St. Louis Industrial Market Expands with 2.2 MSF of Positive Net Absorption in the Second Quarter
New Large blocks of Suburban Office Space and Strong Leasing Activity to Continue in 2018
ST. LOUIS, July 18, 2018 – Cushman & Wakefield announced the St. Louis industrial market recorded 2.2 million square feet (msf) of positive absorption in the second quarter of 2018. For the St. Louis office market, suburban asking rates reached an average of $20.14 per square foot (psf), increasing by $0.32 psf quarter-over-quarter as tenant demand remains strong.
“Development activity has been the biggest story over the past several years with 4.6 million square feet (msf) of new industrial construction and 571,000 sf of new office construction in 2017,” said Brian Ungles, Managing Principal, Cushman & Wakefield, St. Louis. “We expect that trend to continue, as we had 1.5 msf of office space and 5.8 msf of industrial space under construction at the end of the second quarter of 2018.
Class A blocks of office space in the Clayton submarket remain in short supply. A 1.61- acre land site along North Bemiston Avenue was listed for sale, giving developers an opportunity to capitalize on the supply constrained submarket. St. Louis City recorded the highest absorption of any submarket in the second quarter, as St. Louis University and the Cortex district continue to expand. The rise in vacancy within the suburban office market has largely been the result of TD Ameritrade’s acquisition of Scottrade and its decision to downsize and consolidate its offices.
For the St. Louis industrial market, North County continues to see strong construction as the submarket accounted for 63.4% of all deliveries in the first half of 2018. St. Charles County recorded 297,000 sf of positive absorption in the second quarter of 2018, largely due to new construction. Nearly 1.9 msf of space is under construction with average net asking rates pushing $5.36 per square foot (psf).
Q2 2018 Highlights by Industry Sector
- Quick Summary: The St. Louis market ended the second quarter with a vacancy rate of 12.3%, 240 bps below the 10-year average. Negative 109,000 square feet (sf) of net absorption was recorded for the quarter.
- Growth Areas: Louis City recorded the highest absorption of any submarket in the second quarter, with 114,000 sf of positive absorption.
- Asking Rents: Suburban asking rates reached $20.14 per square feet (psf), increasing by $0.32 psf quarter-over-quarter.
- Outlook: Cushman & Wakefield’s forecast projects that new large blocks of space in the suburban market will result in strong leasing activity for the remainder of the year. Tenant demand remains focused on premier space. Expect rental rate growth, as the market continues its streak of strong leasing velocity.
- Quick Summary: The St. Louis market recorded 2.2 msf of positive net absorption in the second quarter of 2018, which lifted total absorption to 2.9 msf year-to-date. Combined, North County and St. Charles account for 70.4% of the total leasing activity.
- Growth Areas: North County continues to see strong development, as NorthPoint Development started construction on a new 385-acre project. Metro East has 2.8 msf under construction with the announcement of World Wide Technology’s 2.0 msf build-to-suit. St. Charles County has 1.9 msf under construction with 77.4% pre-leased.
- Asking Rates: Triple-net asking rents grew 5.7% year-over-year.
- Outlook: Prices and rents are pushing upwards, and the latest trends suggest that pattern will continue into 2019. Several large buildings are being planned in the Metro East, North County and St. Charles County submarkets, providing tenants additional options with leasing velocity forecast to remain healthy.