ST. GEORGE — Despite the fact that St. George continues to attract commercial developers, there are business sectors that are taking a pass on leasing space until the city experiences substantial growth – more than it has experienced during the past few years.
Travis Parry, partner and principal broker with LINX Commercial Real Estate, told St. George News that leases, not construction growth, especially in the area off Interstate 15 Exit 2 known as the Southern Block, may continue to struggle to attract an essential component of any community: a local grocery store.
It’s not a question of whether commercial development will open in southern community developments, Parry said – it’s a matter of when.
“With that said, we have a very healthy commercial sector here. It just depends on what type of business you are dealing with,” he said. “A company like Harmons does very well here. They are a fantastic grocery store. They have multiple locations, and they do well, but development off Exit 2 is a little bit green right now. To have a grocery store doesn’t make financial sense unless it’s a much smaller footprint than larger stores.”
Typically grocery store chains will count the number of rooftops in a given geographic area divided by the number of existing grocery stores to figure out if there is any more room in the market.
“The market in this space in St. George is very competitive,” Parry said.
It’s not just grocery stores that may hold off on developing in the Southern Block and the greater St. George area.
“For St. George, we see the typical requests from residents to get a Trader Joe’s, Cheesecake Factory … as well as a handful of others like a Panera Bread and Hobby Lobby,” Parry said. “But it comes down to a question of demographics.”
As an example, Cheesecake Factory requires a population of 250,000 people living in a 5-square-mile radius of their target location.
Washington County has a population of about 178,000 living within its 2,430-square-mile radius, making a Cheesecake Factory unattainable.
Factoring in tourism and their credit card receipts doesn’t move the goalpost much, Parry said. Although not as stringent as Cheesecake Factory, landing a St. George Trader Joe’s also faces a similar uphill challenge until the local population reaches a profitable level, which could take decades.
“It’s not a demand issue,” he said. “People want to see commercial businesses like this, but for them, it’s about profits now versus profits later. Yes, you might see an early entrance into the commercial market, but as a rule of thumb, commercial development follows residential development, and this could be a decade or more down the road south of St. George proper.”
Darcy Stewart, managing partner of SunRiver, knows the limitations of attracting businesses to lease its 60 acres of commercial space.
“All of the things that we’ve had planned for commercial development at SunRiver, very few of them have come about,” Stewart said. “We are seeking to determine what we can put there and what the city would potentially support as we move down the road.”
Although city officials have not been presented with an official road map of the final stages of development at the 24-year-old SunRiver community, it may take targeted zoning changes in the Southern Block to meet the demographic demands and interest to businesses.
“Grocery stores came in and did their market studies,” Stewart said. “What they indicated was that we were not ready for a grocery store at this time, but this happened before COVID. The reason why they don’t want to come here is the lack of rooftops.”
There are approximately 2,400 rooftops in SunRiver, and grocery stores require a minimum demographic of about 9,000.
“The grocery store people indicated this is a great location someday, but not now,” Stewart added.
Jason Griffith, a senior vice president and commercial investment specialist at NAI Excel and a 28-year veteran in the industry, agrees with the assessment that commercial occupation depends on the numbers.
“All national companies have demographic statistics they have to meet in order for a development to be economically feasible,” Griffith said.
SunRiver’s struggles are not surprising, he added, especially when it comes to attracting grocery stores and restaurants, which operate on thin margins under normal economic times, let alone during a pandemic.
“There have been specialty grocery stores that I have approached, and they basically say, ‘Why would I go to St. George?’ when they are not fully in the Salt Lake and Utah county markets where there are major growth and major concentrations of people,” Griffith said. “Over the years I’ve looked up national franchises and their demographic criteria, and we’re not even close to bringing them here.”
Grocery stores are not going to bank on taking 10-20 years to see a profit.
“They will not look at SunRiver only, they will look at St. George generally,” Griffith said. “They are also going to look at the growth potential of the Southern Block all along the beltway. It all comes into play. It’s not just about SunRiver. Things will change, but it may take some time.”
St. George transplant Benjamin Wilson, who has been living in an apartment since moving to town in 2019, said he is frustrated by the situation.
“I came here to retire and buy a home,” he said. “I started looking at the southern communities of SunRiver and Desert Color because the prices were more in my range. Their selling points included businesses they expected to attract, but right now if I buy I may have to drive into town to get the simplest of things like a haircut or a loaf of bread. … I really don’t want to wait 20 years and drive 20 miles in the meantime to put food in my fridge. I’ll look closer to town to buy.”
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