HEARTLAND SNAPSHOT, AUGUST 2005

St. Louis Office Market

The trends in new office development in the St. Louis market continue to focus on user or owner occupied buildings, rather then speculative development, with the exception of specialty medical office buildings, according to Carl Conceller, a principal with Coldwell Banker Commercial CRA in St. Louis.

Significant developments that have been recently completed include Delmar Gardens I and II in Chesterfield, which added 120,000 square feet of Class A space to the Chesterfield/ Highway 40 submarket. Several new projects also have commenced construction in Chesterfield Valley. New office development continues in St. Charles County with new constructions at WingHaven and at the Highway 40/64 and K intersection. “One of the larger projects to be announced is the development of a new corporate headquarters building for the relocation of Smurfit Stone from Clayton to Creve Coeur at City Place VI,” Conceller says. “This will create a significant block of vacant Class A space in Clayton and add another 187,088 square feet of Class A space to the Creve Coeur submarket.”

While substantial office development has taken place in the western suburbs, new development also is planned for the central business district (CBD) downtown market of St. Louis. Baltimore-based The Cordish Company has been named as the developer of Ball Park Village, which will occupy 12 acres of ground next to the new ballpark currently under construction. The new stadium is scheduled to open for the 2006 Cardinal season. “The completion of this piece of the stadium redevelopment will significantly change the CBD skyline and add a new dimension to attract Class A office tenants to downtown St. Louis,” he says.

One of the most ambitious projects proposed recently is Centene Corporation’s $185 million plan to redevelop an area at Hanley and Forsyth in Clayton that is currently in front of Clayton City Council. The company is requesting a tax abatement for a three-phase project that would include a 289,500-square-foot, 16-story building at the site of the former Library Ltd. This, coupled with The Boulevard St. Louis, a retail/office mixed-use development, continues to reshape Brentwood Boulevard. In addition to the recently completed retail/restaurant tenants, the apartment component of the Boulevard project  is underway with office construction planned on another part of the site in the future.

In the Central West End (CWE), the 170,000-square-foot Cortex Building is underway at Sarah and Forest Park. Washington University Medical School and  Sterotaxis Inc.  are the lead tenants and anchors of this Bio Science development. “While the CWE continues to be a hot spot for housing redevelopment and high-rise luxury condominiums, such as Park East being developed by Opus, the area continues to experience new developments constructed to serve the Washington University BJC Medical Complex, contributing  to the economic vitality of the area,” Conceller says.

The majority of new office development is in West St. Louis County and St. Charles County along the Highway 40/64 corridor. The reasons include the availability of land, highway accessibility, close proximity to supporting services such as retail, restaurants and hospitality facilities, quality schools and a broad array of housing choices for employees.

New developers that have entered the St. Louis market include Panattoni Development, who recently purchased the 120,000-square-foot Atrium Building in Chesterfield, and The Cordish Company.

The range for Class A office space is from $19.00 to $26.50, with an average rate of $21.79 per-square-foot. “The majority of office space in the St. Louis market has been absorbed by small- and mid-size users rather than larger users,” Conceller says.

According to Coldwell Banker Commercial CRA’s St. Louis Metro Office Market survey covering more than 41 million square feet of space in non-owner occupied buildings of 25,000 square feet or greater, the current vacancy rate is 15.4 percent, including space available for sublease. Current asking rates for the entire market are averaging $18.81 per-square-foot, and the effective rate is lower after the effects of free rent and other incentives are incorporated into the rental rates. “Overall the St. Louis region has experienced a decline in vacancy rates and a gradually improving recovery in the office market, but landlords continue to face a very competitive environment in seeking tenants,” Conceller says.

Submarkets and corridors to watch in the future continue to include the Clayton/Central County submarket, which still maintains the highest average asking rate; West St. Louis County; and the continually growing St. Charles County. Another area to watch is the Shiloh/O’Fallon area in Metro East.

“Overall St. Louis has experienced positive absorption and reduced the overall vacancy rate in office space,” Conceller says. “The greatest challenges are to attract new employers from outside the St. Louis region to strengthen the demand for office space.”

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.