Industrial Market Sees 3.58 MSF Under Construction, Reports Cushman & Wakefield
ST. LOUIS, January 12, 2018 – Cushman & Wakefield announced that the St. Louis office market had a stellar year in 2017 with 815,000 square feet (sf) of positive absorption. By the end of the fourth quarter, overall vacancy had dropped to 11.7%, more than 260 basis points lower than at the end of 2015.
“Demand for additional office space continues to grow, and there are only a few large blocks of available space left,” said Brian Ungles, Managing Principal of Cushman & Wakefield’s St. Louis office. “The lack of available space has led to a significant increase in construction activity in the past year with 2.2 million square feet (msf) under construction, of which 86.1% is build-to-suit.”
Annual absorption in West County (631,000 sf), was the highest it has been since 2006, driven by deliveries of several new buildings such as World Wide Technology’s new 210,000-sf headquarters in Westport, Bunge’s new 145,000-sf North American headquarters in Chesterfield and the 125,000-sf Delmar Gardens III in Chesterfield.
The St. Louis Industrial Market experienced over 1.3 msf of positive net absorption in the fourth quarter of 2017, finishing the year with over 5.4 msf of positive absorption. Absorption hasn’t been this high since 2004, when it reached 5.6 msf. Equally impressive, the industrial market’s vacancy rate dropped to 6.0% even with the delivery of 4.6 msf of inventory, 3.2 msf of which was speculative space. The year-end vacancy is the lowest since 2005 and marks the fourth consecutive year where vacancy finished below 7.0%.
St. Charles County’s industrial market experienced its highest annual absorption since 2000 with 1.5 msf of positive absorption in 2017. Absorption was almost exclusively driven by the new construction with a record-breaking 2.1 msf of new space being delivered in 2017.
The Metro East recorded 779,000 sf of overall absorption in 2017. In the past four years, 4.1 msf of new inventory was delivered and 5.0 msf was absorbed, as demand continued to outpace supply. Construction will remain strong in 2018 for the St. Louis industrial market with over 3.8 msf of new inventory underway, 53.4% of which is speculative (2.1 msf).
- Quick Summary: Absorption in both 2016 and 2017, 849,000 sf and 815,000 sf, respectively, are more than double the historical average annual absorption of 380,000 sf.
- Growth Areas: West County had the highest absorption of any submarket with 212,000 sf in the fourth quarter.
- Asking Rents: The average Class A asking rate is currently $22.41 per sf on a gross basis, while the average Class B asking rate is $17.29 psf gross.
- Outlook: Class A space will continue to drive the market, and landlords will increase asking rates.
The economy remains in expansion mode, which will continue to fuel improvement in property fundamentals and translate into continued leasing demand.
- Quick Summary: The St. Louis market finished the year with over 5.4 msf of positive absorption. Absorption hasn’t been this high since 2004, when it reached 5.6 msf.
- Growth Areas: In North County, aggressive tax incentives and limited large blocks of available space spurred construction of 10 buildings totaling 3.8 msf in the last two years. All 10 buildings were speculative construction except Schnucks’s 950,000-sf build-to-suit.
- Asking Rates: The average asking rate is currently $4.47 per sf on a gross basis, as compared to $4.39 psf gross in the fourth quarter of 2016.
- Outlook: 2018 deliveries will provide tenants with options to expand and relocate. Due to new inventory being added to the market, vacancy rates will temporarily rise is some submarkets, however, asking rates will continue to increase.
About Cushman & Wakefield
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