Local real estate developers weigh-in on pandemic challenges

According to Officespace.com, on December 3, Lehi had 137 commercial real estate spaces representing 6,456,310 square feet for rent or lease. Additionally, 53 commercial buildings were for sale. This amount of office space availability could represent challenges for current commercial real estate developers.

McKinsey & Company, a worldwide management consulting company, reports, “The pandemic has forced the adoption of new ways of working. Organizations must reimagine their work and the role of offices in creating safe, productive, and enjoyable jobs and lives for employees. COVID-19 has brought unprecedented human and humanitarian challenges.” 

Mark Hampton, owner and founder of Rimrock Construction, made several observations about the current commercial development climate. “We are looking at how to restructure our offices. The office market will suffer for a time, but there is an enormous increase in companies wanting to come to the Lehi area,” said Hampton. “This is not a long-term problem, but elaborate offices are gone. Nobody is building retail or office space right now.” 

Hampton believes that there will be an influx of people coming to north Utah County, but, he said, “We have to make things more affordable. Young professionals don’t want homes with yards. They want more mobility. Having a yard and the obligation of homeownership does not appeal to this new generation. There needs to be a paradigm shift in living. If we think we can stop the growth, we can’t.”

Nathan Ricks, the managing partner of STACK Development, based at Thanksgiving Point, spoke to the pandemic’s dilemma. “We are at 25% of normal, pre-pandemic, in-building occupancy. Initially, working from home was a positive thing for many of the employees working along Silicon Slopes, but it started to wear on people after a couple of months. Even with Zoom meetings, it is hard to get feedback. We realize the need to gather in person.” 

Ricks continued, “Many office workers have difficulty disengaging from work when they are at home, and some people do not have good working spaces in their homes. 15-20% may be able to work from home permanently, but I predict offices will come roaring back.”

Discussing Lehi’s unique location, Ricks said, “Lehi is an ideal location because of the concentration of office space. We may have to push the pause button for a time, and maybe we overbuilt pre-COVID, but California companies are expanding into Lehi. I expect 200,000 Californians to move to Utah in the next two years.”

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Ricks discussed the lack of rapid transit in Utah County. He likes the bus routes that are currently running in Provo. “Bus transit is so much cheaper. It is about 1/10 the cost of TRAX. I would like to see bus transit from ADOBE to the Point of the Mountain Development. We could better utilize the Frontrunner station if we had bus routes to major office and retail destinations.” 

Ricks acknowledged the lack of some essential resources like water. “To permanently empower development, we need water, which we don’t have. We have to be more efficient with our resources.”

STACK Development recently approached the Lehi City Planning Department with a proposal for 3000 residential units near the Lehi Frontrunner Station. “We need to be smarter about residential development. We have to go vertical. Thinking everybody wants a house with a yard is outdated thinking,” said Ricks. 

According to Ricks and Hampton’s view, the challenges of the commercial real estate business in Lehi will be overcome eventually. There are many moving parts to the puzzle of development in Lehi. Is working from home preferable to working in offices? Is online buying going to become the standard for retail sales? What will this do to the commercial building already here and the construction being considered in the future? 

According to McKinsey research, “80 percent of people questioned report that they enjoy working from home. Forty-one percent say they are more productive than they had been before. Many employees are liberated from long commutes and have found more productive ways to spend that time, enjoyed greater flexibility in balancing their personal and professional lives, and decided that they prefer to work from home rather than the office. Many organizations think they can access new pools of talent with fewer locational constraints, adopt innovative processes to boost productivity, create an even stronger culture and significantly reduce real-estate costs.”