ULI webinar: 'New normal' must assess 'new land use'

By Brice Wallace

With life transitioning to a “new normal” during the recovery from the COVID-19 pandemic, many individual businesses and industries are assessing how they will — or must — change for the future.

That’s certainly true when it comes to land use. How office, retail, restaurant and residential elements along the Wasatch Front will look in the pandemic aftermath was the focus of a recent “new land use” webinar put together by ULI (Urban Land Institute) Utah, APA Utah and the Utah League of Cities and Towns.

Webinar speakers generally envision a flight of people and businesses moving to the suburbs, certain retail types facing troubles while others spread out their locations, and offices being able to quickly change their sizes and configurations to make them more flexible for tenants with a growing number of employees working from home.

The relationships among the different elements was apparent during the discussion. For instance, a movement of people to the suburbs will likely drive more retail and restaurants to follow them. If working from home sticks, even if just for part of the work week, it could mean offices could move out of the urban core or use their current spaces in different ways.

In some cases, the pandemic continued land use trends already in place before COVID hit. For example, Erin Talkington, managing director and director of consulting at RCLCO, said Utah’s millennials already had begun to reach a point in their lives where they were considering buying a house, but the move from renting apartments and into homebuying was hastened because “COVID-19 got them off the fence.”

She predicts that people moving out of a studio or downtown apartment to a suburb three miles away “won’t be moving back.” But that downtown, high-density location will still be attractive to other people when all businesses are fully reopened and the drivers and demand are back in place.

“What we’re really going to see is the explosion, the success, of urbanizing suburbs and kind of the moderate-density urban places … but you don’t have to be in a big apartment building,” she said.

The shift to the suburbs is a result of the work-from-home phenomenon prompted by the pandemic, and many commuters now like the idea of having more time at home instead of being stuck in gridlocked traffic.

“Sitting in traffic for an hour and half, I think people are getting tired of it,” said Dejan Eskic, senior research fellow at the Kem C. Gardner Policy Institute. “Especially coming back from COVID now, too, I think we forgot the miseries of traffic.”

The webinar speakers agreed that in the future, working anywhere from one to three days a week in an office could become normal.

“Especially in the short term, I think it would be bad from a culture, company and HR perspective to just demand that everybody come back to work all at once,” Eskic said. “You’d probably have some workers leave.”

Fewer people at the office could mean that companies will need smaller office space, but some companies will want more space as a way of loosening the density of workers there, said Craig Trottier, Intermountain president for CenterCal Properties.

“We’ve seen it swing both ways,” he said. “Where it’s all going, I won’t predict, but we’re seeing changes there.”

Talkington said workers needing to be the office fewer days a week could cause them to move farther away from that office. They would be willing to face long commutes and nasty traffic if they had to do so only once or twice each week, she said.

Companies probably will seek office space that they can use in a variety of ways, she added. “When we look at the trends, it doesn’t suggest that office is dead, right? There’s still a lot of need for office, there’s a lot of need for collaboration, but the way we use that space is going to be different,” she said.

Shared or flexible office space could become popular options as companies grow unsure of how to plan for office space usage over a long period. “Companies are kind of figuring out how to break the traditional, 10-year office lease model,” she said. “Companies want a lot more flexibility about how they take space and how they use it.”

Talkington also predicted that older office buildings will become less attractive because they could lack the technology needed in today’s business world. They might be renovated or retrofitted, or have their skin pulled off and converted to another use entirely.

Retail likely also will change, the speakers said. Trottier said a “retail revolution” — some might call it a “retail apocalypse” — had been in place for a few years but was accelerated by the pandemic, causing many customers to shop online rather than at brick-and-mortar sites. He foresees enclosed malls facing “significant challenges” while mixed-use developments continue their recovery.

Many of CenterCal’s developments were hit hard last spring but those in Utah and Idaho began to turn around in early fall. Sales volumes in the 2020 fourth quarter topped those of the same quarter in 2019. In Boise, one restaurant saw sales up 30 percent over 2019, despite its dining room being closed 10 months during 2020.

“Much of that [leasing] demand is on the food side,” Trottier said. “The bounce-back from the retail side and from the food side of people looking for space, looking for new opportunities, has rebounded much more quickly than we anticipated, and we think that’s a positive indicator for all of us.”

Apparel stores, department stores, office-supply stores and movie theaters likely will continue to struggle, but businesses that were able to provide drive-through services or customer pickup zones likely will keep those components, he said. Even quick-serve and traditional sit-down restaurants have reconfigured to make order pickup easier for patrons.

“We think that trend will likely continue, even post-COVID, as retailers and food operators try to hedge their bets against future pandemic events that could close down their showrooms or dining rooms,” Trottier said.

Talkington expects department and big-box stores to struggle, with lots of churn related to their occupation and how they use the space. Many could transform into last-mile distribution sites. Any retailer offering commodities faces competition from the likes of Amazon, so fewer companies are seeking storefront space, Trottier said. However, smaller grocery stores continue to be a trend nationally and locally, in many cases located in conjunction with apartments or condos.

As for restaurants, many chef-driven ones that once preferred to be only in a trendy downtown area probably will shift to the suburbs, closer to where people live, Trottier said. Talkington said restaurants there will benefit from people living nearby as those restaurants will have a customer base to serve throughout the day rather than just during dinner and weekends.

Several of the speakers noted that COVID brought into focus the importance of public gathering places. People crave interaction with one another and want places where they feel safe. “I think that’s where the enclosed mall is going to continue to struggle with the perception that it’s not COVID-safe,” Trottier said.

Talkington said people will prefer housing with nearby open spaces, and restaurants or retail sites with outdoor spaces.

“It’s easy to lose that and think that maybe we’ve all turned virtual, but I think the physical place is going to matter more than it has in the past,” she said.

Whatever changes occur to housing, offices, retail and restaurants, Eskic is optimistic that in the long term, they will benefit Utahns.

“Pandemics do end,” he said, “and when that happens, it gives you a chance to reinvent things and make them more efficient, make them better.”