Thinking of developing an office building? You may want to steer clear of South Jordan, which charges developers more than $438,000 to obtain a single office building permit, according to a study released Thursday.
You may also want to avoid Herriman, where it takes more than two years to secure the permit.
In some cities, developers face an extremely long and costly battle to build new office and industrial buildings, according to Michael Roderick, president of the Utah chapter of the National Association of Industrial and Office Properties.
"If we cannot develop and deliver projects in a timely manner and a competitive manner, we are going to lose out to all these industries," Roderick said. "Salt Lake County municipalities are competing with the Denvers of the world, the Phoenixes of the world and Las Vegas for business and industry."
The $10,000 study, which was conducted by two Brigham Young University graduate students and commissioned by NAIOP and the Society of Industrial and Office Realtors, found a wild variation in costs and time in securing commercial and industrial permits in 2005 among Salt Lake County cities. The study ranked 15 cities and Salt Lake County.
The study ranked office permit costs based on a proposal to build a 50,000-square-foot office building comprising two stories with a 25,000-square-foot floor plate. The building was valued at $4.5 million and proposed for a site consisting of 2.5 acres on a commercial land site.
The five costliest cities in obtaining an office building permit were South Jordan, Draper, Murray, West Jordan and Taylorsville. Cottonwood Heights, at $18,823, was the cheapest city in permit and development fees for a single project.
However, Doug Meldrum, economic development director for South Jordan, questioned the accuracy of the study.
"I found a $204,000 discrepancy from what it says in the report to what our fees actually are for office," Meldrum said. "It really concerned me."
Meldrum was so concerned he wrote a letter to NAIOP, saying that the study's numbers are not comparable. "The impact fees on a younger, growing community would be dramatically different than an older, built-out community," Meldrum said. "That is like comparing apples to oranges."
Even with a $204,000 downward adjustment to South Jordan's permit and development fees, the city would still rank as the most expensive city in the county in obtaining a commercial building permit.
Mark Thomas, director of field studies for the BYU Marriott School of Management, stands behind the study's numbers, saying the data were double-checked. Thomas added that some cities were consistent in the numbers they cited to the researchers, while others changed the bids they gave.
"It often took several visits to several departments, and often phone calls weren't very useful," Thomas said. "The process is fairly opaque right now. You don't know what you're getting."
Herriman, Salt Lake City, Riverton and Bluffdale showed the longest times in issuing commercial permits, based on the study's scenario. In Salt Lake City, it took 24.8 months to obtain a permit. Salt Lake County issued permits in 13.4 months, and South Salt Lake showed the fastest turnaround, at 4.6 months.
"The difference between a 15-month process and a 25-month process at an interest rate carry on the land is a lot of money," said Bill Martin, managing partner of Commerce CRG. "Time is as important as money."
Martin added that the cities' impact fees were "all over the map."
"Individuals who come in here, especially from out of state, need to have some consistency," Martin said. "The state provides incentives for companies to come here, but the incentives may be taken away in the timing process."
Murray Mayor Dan Snarr said impact fees are always a sensitive topic among developers.
"You can't have new development essentially being subsidized by people that are already there and have paid fees in the past," Snarr said. "We're a self-contained city. We have our own sewer department and our own water department. We're the only municipality in Salt Lake County that has its own power department." Snarr said those reasons contribute to Murray's No. 3 ranking among highest office permit and development fees.
When it came to industrial properties, South Jordan also ranked as the most expensive city in permit and development fees, at $271,904. Midvale was the least expensive, at $30,116.