Neighborhoods

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS Submarkets

2020 Regional Centers

a

Weber County

b

Davis County

c a

d

Northwest Salt Lake/ Airport

Central Salt Lake City

b

e

f c

Southwest Salt Lake City

d f

e

West Valley City

g

g

h j

South Salt Lake/ Cottonwood

i

Salt Lake City MSA

h

Murray

i

West Jordan

j

Midvale/ Sandy

Salt Lake City Submarkets

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METROPOLITAN AREA OVERVIEW

II. REGIONAL CONDITIONS Existing + Emerging Urban Cores

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3

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10

9 6

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Regional Cores

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EXISTING CORES

EMERGING CORES

1 2 3 4 5 6 7

8 9 10 11

Intern Center/ NW Quad/ Airport 201/ California Avenue Downtown Salt Lake City University of Utah Cottonwood Ft. Union Sandy

Sugarhouse West Valley City Jordan Landing Daybreak

METROPOLITAN AREA OVERVIEW

III. TRANDSPORTATION

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improve commuting networks, both Salt Lake County as well as the greater of high-quality transit options. Regional transit options include a variety of bus routes extending beyond the county, as well as a linear commuter-rail route that extends through the entire length of the greater Wasatch Region from North to South. The commuter rail passes through the central urban core of Salt Lake City with convenient connections to local transit available. Within Salt Lake County, the municipality has introduced a network of local light-rail transit routes in order to connect the various local urban cores and centers

TRANSPORTATION 17

METROPOLITAN AREA OVERVIEW

III. TRANSPORTATION Overview

In December 1999, the Utah Transportation TRAX light rail system, connecting Salt Lake City to Sandy. The TRAX is an electrically pantographpowered light rail system offering a convenient option for city residents to connect to community destinations like schools, commercial and retail centers, and other transportation hubs. There are currently three different lines offered by TRAX, including the blue, red and green lines. The blue line extends from Draper to Salt Lake City, the red connects South Jordan to the University of Utah, and the green provides service to and from the Salt Lake international Airport from West Velley. In total, the TRAX service covers over 42 miles with 50 stations.

In addition to light rail, UTA’s fleet of over 400 buses has serviced residents of Wasatch Front for over 45 With over 120 routes servicing total of 1,400 miles, the bus system links residents to a wide variety of community and recreational services, as well as a commuter-oriented expresses option.

In 2008, in order to connect the city to Wasatch Front residents beyond Salt Lake County, UTA launched the FrontRunner commuter rail service. Today, FrontRunner runs approximately every 30 minutes from Ogden in Weber County, the northernmost region of Wasatch front, south to Provo in Utah County, with 16 stations along the 89-mile corridor servicing Weber, Davis, Salt Lake and Utah counties. The rail service features complimentary Wi-Fi, free parking, and bike lockers to provide a more convenient experience for passengers.

In 2013, UTA introduced the S-line modern streetcar trolley to further link commercial and residential areas within Salt Lake City and Sugarhouse along a 2-mile portion of historic rail corridor and pedestrian greenway. The S-line stops at 7 stations along the route and provides connection to the TRAX and bus services.

Regional Public Transportation Network

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METROPOLITAN AREA OVERVIEW

III. TRANSPORTATION Local Mass-Transit

Local Transportation Network

As previously discussed, development growth in and around Salt Lake City has been largely restricted due to geographic features like the Wasatch and Oquirrh mountain ranges and Great Salt Lake. As a result, the metropolitan area has expanded linearly from North to South along the foothills of the Wasatch Range.

While this condition has resulted in some growing pains for the region, it has also resulted in an excellent transportation network as only one single transit line is needed to service neghboring communities, serving as a central ‘spine’ with additional lines able to splinter off as needed. This condition allows the area to offer effective connectivity throughout the region.

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METROPOLITAN AREA OVERVIEW

III. TRANSPORTATION Commute Source Intensity

An analysis of commute source intensity may be utilized in order to further determine job locations, utilizing inputs in order to effectively assess commute conditions and from the Department of Workforce generalized job data and regional circulation patterns. This is particularly important considering the area’s challenge with air pollution.

Nearby Residential Intensity: Understanding the commuting trends allows city and This layer represents the concentration of households within a quarter mile for each grid square. The county-level transportation planning and guide development accordingly. job counts were estimated by University of Utah’s Gardner The commute source intensity analysis represented above Policy Institute for 2015. In addition, a Real Estate Market demonstrates the spatial relationship between employment Model by the Wasatch Front Regional Council was applied and residential sources. The distribution parameters for in order to further determine job locations, utilizing inputs this data are represented by quarter mile grid units, the approximate size of a downtown Salt Lake City block, of county assessor tax parcel data. aggregated counts.

According to this spatial analysis, the data indicates a strong Nearby Employment Intensity: intensity of employment sources throughout the region, This layer represents the concentration of employment particularly along the north-south Interstate-15 corridor within a quarter mile for each grid square. The county-level and within the Salt Lake City’s center. Additionally, data job counts were estimated by University of Utah’s Gardner also reveals a consistent trend of strong residential source Policy Institute for 2015. In addition, a Real Estate Market concentration in the easternmost areas of the region along Model by the Wasatch Front Regional Council was applied the base of the Wasatch Range.

0

37,000

0 Nearby Employment Intensity

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2,700 Nearby Residential Intensity

METROPOLITAN AREA OVERVIEW

CULTURE + RECREATION

IV. CULTURE + RECREATION

A

home to various waves of native American groups, including the ancient pueblo people, the Navajo Indians, and the Ute tribe, before eventually being settled by religious refugees. Led by Brigham Young, the Salt Lake region was settled in the summer of 1847 by Mormon pioneers of the Church of Jesus Christ of Latter-Day Saints who were fleeing prosecution in eastern states and sought religious refuge in the West. It is said that Brigham Young, upon arrival to the Salt Lake valley, proclaimed “this is the place” - and within days, the settlers had begun drawing plans, developing irrigation networks, tilling soil, and growing crops. As the settlement grew and the transcontinental railway was completed, Salt Lake City became known as the “crossroads of the West”.

Although there is much cultural and religious diversity throughout Salt Lake City and the surrounding area, it is widely regarded as the center of Mormon culture due to the large population of that is embedded within the city’s founding, with about 60% of state population identifying as Mormon. As a result, the Mormon church has had a large influence on local society and heritage.

Mormon culture values tight knit family life, sports, and personal development, and largely discourages smoking and drinking alcohol, which is responsible for the historically stringent state-wide liquor laws.

There are several prominent landmarks, sights, and events throughout the region commemorating Mormon heritage and faith. Perhaps most notable are the Church History Museum, Salt Lake Temple, Daughters of Utah Pioneers, Mormon Tabernacle Choir, and Pioneer day. Many visitors flock to Salt Lake City throughout the year to experience all that the headquarters of the Mormon Church of Jesus Christ of Latter-day Saints has to offer.

Aside from the strong presence of the Mormon church, the Salt Lake City area boasts a number of diverse cultural centers and activities.

Among these are a thriving arts scene, performing arts venues and festivals such as Sundance Film Utah Art Alliance developed an arts hub in downtown Salt Lake City including studio spaces for local and visiting artists, performance venues, community gardens, and more.

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METROPOLITAN AREA OVERVIEW

IV. CULTURE + RECREATION Cultural Sights

Temple Square

Located in the heart of the Salt Lake City center, Temple Square is one of the city’s most visited locations. The square is perhaps most notably known as the home to Salt Lake Temple, a large 19th century gothic revival temple that serves as the headquarters for the Mormon Church of Jesus Christ of Latter-day Saints and the centerpiece of the 35-acre square. Aside from the temple, the square offers a variety of Mormon historical and cultural centers as well as several hospitality, dining, and event spaces. The former Hotel Utah, an elegant historic hotel, is now known as the Joseph Smith Memorial Building and serves as a social center for the Mormon community.

Natural History Museum of Utah

One of Utah’s most renowned cultural destinations, the Natural History Museum of Utah is a world-class museum, event space, and active research institution whose mission seeks to “illuminate the natural world and the place of humans within it”. With sustainability, inclusion, and diversity at the core of its values, the museum offers a wide range of exhibitions and programs that highlight the incredible landscape of Utah. Additionally, the Natural History Museum of Utah participates in several collaborations with the University of Utah and publicprivate partnerships in order to maximize service to the local community. An impressive new museum building by Ennead Architects was constructed in 2011.

This is the Place Heritage Park

As part of Utah State Parks System, This is the Place Heritage Park is the largest park in Salt Lake City, located in the East Bench neighborhood east of the University of Utah. This is the Place is said to be the location where Mormon Place”. The park offers a look back in time of the valley during its early settlement days, celebrating Mormon victories, Native American heritage, mining and the gold rush, as well as other groups that have contributed to diversity of the community, providing an educational and fun experience for both visitors and families.

Salt Lake City Temple Square

Natural History Museum

This is the Place

Cultural Locations

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METROPOLITAN AREA OVERVIEW

IV. CULTURE + RECREATION Recreational Access

In addition to the vibrant culture of Salt Lake City, the region is also widely recognized as a top recreational destination. The area is home to several ski resorts, hiking trails, climbing opportunities, and other various outdoor activities. While there is a large are many recreational activities to engage in, skiing remains the area’s most popular activity, often regarded as “Ski City”. Within just a 30-45 minute drive from the city are the highly popular ski resorts of Big Cottonwood Canyon and Little Cottonwood Canyon, including Solitude Moutain Resort, Brighton Ski Resort, Snowbird Ski and Summer Resort, and Alta ski village. Also in close proximity is Park City, an exclusive enclave of ski resorts and winter tourists and that rivals Aspen and Vail.

Recreational Opportunities

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V. ENVIRONMENTAL CONDITIONS Environmental Overview

METROPOLITAN AREA OVERVIEW

CLIMATE + THE ENVIRONMENT

The Salt Lake City area supports several environmental agencies at both the state and local levels in order to maintain regional environmental stewardship. At the local level, the Salt Lake City Sustainability develop strategies and goals to reduce pollution and increase air quality, protect natural resources, mitigate climate change, and increase the overall resiliency and vitality of the community. Moreover, at the state level, the Utah Department of Environmental Quality serves as the state’s primary regulating agency for environmental policy to protect and safeguard land, air and water.

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METROPOLITAN AREA OVERVIEW

V. ENVIRONMENTAL CONDITIONS Climate

large seasonal temperature variation. This region receives hot, dry summers and cold, snowy winters with modest to light seasonal rainfall. Perhaps the most unique climate attribute of this region is the winter temperature inversions, which consistently cause cold, foggy, and hazy conditions throughout the valley and sequesters air pollutants during mid-winter. The graphs featured above represent the average annual distribution of climate conditions for the Salt Lake City area.

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METROPOLITAN AREA OVERVIEW

Solar Renewable Energy Zone Wind Renewable Energy Zone Geothermal Renewable Energy Zone

Oil + Gas Reserves CO2 Power Plants

Renewable Energy Sources

Nonrenewable Energy Activity

The state of Utah presents a variety of energy resources, including natural gas, coal, and crude oil as well as a number of renewable options. Given the predominately arid desert landscape with a high amount of annual sun exposure, Utah presents one of the country’s largest potentials for solar energy. In addition to solar, the state also incorporates hydropower, wind, and geothermal resources for energy generation. The greater Salt Lake City and Wasatch Front region in particular, however,

Further, energy development operations on state trust lands yields a high amount of royalties that serve as Utah’s largest source of funding for public schools.

While the vast majority of Utah’s electricity is generated from coal, the state’s dependence on fossil fuels has been steadily decreasing. As of 2018, coal represented 66% of net electricity generation, down by

Energy is also a critical industry for the state’s economy, with the fourth highest amount of oil and natural gas land leases in the country and accounts for three of the top one-hundred largest natural gas produces more energy than it consumes, which allows for additional income from exports to other states.

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V. ENVIRONMENTAL CONDITIONS Energy

gas accounts for about 16% with renewable resources accounting for the remaining 18%. Since 2016, most of the electricity generation capacity that has been added is solar-powered.

Looking forward, the area is eager to expand its production of renewable energy. However, given that coal and natural gas are still a mojor component of the local economy, it will continue to take some time to phase these industries out as they begin to diversify their industry and introduce more renewable sources.

METROPOLITAN AREA OVERVIEW

V. ENVIRONMENTAL CONDITIONS Watershed

Salt Lake county is positioned within the Jordan River watershed, a 3,805 square-mile basin, with the Jordan River meandering for over 50 miles through the county’s center – from Utah Lake north to Great Salt Lake, flowing north. This watershed and its many sub-watersheds are an integral component of life throughout the area, in terms of both the natural ecosystem and human habitation. Residents of Salt Lake County depend on the various freshwater mountain creeks and streams within this watershed as a primary source of drinking water and irrigation. The seven major tributary streams include Little Cottonwood Creek, Emigration Creek, Mill Creek, Parley’s Creek, City Creek, Red Butte Creek, and Big Cottonwood Creek, which all originate in the Wasatch range in the east. Currently, the Emigration Creek sub-watershed is the largest contributor of pollutants to the Jordan River Watershed, which is largely due to the existence of over 500 onsite wastewater disposal systems along its course.

In order to ensure proper watershed functions and other vital ecosystem services related to it, Salt Lake County is active in several watershed planning and restoration operations and supports many environmental agencies and organizations.

This primarily achieved by the Jordan River Watershed Council

Lower Weber

Upper Weber

Jordan

Rush-Tooele Valleys

Provo

Utah Lake

organizations, and water districts that are dedicated to the protection of the Jordan River basin’s water quality. By promoting community and stakeholder participation, the JWRC has been successfully leading the region in sustainable groundwater stewardship since 1978.

Spanish Fork`

Regional Watersheds a Little Valley Wash b Crystal Creek c Outlet Jordan River d Lee Creek e Parleys Creek - Jordan River

c

b

d

e

l

r

i Parleys Creek j Outlet Mill Creek k Headwaters Mill Creek

k p

l Coon Creek

q

t

u

n Barneys Creek - Jordan River

p Outlet Big Cottonwood Creek q Headwaters Big Cottonwood Canyon r Bingham Creek s Midas Creek

w

x

m Headwaters Barneys Creek

o Oulet Little Cottonwood Creek

o

s v

h Emmigration Creek

i

j

n

m

g City Creek

h

f a

f Red Butte Creek

g

t Dry Creek - Jordan River u Headwaters Little Cottonwood Canyon

y

v w Corner Canyon - Jordan River x Rose Creek

Level 12 Watersheds - Jordan Watershed

y Wood Hollow - Jordan River

27

METROPOLITAN AREA OVERVIEW

V. ENVIRONMENTAL CONDITIONS Climate Change

navigating the effects of climate change. While climate change presents several trials and tribulations, the Salt Lake City area is particularly vulnerable to its potential impact on air quality, temperatures, water supply, and tourism.

Because of the winter temperature inversions previously discussed, air quality of the Salt Lake City area is already non-attainment for ozone pollution, which climate change has been predicted to increase. Aside from the wintertime inversion season, summer season, increasing PM2.5 pollution from smoke, which climate change has also been predicted to increase.

In addition to air quality, climate change also poses a large threat to the area’s water supply. The majority of the area’s drinking water is sourced from surface water that is stored in Wasatch mountain snowpack that is distributed to the region via a series of watersheds as the snow melts. However, rising temperatures have a heavy impact on the amount of water supplied, when it melts, and its quality. Data indicates that for every degree Fahrenheit increase, the Salt Lake City area can expect about a 3.8% average decrease in overall water volume that is contributed by streams of the Wasatch Range.

Furthermore, aside from potable water, the impact of rising temperatures on snow melt will also heavily impact the winter ski industry, which contributes an excess of $1.3 billion to the state the ski season will consequently become shorter and shorter with decreases in snowfall and snow cover area. One study indicates that snow depths in the American West could potentially decline by between 25 and 100%. The economic impact of decreased tourism from skiing could be severely damaging to small communities such as Park City where the ski industry is responsible for the majority of the local economy.

28

METROPOLITAN AREA OVERVIEW

VI. PUBLIIC WORKS + UTILITIES

PUBLIC WORKS + UTILITIES

The Salt Lake City Department of Public Utilities provides drinking water, stormwater, wastewater, street lighting services for residents of Salt Lake City. In addition to regulating public utility services, the Department of Public Utilities is also actively involved in watershed protection, resource conservation, safety, and community engagement.

Other utilities such as energy and telecommunications are provided by regulated investor-owned companies.

Utah’s only rate-regulated public power utilities are Rocky Mountain Power for electric services and Dominion Energy for natural gas, however there are a number of unregulated rural electric cooperatives.

Telecommunication services are provided by CenturyLink, which serves as the incumbent provider for most of Utah’s population centers.

WATER SUPPLY SOURCES

WASTEWATER

Ground water: 12.7%

Gallons of raw sewage treated daily: 31.3 million

Surface water: 33. 6% Purchased water: 53.7%

Sanitary sewer lift stations: 34 Sewer main lines cleaned: 1,602,448 ft.

STREAM SOURCES

Replacement pipe installed: 6.17 MILES

LCC, BCC, Parleys, City Creek: 56%

Biosolids treated for reuse: 4,370 TONS

Deer Creek/CUP/Other: 34.5%

Megawatt hours generated by methane gas creation: 5,469,489 kWh

Groundwater and Springs: 9.5%

29

METROPOLITAN AREA OVERVIEW

QUALITY OF LIFE

As evidenced from the overview provided above, the

Salt Lake City Metropolitan Statistical Area presents several key conditions that further contribute to overall quality of life amongst its residents. This includes a convenient network of mass transit options, geographic advantages that offer a wide range of recreational opportunities, as well as a vibrant, diverse community culture. In addition to the advantages of previously discussed conditions, there are a number of other factors contributing to the area’s quality of life, such as accessibility and community services.

30

VII. QUALITY OF LIFE

VII. QUALITY OF LIFE Accessbility

METROPOLITAN AREA OVERVIEW Due to the area’s increasing population density, the ability to navigate through the city without additional stress is important. Accessibility factors such

Central City

Although the overall Walk Score for Sat Lake City is 59 out of 100, which translates to “somewhat walkable”, there are numerous neighborhoods within the urban core that boast “very walkable” ratings of 80 and above, such as Central City. Additionally, the Wasatch Choice 2050 Vision, a locally driven approach to community development and planning, includes a transportation and land use connection program to assist the community in implementing changes within better facilitate walking, biking, and public transit.

Furthermore, while less dependance on motor vehicles is a long-term goal of the city, the majority of Central City

residents currently rely on driving as their primary are important to consider. The map [position] roadways, indicating that the majority of primary roads, despite some portions of major interstate arteries, do Looking forward, increasing walkability while decreasing vehicular will be critical for Salt Lake city importantly, it to mitigate the city’s ongoing air quality challenges. In recent years, several plans have been

Walkability

reduce the amount of car dependance for residents.

One such plan is a recent effort known as “The Rio Grande Plan”, which seeks to revive the Rio Grande train station in the Depot District of downtown and introduce an underground rail network.

31

METROPOLITAN AREA OVERVIEW

VII. QUALITY OF LIFE Community Services

Community Services

To further promote a high quality of life and sustainable community development, community services, including healthcare and education, are also a critical consideration for potential residents. Throughout the city there are a variety of schools, childcare centers, healthcare facilities, and other community service locations within close proximity to residential areas. Moreover, the Salt Lake County School District presents exceptional publicschool choices that are ranked in the top ten in America for quality education.

In addition to education institutions, the quality of Salt Lake City regional healthcare centers is also impressive. Three medical centers in Salt Lake County, including University of Utah Health Care-Hospital and Clinics, Intermountain Medical Center, and Primary Children’s Hospital, were ranked by U.S. News and World Report in the top 50 for particular specialty centers, with the University of Utah hospital ranking as the number one hospital in the state of Utah.

32

HIGHER EDUCATION Art Institute of Salt Lake City Ensign College Salt Lake Community College Eagle Gate College Westminster College University of Utah

West High School

METROPOLITAN AREA OVERVIEW

VIII. ECONOMIC DEVELOPMENT

ECONOMIC DEVELOPMENT

Compared to other metropolitan areas, Salt Lake City presents an

exceptionally business-friendly landscape. USNews and World Report’s 2019 stability and business environment, and number 2 for economy. This is in part due than New York on state and local services. Additionally, Utah offers appealing corporate tax rates that are below 5% and no estate or inheritance tax. These favorable conditions help promote a prosperous job market, steady employment and rising wages.

33

METROPOLITAN AREA OVERVIEW

VIII. ECONOMIC DEVELOPMENT Programs + Incentives Moreover, As 80% of Utah’s growth over the next 40 years is expected to occur in the region along the Wasatch Front, several economic incentives and public policy initiatives are in place that stimulate economic growth and development in order to ensure economic prosperity for decades to come. Major economic development agencies include the Gardner Policy Institute, the Salt Lake City Department of Economic development, the Salt Lake City Redevelopment Agency, and A component of the University of Utah’s David Eccles School of Business, the Gardner Policy Institute prepares demographic, economic, and public policy research to inform local and state economic strategies.

Being located at University of Utah’s Salt Lake City campus, the Gardner Institute is able to serve as a trusted local economic resource as well as foster an actively engaged relationship between research and practice.

Their well-trained team of economists are experts in analyzing economic trends and impacts, assessing expenditure and tax policies, formulating economic forecasts, and providing economic development consultation.

The institute’s emphasis on community outreach, survey research, and demographics allows them to effectively analyze public policy procedures with the community’s best interest at heart. is centered on a continued commitment to represent and serve statewide economic development in order to provide valuable business resources for the recruitment, growth and creation of companies in Utah, with 18 business resource centers across the state in order to extend its services to local communities. In order to help startups with research and innovation needed to successfully establish themselves, the GOED operates the “Utah Industry and Innovation Center” with focus on target industries, which includes manufacturing, aerospace and defense, In addition to development and growth services, the state’s

Science and Tech Tax Credits, and the Utah New Market Tax Credit.

The EDTIF is a statewide incentive program allowing municipalities to create “economic development zones” that operate similarly to opportunity zones. These economic development zones allow eligible businesses that introduce new jobs or capital investment to apply for a partial state tax rebate up to 30% for up to 20 years. Other tax credits include the Life Sciences and Technology Tax Credit, which is a postperformance-based tax credit that extends up to 35% of investment over 3 years to qualifying investors, as well as the Utah New Market Tax Credit, which seeks to attract private capital investment in severely distressed regions that are in need of economic development and employment opportunities. Additionally, the GOED offers funding through a preAssistance Fund, which provides grants for the introducing high-paying jobs in both urban and rural counties.

34

ECONOMIC + DEMOGRAPHIC ANALYSIS

VIII. ECONOMIC DEVELOPMENT Programs + Incentives

At the local level, the Salt Lake City Department of Economic

This department provides critical services and support for businesses with emphasis on corporate recruitment, small business needs, retention and expansion, marketing and communications, strategic initiatives, as well as foreign trade. The SLCOED is also responsible for the promoting and designating the community’s 7 opportunity zones that in order to stimulate economic activity while reinforcing designated commercial cores. Further, SLCOED has Source: SLC Department of Business Development

development of a Life Sciences corridor from Research Park to NW Quadrant as well as increase institutional capacity to expedite Life Sciences’ industry growth and labor force.

Operating under the Salt Lake City Department of Economic Development, the Redevelopment area’s primary redevelopment agency that seeks to advance the revitalization of local neighborhoods and business districts in order increase livability and foster authentic communities while expanding economic growth. Their leading focus is to connect developers and investors with various funding opportunities, as well as to connect design and development professionals with local revitalization opportunities.

The agency also provides several incentives and funding options of their own, such as loans for project that align with the goals of the RDA, Tax Increment

Source: SLC Department of Business Development

grants for organizations and businesses seeking an environmental cleanup site, as well as the Granary District Adaptive Reuse Loan Program, which offers forgivable loans to encourage adaptive reuse efforts of the unique warehouse and industrial building of the Granary District.

35

METROPOLITAN AREA OVERVIEW

VIII. ECONOMIC DEVELOPMENT Region Growth Plan

Regional Centers 2020

This map displays existing districts and centers determined by the Wasatch Choice 2050 initiative that was launched by the Wasatch Front Regional Council.

This initiative seeks to provide a vision for regional growth through 2050 in order to inform transportation decisions, development patterns, and economic opportunities.

36

METROPOLITAN AREA OVERVIEW

VIII. ECONOMIC DEVELOPMENT Region Growth Plan

Regional Centers 2050

This map displays the projected evolution of today’s current districts and centers by the year 2050. Notable elements include the transition of Research Park from a special district into an educational center, increased activity in Tooele County, as well as increased area designated for Industrial activity.

37

2 ECONOMIC + DEMOGRAPHIC ANALYSIS

38

ECONOMIC + DEMOGRAPHIC ANALYSIS

I. INTRODUCTION Overview

In order to provide a further understanding of current

market and development conditions within the Salt Lake City metropolitan area, a comprehensive demographic and economic analysis has been prepared. This analysis will primarily examine statistical data from the US Census and Bureau of Labor Statistics, as well as industry and employment trends from various economic research agencies. Emphasis will be placed on demographic conditions such as population and household trends, as well as economic indicators including employment and industry trends.

39

ECONOMIC + DEMOGRAPHIC ANALYSIS

40

I. INTRODUCTION Location Reference

ECONOMIC + DEMOGRAPHIC ANALYSIS

2010

POPULATION

II. POPULATION Overview + Density 2020

2030

The population of the Salt Lake City metropolitan area has seen tremendous growth in the last decade due to expanding employment opportunities, higher than average fertility rates, as well as an overall increase in net in-migration since 2015. Today, the greater metropolitan population is approximately 1.25 million people with an expected growth rate of 1.2% over the next 3 years, estimating to an City proper accounts for roughly 20% of the metropolitan population with about 213,000 residents. The city’s population has increased by 14.4% since 2010 with a current annual growth rate of 3.1%. x-x, the population distribution has remained rather consistent, with existing regional population centers densifying rather than receding outwards. This trend is projected to continue, primarily due to the geographical constraints of the region that naturally cause sprawl to become cumbersome.

41

ECONOMIC + DEMOGRAPHIC ANALYSIS

II. POPULATION Metropolitan Statistical Area

The population demographics of the MSA are similar to those of the city with subtle variations. Both boundaries present an even 1:1 male-to-female ration and a relatively young overall population with a median age of 32 years old, well below the US average of 38. However, the age distribution of residents under the age of 18 is less in Salt Lake City the greater metropolitan area, which supports the nvationwide trend of families diversity and are largely comprised of white-Caucasian with a growing Hispanic minority.

42

ECONOMIC + DEMOGRAPHIC ANALYSIS

II. POPULATION Salt Lake City Proper

43

ECONOMIC + DEMOGRAPHIC ANALYSIS

2010

HOUSEHOLDS

44

III. HOUSEHOLDS Overview + Density 2020

2030

Household growth patterns primarily align with the same spatial trend as the overall population, with a growing number of households arising in existing residential centers such as West Jordan. Additionally, several household demographics also follow trends that are reflective of the population distribution, such as growth patterns. Since 2010, the number of households in the Salt Lake City metropolitan area have experienced an average annual increase of 1.5%, which is slightly higher than the population growth, most likely as a result of an overall decline in average household size. This rate is considerably higher than that of the larger Western Region of the United States, which has only experienced about .75% of household growth per year on average. Furthermore, the average household size for metropolitan Salt Lake City currentaly stands at 3 members, which is less than the state of Utah yet still larger than national average of 2.6.

ECONOMIC + DEMOGRAPHIC ANALYSIS

III. HOUSEHOLDS Metropolitan Sttiatical Area

AVERAGE HOUSEHOLD SIZE

45

ECONOMIC + DEMOGRAPHIC ANALYSIS

III. HOUSEHOLDS Salt Lake City Proper

The median household income in Salt Lake City is $63,971, about 20% less than the metropolitan region’s average of $80,196. Salt Lake City’s average household size of 2.4 is also less than the metropolitan average of 3.0, which is supportive of the income gap between the two regions. In addition, the metropolitan area’s household size is greater than the national average of 2.6, which is reflective of the region’s strong religious values and family-oriented community.

Household type also differs from city to metro, with 33% of Salt Lake City household claiming non-family status compared to only 14% of the metropolitan area, a trend that further explains the income gap as less households within the city are responsible for the costs of providing for a family.

AVERAGE HOUSEHOLD SIZE

46

ECONOMIC + DEMOGRAPHIC ANALYSIS

2010

JOBS

IV. EMPLOYMENT TRENDS Overview + Density 2020

2030

Unlike household and other demographic trends, the Salt Lake City MSA’s distribution of jobs doesn’t necessarily follow the same spatial patterns that the population does. Figures x-x reveal West Valley City, Sandy, and Draper to be the largest growing are to be expected from West Valley City, which boasts the second highest population after Salt Lake City with relative propinquity to the airport and city center, the same cannot be said for Sandy and Draper.

Sandy has experienced immense economic growth over the last two decades from securing several major entertainment transit-oriented, mixed-use masterplan development named The Cairns, which is anticipated to add thousands of jobs to the area across its 20-million square feet of development upon completion On the other hand, situated along the Wasatch foot slopes at the southern end of Salt Lake County, the population of Draper is about half that of Sandy with an estimated employment base to soon exceed its larger neighbor. This is primarily due to Draper’s expanse of redevelopable areas, such as the 700-acre Utah State Prison site, as well as its strategic location in the heart of Silicon Slopes - an emerging hotspot for major technology corporations that is expected to rival Silicon Valley. Several major tech companies – such as eBay, Tesla, and Dell – have already begun to call Draper home, introducing hundreds of jobs to the market. In total, the Silicon Slopes initiative has contributed over 100,000 jobs across the region that pay $100,000 or more.

47

ECONOMIC + DEMOGRAPHIC ANALYSIS

Overall, employment and job opportunities throughout the Salt Lake City metropolitan area have

IV. EMPLOYMENT TRENDS Labor + Uneployment

UNEMPLOYMENT RATE 2010 - 2020

over the last ten years. According to the U.S. Bureau of Labor Statistics, Salt Lake City reported an unemployment rate of a mere 2% at the end of 2019, which was the lowest unemployment rate among all metropolitan areas in the U.S. with populations above 1 million people.

Furthermore, in a recent study conducted by WalletHub, Salt Lake City was found to have the best job market in the nation, with particular strength in employment growth, average starting salary, employment outlook, as well as job security.

In fact, many industries, such as construction, have struggled to secure enough skilled employees to satisfy the market’s growing demands despite a growing labor force.

Census Region Labor Force Matrix

However, just after claiming an unemployment rate lower than the lowest recorded U.S. average of 2.5% in 1953, the unemployment rate soared to over 12% in the second quarter of 2020, the Salt Lake City metropolitan area began to recover after peaking at around 9%. Regional unemployment has continued to recover and was reported by BLS to be at 5.2% as of September 2020 after reaching 4.7% the month prior.

Due to the growing uncertainty surrounding the risks of COVID-19, it is unclear exactly when the unemployment rate might be expected to resume its trending decline from 2%.

Despite recent events, the typically favorable employment conditions of Salt Lake City are largely due to three key factors – a stable, well as a state-led pro-business climate highly suitable for employers.

Western Labor Force

48

ECONOMIC + DEMOGRAPHIC ANALYSIS

V. LABOR FORCE Overview

To begin, consider the region’s annual labor force trends. According to data from the bureau of Labor the metro area’s labor force is highly resilient. As both the nation and greater Western U.S. Region demonstrate a sharp decline in labor force growth between since 2019 as a result of the recent global pandemic, the growth rate of Utah and Salt Lake City metro both continue their upward trend. This occurrence reveals that the state and local labor forces are diverse and robust enough to withstand the volatility of a major market interruption.

LABOR FORCE

Salt Lake City MSA

Utah

United States

49

ECONOMIC + DEMOGRAPHIC ANALYSIS

VI. INDUSTRY EMPLOYMENT

EMPLOYMENT BY INDUSTRY

EMPLOYMENT GROWTH ALL OCCUPATIONS

The economy of Salt Lake City presents an incredibly diverse mix of industries. Overall, Utah presents a highly favorable employment climate. WalletHub recently recognized Utah as having the number 1 work environment in the nation, while data from the Bureau of Labor Statistics indicated that Utah experienced the Lake City have demonstrated consistent employement growth above the national average.

For insight into the composition of Salt Lake City’s employment landscape, Figure xx represents the trade, transportation and utilities industry accounts for the most number of jobs with 148,811 employees.

However, employment opportunies in Salt Lake City have been becoming increasingly diverse in recent years. Although mining and manufacturing continue to serve as leading industries within the region, other industries such as tech and healthcare have been rapidly growing. Looking forward, Health Care and Social Assistance is projected to be the fastest growing industry sector, predicted to experience 2.1% of growth.

50

ECONOMIC + DEMOGRAPHIC ANALYSIS

VII. WAGES

AVERAGE ANNUAL INCOME BY OCCUPATION

$7.25 2020 Minimum Wage

WAGES

Average wages for employment in Salt Lake City are consistent with national wage numbers, including the and plans to raise the local minimum wage above the federal standard. Figure xx represents the change in average annual average weekly wage for Salt Lake County and the United States. Until 2019, the average weekly wage for employees in Salt Lake County have remained about 5 percent below the national average and have increased at the same rate of roughly 3% annually. However, this gap has narrowed since 2019, with the US average currently 4 percent higher than Salt Lake County. While Salt Lake County wages are lower, they still remain within relative range given that the cost of living in Salt Lake County is 6% less than the United

AVERAGE WEEKLY INCOME

51

ECONOMIC + DEMOGRAPHIC ANALYSIS

LOCATION QUOTIENT

VIII. INDUSTRY ANALYSIS Location Quotients

TOP OCCUPATIONS LOCATION QUOTIENTS

In order to better understand the concentration of industry employment relative to the US, this page provides an overview of location quotients for several major industries. Figure xx highlights location quotients for the top 15 occupations within Salt Lake xx utilizes location quotients in order to represent a 10-year employment forecast with and average wages. Of the top 15 occupations by number sales, management, customer service, demonstrate a stronger than average presence in Salt Lake City.

Furthermore, one can quickly identify pharmaceuticals and electronics manufacturing present a relatively large local industry base as well as offer high average annual wages.

LEADING & EMERGING INDUSTRY While manufacturing and mining may have dominated the economy of the Salt Lake City area throughout much of

recent years, which also includes a rapidly growing consumer services sector and a thriving Life Sciences sector. According to the life sciences and healthcare, aerospace and logistics”, with over 9,000 new jobs created in these industries since 2016.

52

ECONOMIC + DEMOGRAPHIC ANALYSIS

VIII. INDUSTRY ANALYSIS Major Industries

TECH In 2018, Forbes listed Salt Lake City as the number one most well-positioned city to become the next “Tech Mecca”, while that more 66% of all major commercial leases signed in 2018 were by tech companies, which was more than major tech cities such as San Francisco and Seattle. As more and more major tech companies flee the high costs of Silicon Valley for the more business-friendly environment of Salt Lake City, the area has been dubbed “Silicon Slopes”. Silicon Slopes, which now community. While Silicon Slopes seeks to promote education, engagement, and service at the state-level, the name more commonly refers to the growing tech community of the greater Salt Lake City – Provo metropolitan area, where the initiative began.

Today, more than 6,500 tech companies have found a home in Silicone Slopes, including Overstock.com, Clearlink, Adobe, Ancestry.com, Ebay, and Instructure. In early summer 2018, software giant Adobe began construction on a $90 million facility to its Lehi campus that is expected to add 1,300 employees and $2.9 billion in wages over the next 20 years. Adobe currently operates a 280,000 square-foot building with 1,200 digital marketing employees.

FINANCIAL SERVICES and is slated to continue expanding in years to come. According to the Bureau of Labor Statistics, Salt Lake City is the leading

Sachs, and, as of recently, J.P. Morgan. Additionally, the state is also home to the most industrial banks in the country with eight being ranked in the top ten nation-wide. While many factors have contributed to this growth, it is largely due to Utah’s attractive named Utah ninth in the nation for “total tax climate”.

LIFE SCIENCES / HEALTHCARE According to recent article in Trade & Industry Development, Utah is the leading state in the nation for life sciences job growth, with over 1,100 companies providing close to 40,000 jobs in the industry. In Fiscal Year 2019, interest in the Life Sciences industry remained strong in Salt Lake City. Since 2016, an estimated $200 million has been invested into this sector creating more than 2,500 jobs. has launched a series of initiatives in recent years to create a platform for Life Science growth. A major component of this is a massive effort to develop a Life Sciences corridor called “BioHive” fueled by a network of several intentionally selected opportunity zones that stretch from Research Park at the University of Utah to the Northwest Quadrant near the airport. BioHive includes researchers, developers, laboratories, healthcare delivery systems, digital and IT services, manufacturers and supply chain businesses in an effort to bring industry ideas to life from conception to production.

TOP 12 LIFE SCIENCE COMPANIES

COMPANY Associated Reg & University Pathology Myriad Genetic Laboratories Nelson Laboratories Varian Medical Systems Varex Imaging Corporation Bard Access Systems Ge Oec Medical Systems Genysis Brand Solutions ICU Medical

EMPLOYEES

DESCRIPTION

2,000 - 2,999

Medical Laboratories

1,000 - 1,999 500 - 999 500 - 999 500 - 999 500 - 999 250 - 499 250 - 499 250 - 499

Research & development in Biotech Research & development in Biotech Medical Testing Irradiation apparatus manufacturing X-Ray equipment manufacturing Surgical and medical instruments Irradiation apparatus manufacturing Medicinal and botanical manufacturing Surgical and medical instrument manufacturing

RB Health Manufacturing US

250 - 499 250 - 499

Stryker Corporation

250 - 499

Surgical and medical instrument manufacturing

Pharmaceutical preparation manufacturing

53

ECONOMIC + DEMOGRAPHIC ANALYSIS

VIII. INDUSTRY ANALYSIS Top 10 Employers

TOP 10 EMPLOYERS

BY REGION COMPANY

54

INDUSTRY

NUMBER OF EMPLOYEES

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Intermountain Healthcare University of Utah Hospital State of Utah Brigham Young University Wal-Mart Associates Hill Air Force Base Davis County School District Utah State University Smith’s food and drug centers Granite School District

Health Care Higher Education State Government Higher Education Warehouse Supercenters Federal Government Public Education Higher Education Grocery Stores Public Education

20K + 20K + 20K + 15K - 19,999 15K - 19,999 10K - 14,999 7K - 9,999 7K - 9,999 7K - 9,999 7K - 9,999

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

University of Utah Hospital State of Utah Intermountain Healthcare United States Government Wal-Mart Associates Granite School District LDS Chruch Agencies Zions Bank Salt Lake County Jordan School District

Higher Education State Government Health Care Federal Government Warehouse Supercenters Public Education Religious Organizations Financial Services Local Government Public Education

20K + 20K + 15K - 19,999 10K - 14,999 7K - 9,999 7K - 9,999 7K - 9,999 7K - 9,999 5K - 6,999 5K - 6,999

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Tooele School District Public Education Wal-Mart Warehouse Supercenters United States Government Federal Government Cabela’s Warehousing/ Storage US Magnesium Metal Production/ Processing Tooele County Local Government Mountain West Medical Center Health Care Detroit Diesel Remanufacturing Manufacturing Carlisle Construction Materials Manufacturing Tooele City Local Government

1K - 1,999 1K - 1,999 1K - 1,999 500 - 999 250 - 499 250 - 499 250 - 499 250 - 499 250 - 499 100 - 299

UTAH

SALT LAKE COUNTY

TOOELE COUNTY

3

MARKET ANALYSIS

55

MARKET ANALYSIS

I

n recent years, the Salt Lake City real estate market has high quality of life and affordability. In 2020, LendingTree released a study that named Salt Lake City among the 10 most popular metropolitan areas for millennial homebuyers. To gain a deeper understanding of this growing trend, this section provides a comprehensive market analysis study of the Salt Lake City apartment sector. The study will begin with an analysis of the apartment market for the overall metropolitan area, followed by a closer examination of each of the ten submarkets. From here, an equilibrium and capture analysis was been prepared along with a concluding performance review and market summary. The numerical data in this report relies on transaction and performance trends generated from a REIS market report prepared on November 30, 2020 unless otherwise stated.

56

I. INTRODUCTION Overview

MARKET ANALYSIS

II -III. INVENTORY + VACANCY

INVENTORY experienced an overall steady increase inventory since 2010. However, metro inventory has experienced the most growth in recent years with a 5-year average annual growth rate of 2.88% since 2015, which is above the 2.3% US average for the same period. This equates to a total of 8,694 units introduced to the market during this period, distributed across the region’s ten submarkets. For the 5-year period from 2011-2015, inventory grew at an average annual rate of only 1.2%, which amounted to a total of 6,558 units delivered to the market. While inventory growth for 2020 stands at 3.2% moving into Q4, growth is expected to slow in 2021 and continue a downward trend eventually falling below 1% within the next 5 years.

3,376 studios, 36,738 1-bedroom units, 48,654 2-bedroom units, and 10,923 3-bedroom units, with average sizes of 462 sq’, 694 sq’, 982 sq’, and 1278 sq’, respectively.

3.1.1

SALT LAKE CITY APARTMENT INVENTORY

VACANCY Salt Lake City apartment vacancy rate was reported to be 5.8% as of Q3 2020, up 100 basis points from Q3 2019 continuing an upward trend that started in 2016, proceeding a 15-year low of 3.7% in 2015. While the vacancy rate has been on the rise in recent years, it seems to be closely following the same pattern as the greater western region’s trend line, with stark similarity that extend beyond the local market, in contrast to San Francisco where the vacancy trend has followed a more independent pattern of its own. This could potentially be explained by trends of out-migration at the local level for areas such as San Francisco due to increasing costs and policy concerns, despite a growing trend of increasing in-migration throughout the Western Region overall where many inland states such as Utah and Colorado that boast more affordable costs of living.

VACANCY RATES

57

MARKET ANALYSIS

IV. ASKING RENTS

However, despite larger regional conditions, vacancy trends for Salt Lake City may be further explained at the microas evidenced by the more than 1% increase that began in mid-2015 and continued until 2018. This directly correlates with the increased rate of inventory growth that also began in 2015 until it peaked in 2018 at an annual growth of 3.6% with the completion of 3,290 new units. This was followed by a more than 50% decline in 2019 as new unit completions fell to 1,496 resulting in 1.6% inventory growth, which is further reflected by a slight drop in vacancy rates in 2019.

Yet, the vacancy rate has since spiked over the course of 2020 reaching a near 10-year high of 6% in November. While inventory growth has resumed a rate similar to what was seen in 2018 with the completion of 3,095 new units, vacancies have risen far above the 2018 rate and continue to rise. This is most likely due to the ongoing economic impact that has ensued from the COVID-19 coronavirus pandemic that commenced in Q1 2020. REIS predicts that vacancy rates will continue to rise well into 2021for the Salt Lake City apartment market once the pandemic begins to recede and the market is able to begin absorbing more inventory.

ASKING RENT TRENDS rents in Salt Lake City are among the lowest in both the U.S. and Western Region markets with an average asking price of $1,072.00 as of November 2020. However, while low asking prices might seem like a deterrent for investors, it is offset by the low cost-per-unit price, which is consistent with rental rates offering price points well below the Western and US averages

AVERAGE COST-PER-UNIT

experienced consistent growth until this year, which saw a slight decline that is most likely linked to the ongoing pandemic. However, despite this year’s set-back, rent growth has been relatively strong with a 5-year average annual growth rate of 5.3%, which translates to a more than $200 increase over the 5-year period.

This market is also less volatile than those with higher transaction volumes such as San Francisco, which means that it is more likely to absorb the impact from a sudden change in the economy. Additionally, the below average asking rents are able to attract a larger number of residents while maintaining opportunity for continued, more sustained growth.

AVERAGE ASKING RENT PER UNIT

58

MARKET ANALYSIS

V. CONSTRUCTION + ABSORPTION

COMPLETIONS

CONSTRUCTION/ ABSORPTION

Q2

Q3

Units Built

736

363

Units Absorbed

541

333

Con/Abs Ratio

1.4

1.1

CONSTRUCTION Despite economic interference by the coronavirus pandemic, apartment construction during 2020 remained strong, with 6,309 units currently under construction and 3,095 new units expected to be completed by year’s end - more than double the 1,496 that were completed in 2019.

Of the 6,309 units under construction, rate rentals of which over half - nearly 2,300 - are located in the Central Salt Lake City submarket. In total, 176 new multi-family building construction have been proposed, and 22,875 units have been planned in 2020 as of December 1, 2020.

ANNUAL ABSORPTION

ABSORPTION AND VACANCY

ABSORBTION Overall, Salt Lake City deomonstrates strong absorption trends in the apartment sector, with 1,488 units absorbed by the market in the last 12 months, which yielded 1.6% annual occupancy growth since Q3 2019.

This may be supported by a number of trends, such as a steadily increasing labor force and employment growth, as well as consistent household growth. Since Q4 2010, households have incread at average annual rate of 1.7%, which translates to the addition 9,900 households annually.

In order to capture an idea xx represents the total number of units completed and absorbed relative the vacancy rate. Here, a decrease in absorption values with an increase of new units directly correlates to an increase in vacancy rates. Looking forward, the vacancy rate will begin to decrease in about a year as completions decline and the pandemic subsides, which will allow the market time to absorb the influx of units.

59

MARKET ANALYSIS

METRO MARKET SUMMARY SUMMARY

MARKET SUMMARY

This analysis indicates that the Salt Lake City apartment sector is overall relatively stable and market volatility that may have ensued from the coronavirus pandemic relative to other metropolitan areas. In Q3 2020, net absorption has remained positive at 274 units with 363 new units delivered to the market. Additionally, effective rent rates are up 1.8% from Q3 2019 while transaction price per unit has been in decline, which signals a good time to enter the market. In order to obtain a more comprehensive understanding of the Salt Lake City apartment market, the following submarket analysis will further examine various market conditions of each submarket.

60

MARKET ANALYSIS

VI. SUBMARKET ANALYSIS Submarket Introduction + map

The following pages

identify and discuss each of the ten unique apartment submarkets that comprise the metropolitan Salt Lake City market. Each submarket will include a brief overview of current market trends as well as a series of graphics depicting past, present and projected metrics. From here, an overall submarket review and performance analysis will be provided utilizing data from

a

comparatively assess the ten submarkets without market irregularities resulting from the COVID 2019 pandemic. The numerical data in this report relies on transaction and performance trends generated from a REIS market report prepared on November 30, 2020.

b

c

d f

e

g h j

i

a

Weber County

b

Davis County

c

Northwest Salt Lake/ Airport Central Salt Lake City

d e

West Valley City

f g

Southwest Salt Lake City South Salt Lake/ Cottonwood

h

Murray

i

West Jordan

j

Midvale/ Sandy 61

MARKET ANALYSIS

VI. SUBMARKET ANALYSIS Murray ABROPTION RATE

MURRAY

VACANCY RATE

EMPLOYMENT GROWTH

INVENTORY

The Central Salt Lake City submarket, which includes the city’s CBD, is the second largest of the ten submarkets, accounting for roughly 13% of the total metropolitan, about 13,100 units. Over the last 10 years, this submarket has seen a growth of 5,422 units with several projects currently in the pipeline. While asking rent prices have increased steadily over the years due to a consistent demand, Central Salt Lake is still a relatively affordable market compared to other urban markets with an average two bedroom unit price of $1,469.

The vacancy rate for this area currently stands at 12.2% for Q3 2020, up 180 basis points from Q3 2019. This is relatively high compared to the metropolitan area’s 2020 Q3 rate of 6.2%. Further, the Central Salt Lake City submarket also presents a competitive annual absorption totaling 491 units from Q3 2019 – Q3 2020, which is above the 13.2% higher than the 10 year average of 433 units.

62

ASKING RENT PER UNIT

MARKET ANALYSIS

DAVIS COUNTY

VI. SUBMARKET ANALYSIS Davis County ABROPTION RATE

VACANCY RATE

INVENTORY

Davis County is located to the north of Salt Lake County and includes various cities along the Wasatch Front between Salt Lake City and Ogden. This submarket presents 10,756 market rate units, accounting for 11% of the metropolitan inventory. With 2252 units delivered to the market over the past 10 years, Davis County has experienced 2.4% annual growth in inventory, which is higher than the 2.2% metro average. The Davis County Submarket also boasts the second lowest vacancy rate at 3.2% and has experienced the second highest effective rent growth rate with a 3.4% 12-month increase, which sets the current average effective rent at $1,010. Furthermore, the 12-month absorption value stands at 38 units, with 308 additional units to be absorbed and 334 units introduced by the end of the year. Looking forward, 289 units will be introduced and 114 absorbed through 2022, which is expected to result in an increase in vacancy by 50 basis points.

ASKING RENT PER UNIT

63

MARKET ANALYSIS

CENTRAL SALT LAKE

VI. SUBMARKET ANALYSIS Central Salt Lake ABROPTION RATE

VACANCY RATE

INVENTORY

The Central Salt Lake City submarket, which includes the city’s CBD, is the second largest of the ten submarkets, accounting for roughly 13% of the total metropolitan, about 13,100 units. Over the last 10 years, this submarket has seen a growth of 5,422 units with several projects currently in the pipeline. While asking rent prices have increased steadily over the years due to a consistent demand, Central Salt Lake is still a relatively affordable market compared to other urban markets with an average two bedroom unit price of $1,469.

The vacancy rate for this area currently stands at 12.2% for Q3 2020, up 180 basis points from Q3 2019. This is relatively high compared to the metropolitan area’s 2020 Q3 rate of 6.2%. Further, the Central Salt Lake City submarket also presents a competitive annual absorption totaling 491 units from Q3 2019 – Q3 2020, which is above the 13.2% higher than the 10 year average of 433 units.

64

ASKING RENT PER UNIT

MARKET ANALYSIS

MIDVALE | SANDY

VI. SUBMARKET ANALYSIS Midvale/ Sandy

ABROPTION RATE

VACANCY RATE

INVENTORY

The Midvale/Sandy is located in southeastern most region of Salt Lake County and is the largest of the ten submarkets, with 16,416 units accounting for 16.7% of the metropolitan inventory.

The 10-year growth rate has remained consistent with the metropolitan average of 2.2%. Vacancy currently stands at 5.3%.

Effective rent per unit is $1,144, which is a 1.9% increase from Q3 2019. Despite no new units to be delivered through 2022, the vacancy rate is expected to rise to 6% during this two-year period.

ASKING RENT PER UNIT

65

MARKET ANALYSIS

NW SALT LAKE | AIRPORT

VI. SUBMARKET ANALYSIS Northwest Salt Lake

ABROPTION RATE

VACANCY RATE

INVENTORY

North Salt Lake/ Airport is the second smallest of the ten submarkets, representing 5.1% of the metropolitan inventory with 5,004 units. While average effective rent per unit has declined from May – September 2020, it is up 1.4% since Q3 2019 and currently stands at $855/unit. The vacancy rate is 6.2%, which has increased 60 basis points since Q3 2019. Moreover, while the 10-year average absorption since Q4 2010 is +49 units, it is now -32 units for the previous 12-month period. However, over the next two years the absorption value is expected to continue at 49 units annually, which falls short of the 75 units to be introduced per year during this time. This will cause the vacancy rates to increase and asking rents to decrease through 2022.

66

ASKING RENT PER UNIT

MARKET ANALYSIS

SOUTH SALT LAKE | COTTONWOOD

VI. SUBMARKET ANALYSIS South Salt Lake/ Cottonwood ABROPTION RATE

VACANCY RATE

INVENTORY

The South Salt Lake/ Cottonwood submarket is a predominately singlefamily residential area located just south of Central Salt Lake City and includes the Cottonwood, Millcreek, and Sugarhouse neighborhoods. This submarket represents 8.5% of the total metro inventory with 8,369 market rate units. The growth of household income has fallen by -0.7% in the last year as the pandemic has continued to impact employment conditions. Moreover, with 333 units expected to be delivered to the submarket by the end of the year, the vacancy rate will consequently experience a slight increase from 4.6% to 5%.

ASKING RENT PER UNIT

67

MARKET ANALYSIS

SW SALT LAKE

VI. SUBMARKET ANALYSIS Southwest Salt Lake ABROPTION RATE

VACANCY RATE

INVENTORY

Southwest Salt Lake City represents the developed area south of Highway 201, between interstates 215 and 15, including much of Taylorsville. This submarket accounts for 13.6% of the total metropolitan inventory, with 13,060 market rate units.

While the vacancy rate is up 50 basis points from Q4 2019, it remains the lowest of all submarkets at 3.1%. The average effective rent per unit is $855, which is down 2.5% from 2019 and expected to continue to fall. Despite comparatively low cost of rent, the absorption value over the previous 12-month period stands at negative 69 units.

68

ASKING RENT PER UNIT

MARKET ANALYSIS

VI. SUBMARKET ANALYSIS Weber County ABROPTION RATE

VACANCY RATE

WEBER COUNTY

INVENTORY

Weber County is located in the Wasatch Front region two counties north of Salt Lake. Ogden, the county seat, is a growing principal city of the larger Wasatch metropolitan area with a population of roughly 90,000. While Weber County is located beyond the boundaries of the Salt Lake City MSA, it is a distinct geographic concentration and recognized submarket within Salt Lake City, containing 6.8% of total metro inventory with 6.689 market rate units. The Q3 2020 vacancy rate for this submarket is 4.3%, about 2% less than the metro rate and down 20 basis points from Q3 2019. Given the current pandemic, 2020 Q3 job growth is down -2.8%, which is still far below the national average of -7.2%. Additionally, effective rent per unit is $880, up 3.7% from Q3 2019. However, absorption trends for weber county indicate underperformance with only 29 units absorbed in the last year, which is over 70% lower than metro average of 98 units.

ASKING RENT PER UNIT

69

MARKET ANALYSIS

WEST JORDAN

VI. SUBMARKET ANALYSIS West Jordan ABROPTION RATE

VACANCY RATE

INVENTORY

West Jordan is a rapidly expanding suburb of Salt Lake City representing 12.9% of the total metropolitan apartment inventory with a 3.5% annual growth rate, which is higher than the metro average of 2.2%. Operating expenses stand at 41%, the second lowest of the ten submarkets. The average asking rent per unit is $1,194 with 7.2% vacancy.

348 new units are expected to be delivered over the next two years from 2021-2022.

Moreover, annual absorption is estimated to average around 37 units per year. This will likely cause the vacancy rate to slightly rise as the annual absorption value is less than the amount of new inventory entering the market.

70

ASKING RENT PER UNIT

MARKET ANALYSIS

WEST VALLEY CITY

VI. SUBMARKET ANALYSIS West Valley City ABROPTION RATE

VACANCY RATE

INVENTORY

While West Valley City boasts a large population of 137,000, it is the smallest of the ten submarkets accounting for less than 5% of the metropolitan inventory, suggesting that it is predominately a single-family residential area. However, this submarket has seen a 2.6% annual growth rate, which is above the 2.2% metropolitan average. While the vacancy rate of 4% has seen no change in the previous 12 months, the average effective rent per unit is currently $927, down -.7% from Q3 2019. The absorption value for the previous 12 months stands at -1 unit, which is considerably lower than the 10year average of 108 units per year. Over the next two years, absorption is expected to continue a negative trend, causing vacancies to rise and asking rents to decline.

ASKING RENT PER UNIT

71

MARKET ANALYSIS

VII. SUBMARKET OVERVIEW + PERFORMANCE

SUBMARKET OVERVIEW SUBMARKET

Central Salt Lake City Davis County Midvale/ Sandy Murray Northwest Salt Lake/ Airport South Salt Lake/ Cottonwood Southwest Salt Lake City Weber County West Jordan West Valley City

ASKING RENT

ABSORPTION

INVENTORY

VACANCY

$1,343.41

818

13,570

11.2%

$1,029.11

110

10,880

3.1%

$1,215.29

401

16,416

5.1%

$1,063.16

-2

7,187

3.4%

$919.92

51

5,004

6.0%

$934.23

128

8,369

4.5%

$918.87

14

13,060

2.5%

$901.37

192

6,785

4.4%

$1,166.93

-23

12,643

4.6%

$962.33

37

4,791

4.0%

16,000 units, which represents nearly 18% of the metropolitan inventory. This submarket also boasts the second highest asking rent at a price of $1,215.00. The vacancy rate, 5.1%, is somewhat high compared to the other markets yet is considerably strong considering the ongoing pandemic. On the other hand, the Central Salt Lake City submarket accounts for the second largest concentration of metropolitan inventory with 13,570 units. This submarket represents the fastest growing area with 28.5% of total metropolitan completions since 2010. Although Central Salt Lake City has absorbed the most units of any submarket, the vacancy rate is considerably high at 11%. However, it should be noted that this is most likely a result of the pandemic, which has notoriously impacted regional cores the most as many people across the nation have fled from the inner-city to reduce exposure. This may be supported by the vacancy trends of Southwest Salt Lake City, which represents a similar concentration of inventory yet considerably less urban. Here, the vacancy rate is a mere 2.5% for 2020 YTD. However, there have also been no completions and no units under construction in the submarket during 2020, while Central Salt Lake City has seen a

SUBMARKET PERFORMANCE SUBMARKET

Central Salt Lake City Davis County Midvale/ Sandy Murray Northwest Salt Lake/ Airport South Salt Lake/ Cottonwood Southwest Salt Lake City Weber County West Jordan West Valley City

TRANSACTIONS SALES VOLUME

AVG PRICE/UNIT

ABSORPTION

8

$37,451,500.00

$127,820.82

7.2%

0

-

-

1.1%

1

$4,246,250.00

$132,695.31

2.6%

0

-

-

0.0%

2

$23,856,250.00

$150,988.92

1.1%

7

$118,695,000.00

$183,738.39

1.6%

0

-

-

0.1%

4

$21,948,750.00

$129,110.29

3.0%

0

-

-

-0.2%

1

$12,800,000.00

$142,222.22

0.8%

total transaction sales volume for 2020. However, while this submarket received the highest sales value, it also presented the highest costper-unit price of $183,738. Central Salt Lake City, which witnessed the second highest sales volume at $37,451,500, yielded an average cost-per-unit price of $127,820 – the least of all ten submarkets. Additionally, as mentioned above, the Central Salt Lake City submarket represents the highest asking rents throughout the metropolitan area. This indicates that Central Salt Lake City outperforms the others with regard to return on investment, offering the most affordable price to enter the market with the highest returns, despite South Salt Lake City/ Cottonwood receiving a higher sales volume.

72

MARKET ANALYSIS

VIII. EQUILIBRIUM + CAPTURE ANALYSIS

CAPTURE ANALYSIS Total existing households exceeding $100,000

125,855

PRIMARY + SECONDARY 121,009

Share of renter households

32.00%

50.00%

Total estimated renter households

40,274

60,505

Estimated rental household turnover rate

48.00%

48.00%

Renter household demands - existing renters

19,130

29,042

1.36%

1.47%

1,712

1,779

548

889

19,678

29,932

5.12% 1.52%

3.36% 1.00%

1.22%

0.80%

MARKET COMPONENT

Annual household growth Estimated renter household growth earning $100,000 Total renter household demand

PRIMARY

In order to better understand demand, determine the audience and express eligibility for multi-family development within Salt Lake City, conditions, indicating that the market only needs to capture approximately 5 of every 100 eligible households in order to absorb 1008 units per year, which roughly equates to the current amount of surplus on the market as of 2020. Ultimately, this demonstrates that enough eligible in the table represents the primary market, Salt Lake City, merged with a secondary market, Denver, in order to understand how the capture rate might interact when merged with a separate yet similar market.

To further investigate the relationship between supply and demand within the Salt Lake City apartment market, consider the that is currently under construction, and supply that is planned/ proposed. The estimated years of oversupply and supply under construction are both less than 1, which signals a relatively strong demand overall. Yet, the 7.6 total number of years to absorb all levels of supply is rather high. Upon closer examination, however, one can see that the majority of this supply is either planned or proposed. While this number does take into consideration a factor of 50% for units that may not come to fruition, it does not consider a relative timeline for when this supply might actually be delivered to the market. Therefore, keeping in mind the positive demand performance determined by the capture analysis, the total years of supply to be absorbed may be understood as a relatively stable scenario looking forward.

EQUILIBRIUM ANALYSIS Year-end 2020 inventory units

99,294

Stabilized occupancy

93.75%

stabilized occupied stock

93,088

Less: Year-end 2020 number of units to be absorbed

1,749 1,941

Estimated years of oversupply as of year-end 2020 Units under construction as of year-end 2019

0.90 752

Units under construction - stabilized occupancy at 93.75%

705 1,941

Years of supply under construction Units planned and proposed as of year-end 2019 Percentage to be realized

0.36 26,343

50% units planned/ proposed as of year-end 2019

50% 13,172

50% units planned/ proposed - stabilized occupancy at 95%

12,348 1,941 6.36 7.63

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MARKET ANALYSIS

IX. NEW PROJECTS

ON THE BOARDS: PLANNED AND PROPOSED LIBERTY SKY | CENTRAL SALT LAKE CITY | 300 UNITS The Liberty Sky development in downtown Salt Lake City is slated to become million, this project will rise 24 stories above South State Street, a major northsouth commercial corridor that extends from the city center to Draper. This project is expected to deliver approximately 300 market rate units ranging from studios to 2-bedroom apartments, with 1-bedroom units representing the majority of the unit mix. A small percentage of affordable workforce housing units have been considered by the development team but have not yet been be constructed behind the building, separating it from a neighboring residential project. The development presents a competitive parking ratio of 1:1, crediting the neighborhood’s high walkability and convenient access to public transportation options. The construction of Liberty Sky commenced in early 2019 and is currently under construction, expected to be completed sometime the current demand for housing led the team to reconsider.

KENSINGTON TOWER | CENTRAL SALT LAKE CITY 380 UNITS The Kensington Tower follows the pursuit of Liberty Sky to take advantage of downtown Salt Lake City’s growing demand for housing. This project will stand 39-stories tall at over 400 feet, becoming the tallest building in Salt Lake City.

The development team has indicated that The Kensington will introduce luxury rental units in hopes of attracting highearning residents that are looking for urban living in the heart of downtown. The building will feature an amenities deck on as an outdoor pool deck on top of the building. This project is expected to deliver approximately 380 luxury units.

SAGE VALLEY | TAYLORSVILLE | 430 UNITS is nevertheless underway on the former “Sage Valley” residential development at 1770 4100 South, on the border of Taylorsville and West Valley City. The project is on the site of a former Kmart building and has been rather controversial since its conception in early 2018 due to a lack 6-story, 539,986 square foot development will introduce 430 luxury townhomes and apartments at a total estimated cost of approximately $100 million. The project is also planned to include street-level commercial and retail space. While construction start in November 2019, a completion date has not yet been announced.

74

MARKET ANALYSIS

X. MARKET CONCLUSION

MARKET CONCLUSION

Despite recent nation-wide market disturbances from the COVID-19 coronavirus pandemic, the Salt Lake City apartment market has remained resilient and stable.

This may be supported by the consistent correlation between annual absorption trends and vacancy rates, which have followed a standard inverse relationship.

Furthermore, vacancy rates have followed a direct relationship with the number of completions and new inventory being introduced to the market. This multiinflux of new inventory in recent years, it is not currently oversupplied but rather experiencing a transition as it works to absorb this new inventory. This may be demonstrated by asking rent trends, which, until this year, have experienced steady growth year-over-year despite changes in vacancy and inventory, further supporting a strong demand for housing units.

Other economic components contributing to Salt Lake City’s stable market include steady household growth and in-migration trends, employment growth, and cost-of-living, which all encourage healthy demand trends. Since 2010, household growth has averaged 1.7% per year, which is higher than the US average of about 1.2% per year. Additionally, higher than average birth rate and in-migration has led Utah to become one of the nation’s fastest growing states.

Moreover, Salt Lake City employment and labor force has continued to perform exceptionally well in recent years. Over the last ten years, annual job growth on average has remained well above the national average with low unemployment peaking at just 2% in December 2020. To further contextualize the market’s strong foundation, Salt Lake City’s cost of living is 6% lower than the national average.

Again, it should be noted that these conditions are predominately based on market trends prior to 2020 in an effort to assess normal market conditions.

Yet, Salt Lake City has performed exceptionally well during the pandemic as it continues to dodge major challenges that many other metropolitan areas have faced as a result. Despite experiencing a rather high number of COVID-19 cases, the area’s economic success during this time may be attributed to its highly productive employment climate. According to the Bureau of Labor Statistics, Salt Lake City only experienced a 3.6% decline in jobs from Q3 2019 to Q3 2020, ranking in the top 10 of 82 metropolitan areas. the Salt Lake City multi-family market due to the area’s affordability, growth, and increasing demand. Of the ten submarkets that comprise the metro area, the Central Salt Lake City Submarket demonstrates particular promise, with high asking rents yet low cost-per-unit transaction price. In addition, the area’s robust employment and resilience throughout the coronavirus pandemic are a strong indication that this market is likely to remain bullet-proof should a future economic disturbance occur. Furthermore, a report by real estate media group Inman determined Salt Lake City to be among the top ten most popular metros for millennial homebuyers, a demographic that UtahBusiness magazine recognized as demonstrating a preference for more urban style apartment living.

Salt Lake City’s current median age is 32, which falls in the middle of the millennial generation. This circumstance suggests a demand for multi-family units that is embedded within regional demographics rather than temporary need, fostering a prosperous climate for apartment development opportunities.

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4

OUTLOOK: MARKET + PRODUCT RECOMMENDATION

76

MARKET OUTLOOK

As this report has determined, the Salt Lake City metropolitan area demonstrates itself as a well-positioned market for real estate investment activity. Robust economic conditions such as strong employment trends, a well-educated labor force, the emergence of highly valuable business sectors, and steady population growth yield a solid foundation to sustain and facilitate continued demand, growth and opportunity across all sectors of real estate. Furthermore, the city presents an extensive network of effective public transportation networks that provide fast, reliable, seamless connectivity to nearby areas, which further supports development potential.

Given the vast amount of opportunity that exists throughout metro Salt Lake City, a number of various project and product recommendations could be proposed as viable development options. Yet, upon careful consideration of the economic and regional conditions outlined above, our team would recommend a mixed-use, transit-oriented development or community core along a primary mass-transit line. The mixed-use product mix is recommended to include market rate multi-family residential units for-sale and for-rent, a grocery flex-space with short-term lease options that is managed inhouse. Furthermore, given the geographic and environmental conditions of this region, the project should incorporate various principles of sustainable design.

This recommendation seeks to provide a mutually while maintaining an agenda that is in the best interest of the city. To begin, consider location and site recommendations. be located at a point that can easily connect to mass-transit in order to achieve a true TOD. The TOD is encouraged in help mitigate the region’s increasing air-quality challenges from winter inversions. Furthermore, securing a site within an emerging core would appeal to the millennial generation, which represent a large share of the demographic group and

I. METROPOLITAN MARKET RECOMMENDATION

have demonstrated a preference for more urban living conditions. Since the recommended project type is a TOD, an emerging core would also provide more opportunity than an existing core, since an existing core is more likely to have already established a strong relationship with a major transit node. Additionally, an emerging core presents more flexibility to inform future development, which thus offers more opportunities to initiate place-making efforts that are in line with the project’s overall branding campaign.

From here, consider the project’s recommended programming and product mix. First, it should be noted that the project should encourage increased density. Given the physical geography that serves as a natural growth boundary for the region, development is unable to expand outwards, thus the city is faced with no reasonable solution other than to densify the existing built environment within the bounds of Salt Lake Valley. While this may seem to be a cumbersome condition, increased density will further appeal to the millennial audience. With regard to product delivery, a mix of for-sale and for-rent market-rate units are recommended in order to appeal to a wider demand. A health-oriented grocer such as whole target demographic, but further serve as dependable tenants that have remained rather resilient to the current transition in retail trends. Last, co-working flex-space is recommended in an effort to attract tenants from the emerging tech sector and start-up community.

To conclude, further recommendations would include the integration of sustainable design approaches to address ongoing air-quality challenges. For example, vertical and rooftop greenspace would help to maximize carbon sequestration and help purify the air. Furthermore, photovoltaic cells may be integrated where appropriate to take advantage of the region’s abundant annual solar exposure. While these scale, it may encourage nearby properties to consider the trend, thus initiating impact at a community level.

MARKET + PRODUCT RECOMMENDATION 77

MARKET OUTLOOK

In contrast to other Western Region metropolitan areas such as San Diego or Seattle, the cost of living and asking rents remain affordable across all ten of the Salt Lake City submarkets, which allows residents the ability to consider other factors such commute distance, neighborhood character, and lifestyle preferences without being limited to a handful of affordable options. While the cost of rent is relatively affordable throughout the metro overall, variation inevitably remains, with some submarkets commanding higher rents and increasing at different rates than others. Moreover, some submarkets also present more advantageous opportunities and incentives, such as transportation access, tax credits, opportunity zones, public funding, or favorable zoning. submarket analysis, our team recommends the Central Salt Lake submarket as the leading option for real estate investment in multi-family development. As previously discussed in the submarket performance summary on page 72, this submarket demonstrates the lowest average price-perunit and the highest asking rents of the ten submarkets, which is an immediate indication of high investment returns. Despite initial investment promise, this submarket also includes two opportunity zones, roughly 30% of the Life Sciences Corridor, Redevelopment Agency. Each of these components offer several funding options and tax incentives, added community value, and increased project potential. Furthermore, the zoning code for this area allows considerable height allowances and

II. SUBMARKET RECOMMENDATION

increased density. The Central Salt Lake submarket also includes the city’s Central Business District, high walkability, as well as access to major transportation hubs.

In order to take the most advantage of the many opportunities that this submarket presents, our team recommends entering the market no later than year-end 2021.

This window provides adequate time to take advantage of lowprice points that have resulted from the economic impact of the pandemic before the market is able to recover and resume its previous upward trajectory come 2022.

Entering the market and establishing occupancy before the close of 2021 will ensure market conditions for product delivery, which would be introduced to the market in the midst of a 760% increase in absorption leading into 2022.

In addition, vacancy rates will begin to decrease as a result of inventory, yielding a promising market climate with increased demand. If this forecast remains accurate, the project should target a strong absorption rate above of 25% per month and may expect to experience a bullish absorption rate exceeding upwards of 75 – 100% by Q2 2022.

While demand is expected to make a quick comeback by 2022, average asking rent per unit will lag behind about a year, expected to resume its pre-pandemic price point of about $1,350 by 2023, and is anticipated to exceed $1,400 by 2025.

In order to remain competitive, the project should expect to command approximately $1,225 and $1,500 for one- and twobedroom units, respectively.

SUBMARKET RECOMMENDATION 78

METHODOLOGY

CRITICAL ASSESSMENT

What are the trends in your targeted type of development? many American metros have yet to formally align access to transportation with potential of transit-oriented developments as early as 2010. In 2014, the Utah tax revenue by investing in residual land from mass-transit infrastructure projects through development venture with private partners. This initiative dwelling units being introduced to the market since 2015. A recent example is the South City development currently under construction in south Salt Lake, which will occupy a strategic location at the intersection of the TRAX and and commercial space in an effort to offer South Salt Lake with a downtown area of its own.

What is the market?

The current market is largely represented by a growing demographic of millennials that prefer more urban style living arrangements compared to previous generations.

What is the depth of this market?

This market study has revealed that Salt Lake City demonstrates considerable growth trends, promising absorption trends, and affordable living costs, which foster a healthy market demand and indicate increased market depth.

What are the market’s perceived values? values. According to WalletHub, Utah is the second happiest state behind Hawaii, which suggests that the market likely reflects the values of the community. Overall, positive media and popular press reports signify that the Salt Lake City market is widely perceived as a rapidly emerging western market that offers an affordable alternative to the high costs of other major western metros.

What opportunities and challenges does the current market investment opportunities due to rapidly emerging tech and life sciences sectors, a favorable business and tax climate, and affordable yet competitive price points. On the other hand, the region’s continued struggle to mitigate poor air-quality from winter climate inversions poses a considerable challenge for the market.

How did you determine and gain an understanding of your target market?

An understanding of the target market was achieved through a process of market research and analysis outlined in the Metropolitan Area Overview.

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METHODOLOGY

What are market positions, development programs, price or rental points, absorption, and lessons learned for competitive projects?

Who are their buyers or tenants?

Salt Lake City is a well-positioned market that appeals to the millennial demographic and offers a series of attractive development programs as well as competitive price points and absorption trends. Further insight into market conditions and performance are outlined in the market analysis provided on page 53.

What are the opportunities and challenges presented by the competition and comparable projects?

The completion of comparable TOD projects presents a unique opportunity to better understand leading elements for success by analyzing what has performed well in this market and what has not. In other words, they offer a point of reference and precedent when planning a new development proposal.

However, existing TOD projects can be cumbersome as they inevitably increase competition within target market.

What conclusions with respect to demand can be drawn about all aspects of the targeted asset type you are studying?

The targeted assett strong millennial client demand and a need to mitigate oriented development.

market is projected to buy/rent?

Transit-oriented developments are best achieved through buildings with a high density of dwelling units. Furthermore, buildings that feature sustainable environmental performance are not only an asset for the community and environment at large, but also further appeal to the millennial demographic.

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CRITICAL ASSESSMENT

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