HEARTLAND SNAPSHOT, JANUARY 2008

St. Louis Retail Market

After an active first half of 2007, the retail market in St. Louis is beginning to stabilize with modest growth heading into 2008. The market is seeing positive growth from an investment and development standpoint, with the latter half of 2007 marked by a couple of big deals.

One of the biggest transactions has been CBL & Associates Properties taking control of four regional malls in the St. Louis area from The Westfield Group. In two transactions totaling $1.03 billion, CBL acquired a controlling interest in West  County Center in Des Peres, South County Center in Mehlville and Mid-Rivers Mall in Saint Peters; and acquired Chesterfield Mall in Chesterfield.

Another big transaction involves the locally-based DESCO Group selling a majority interest in a 33-property Schnucks grocery store portfolio managed by the company and owned by The Schnuck family. The portfolio was acquired by a joint venture involving DESCO, Australia-based Macquarie CountryWide Trust and Jacksonville, Florida-based Regency Centers Corp. Macquarie now owns a 60 percent interest in the portfolio, DESCO owns 27 percent and Regency owns 13 percent.  According to Marcus & Millichap’s third quarter market report, the deal was reportedly valued at approximately $400 million, or approximately $196 per square foot.

The Meadows at Lake Saint Louis is a 500,000-square-foot lifestyle center currently under development in Lake Saint Louis, Missouri.

Numerous development projects have also kept the market busy. In Lake Saint Louis, within the ever-expanding Interstate 64/U.S. Highway 40 corridor, developers Davis Street Land Company and Bruce Johnston are advancing construction for Phase I of The Meadows at Lake Saint Louis lifestyle center. The first phase of development, which totals 260,000 square feet, consists of junior anchors, specialty retail stores and restaurants. Future phases will bring the center to 500,000 square feet. Tenants already signed include Coldwater Creek, Chico’s, White House/Black Market, Banana Republic, Victoria’s Secret, Ann Taylor Loft, Talbot’s and BC’s Kitchen. The center, which is scheduled to open in August, is going to incorporate two landscaped boulevards in a downtown street grid, reflecting the trend of more pedestrian-friendly shopping centers.

Manchester Highlands is a 525,000-square-foot retail center currently under development in Manchester, Missouri. Tenants already signed include Wal-Mart, Costco, PetsMart, Ulta, Best Buy, and Bed, Bath & Beyond.

Further south, construction is underway for Pace Properties’ Manchester Highlands, a 500,000-square-foot in-line retail development located in Manchester, Missouri. A Costco and a Wal-Mart Supercenter will anchor the new shopping center, which is scheduled for completion in the fall.  

In Town and Country, Missouri, Emerald Development is expecting a completion in the second half of the year for Town and Country Crossing, a 75-acre mixed-use development. The project will include approximately 310,000 square feet of retail, with Target and Whole Foods Market anchoring the retail component.

Development is not just limited to the Missouri side of the area. In the suburb of Belleville, Illinois, construction is underway for Belleville Crossing, a 410,000-square-foot shopping center located at the intersection of Frank Scott Parkway and Highway 15. Phase I of the center recently opened and includes 120,000 square feet of retail space, as well as 10 outlots. The center is being anchored by Target and The Home Depot.

According to Marcus & Millichap’s third-quarter report, new retail construction will consist mostly of neighborhood retail centers, but a cooling of the single-family housing market will cause developers to reduce the amount of deliveries of this particular type of development. When overall construction totals come in for 2007, they are expected to be lower than 2006, down from 3 million square feet delivered to 2.6 million square feet delivered in 2007. Vacancy rates are expected to remain relatively stable, coming in at 9.2 percent for the year, a 40 basis-point increase from year-end 2006.

Rental rates are also trending upward, with average asking rents for the market increasing to $15.06 per square foot, and effective rents rising to $13.16 per square foot. Of all the markets, north St. Louis is making the biggest strides. In the past year, the market has seen asking rents rise a market-high 2.9 percent to $12.28 per square foot, while effective rents have increased 1.4 percent — much more than the 1 percent gain reported by the market as a whole.

Gains will be modest, but the retail market in St. Louis is still moving in the right direction.

©2008 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.