Holes in the ground — Construction projects hurt by economic slowdown

HOLLADAY — At the former Cottonwood Mall, the building that houses Macy's stands like an island amid a sea of dirt.

The development is moving along but at a slower pace than originally anticipated, as the national economy has declined and tightened credit markets.

Across town in Sugar House is a giant landscaped hole in the ground. Historic buildings that hugged the corner of 2100 South and Highland Drive were demolished last winter, but building has not yet begun and is on indefinite hold.

With the exception of South Towne Center, every major retail complex in the Salt Lake Valley is undergoing reconstruction. Developers have promised beautiful new "lifestyle centers" that combine office, residential and retail space similar to The Gateway.

But with the economy's crash, loans have become tough for developers to obtain. Retailers that only months ago were in expansion mode have become reticent about signing long-term leases in new developments.

Developers with projects in the Salt Lake Valley have said that the number of leases they have signed has slowed. Making problems worse, the Cottonwood Mall and Sugar House developers have admitted to city officials that the credit crunch has also prevented them from following original construction deadlines.

Darrel Tate, a retail and land specialist with local real-estate firm Commerce CRG, said some of the trends in the home mortgage industry were replicated in the commercial mortgage industry. Lending became aggressive and commercial mortgages were bundled and sold as commercial mortgage-backed securities.

Those commercial securities "haven't quite seen the fail rate of the residential-backed securities, but there is a lot of prediction that that is forthcoming, that we're going to see a pretty significant impact due to the commercial mortgage-backed securities market, as well," Tate said.

Discretionary income that people normally spent at the mall is now used for fuel and the rising cost of goods. That also has hurt retailers, Tate said. And retailers are feeling the credit crunch. They sometimes get short-term loans to purchase merchandise or pay employees. The credit, these days, isn't always available.

"You have less expansion pretty much across the board announced by more retailers, which is certainly going to impact how aggressively you do retail development," Tate said.

The credit crunch

Chicago-based General Growth Properties Inc. owns the former Cottonwood Mall site and is overseeing the new development, which was planned to have about 500 townhomes, condos, and single-family detached homes, as well as 400,000 square feet of retail and 400,000 square feet of office space.