HEARTLAND SNAPSHOT, APRIL 2006

St. Louis Multifamily Market

For a number of years, St. Louis has been making an effort to revitalize its downtown. Much of the significant multifamily development in St. Louis can be attributed to mixed-use projects that have been developed downtown. “With so much development coming online, it would be positive for the industry to see a slowing of new development in an effort to absorb the inventory being brought online,” says Gregory Lee, senior vice president of asset management with St. Louis-based Gundaker Commercial Group. St. Louis’ revitalization efforts have been rewarded by the influx of young people, both renters and buyers, that are choosing downtown as their home. Washington Avenue has been rejuvenated as an entertainment district that showcases urban living. The St. Louis suburb of Clayton, Missouri, has seen new development as well, with the demolition of one- to two-story multi-unit buildings to make way for 10- to 12-story high-rise properties.

Lee anticipates continued growth along the Interstate 64 corridor on the Illinois side of the city and the Interstate 55 corridor in Jefferson County in Missouri. The Central West End is also a hotbed for overall development, with the continued growth and expansion of medical facilities driving the rejuvenation of the area. “The Interstate 55 corridor [into Jefferson County] is becoming the new bedroom community,” Lee notes. “Residents are enjoying new development in the county with the convenience of the city only 15 to 20 minutes away.” Additionally, the University City and infill submarkets around downtown are continuing to reinvent themselves, as St. Louis renters desire town settings with services and amenities in walking distance.

The repositioning of existing properties through rehabilitation is a significant trend in the area, along with continued growth in the addition of amenities for Class A and B properties. Amenities include high-speed Internet access, on-site business centers, after-school learning facilities, meeting spaces, concierge services, and laundry and trash pick-up.

Suburban Class A properties are being built with the goal of attracting upscale and affluent residents choosing to rent rather than buy. Urban developments such as historic renovations and/or lofts are attracting young singles who are not ready to purchase. Significant rehabilitation projects are happening throughout St. Louis, including B and C properties that are both urban and suburban. These projects include North Winds by Eagle Pointe in Ferguson, Missouri; Hawkins Village by EM Harris in Fenton, Missouri; and Brookside Village by Gundaker Commercial Group in Affton, Missouri.

According to Lee, rental rates in St. Louis are “widely varied due to the mix of affordable workforce housing and premium market rate housing.” Rents range from $450 to $1,400 per month depending on property type, location and amenities. Occupancy rates range from 87 to 92 percent without taking concessions into account, according to Kirk Mills of St. Louis-based Mills Properties.

Connie Boehle of Gundaker Commercial Group believes the affordable housing and downtown markets have seen significant growth during the last few years. The first and second quarters of this year will experience a period of slow growth, but there is hope for market stabilization by the third quarter. “With several large employers restructuring within the market [such as Ford and May Company], the multifamily market will see fluctuation,” Lee says.

Kenneth Aston of Hendricks & Partners thinks the St. Louis apartment market is in the midst of a recovery after the housing market has weathered historically low interest rates, the climb in single-family home buyers and the national economic recession. Lee concurs with this statement. “An increase in traffic has reinvigorated the apartment industry after a downtime during the housing boom,” he notes. “We are also finding [that] it is easier to pass along rent increases that it has been. Renters are more accepting of the increase as amenity packages and concessions remain competitive.”

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