HEARTLAND SNAPSHOT, AUGUST 2007

St. Louis Office Market

The Koman Group is expected to begin construction of City Place North, a Class A office building in Chesterfield that will be available late 2008.

Occupancy in the St. Louis office market continued to tighten during the first half of 2007, leaving fewer options for tenants seeking 30,000 square feet or more of existing, contiguous, Class A space. Demand for office space in the region remained healthy, with more than 330,000 square feet of direct absorption to date this year. Vacancy rates have steadily declined, posting a vacancy rate of 11.7 percent, a decrease of 2.2 percent from this time last year and the lowest rate recorded since 2000. Tenant demand for prime office space is anticipated to accelerate developer’s build-to-suit projects and new construction planning for this year. 

Large blocks of quality office space are scarce in the St. Louis region due in part to cautious commercial development in the past. The West St. Louis County office submarket, encompassing the Chesterfield, Olive/Interstate 270, Westport, and Manchester/I-270 sectors, and comprising more than 19 million square feet of existing inventory, has experienced the most construction activity in recent years. Just in time for the start of the 10.5-mile reconstruction project of Highway 40/Interstate 64, developers such as Sachs Properties, The Koman Group, and Duke Realty Corporation have announced new office projects expected to be completed in 2008. 

Sachs Properties is developing the 100,00-square-foot Central Park Square I within its Downtown Chesterfield community, with completion expected next summer.

Sachs Properties’ Downtown Chesterfield development, located at Chesterfield Parkway West and I-64, is among the most notable West County office projects currently in the pipeline. The first phase of the project includes Central Park Square I, a five-story, 100,000-square-foot office building currently under construction and due to debut summer 2008.  AEP MEMCO, the second-largest dry cargo barge operator in the country, is relocating its headquarters to 42,000 square feet in Central Park Square I next year. The Koman Group’s upcoming Class A office projects, CityPlace Seven and CityPlace North, are expected to begin construction this year, collectively delivering approximately 225,000 square feet of office space in late 2008. The Highway 40/I-64 reconstruction project has created a window of opportunity for developers in the West County submarket, and is expected to be a major supplier of new speculative and build-to-suit projects in the near future. 

City Place Seven is a Koman Company-developed, Class A office property set to break ground soon along the Highway 40/Interstate 64 corridor west of downtown St. Louis.

Average asking rental rates in the St. Louis office market fell slightly since the beginning of the year, but continue to trend upward year-over-year, closing second-quarter 2007 at $18.11 per square foot. The average asking rental rate for Class A space posted $21.41 at mid-year, a slight decline from first-quarter 2007. This recent decrease of rental rates was the result of increased leasing of Class A space. As higher-priced availabilities diminish from the market, the average price of available space will subsequently fall. As the market continues to tighten, rental rates are expected to increase slightly. 

— Kimberly Travis is senior research associate at St. Louis-based Gateway Commercial, a member of the Cushman & Wakefield Alliance.


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