It's difficult to tell in the photo what the street designers intended here. Are you sure it's MUP all the way through part 1? It also looks like a bike lane in the street. Assuming it's MUP and not sidewalk through step 1, the crosswalk is your "permitted space"; the MUP dumps into the crosswalk, where else are you supposed to go?

We have several intersections that are set up the same way here in FoCo, and I would assume that the south side is the continued MUP, it just hasn't been fully upgraded. Since there is no MUP, sidewalk, or bikelane going west from the end of step 1, I think you're pretty much doing the only reasonable thing you can do.

In short, I'd do that intersection the same way you do.