2019-07-10_DTZ戴德梁行_Office_Q4_2018_St.Louis_4页_784kb

St. Louis Office Market Q4 2018 Summary

Core Content Overview

The St. Louis Office Market Q4 2018 report provides a comprehensive analysis of the economic and market conditions affecting the office sector in the St. Louis metropolitan area. It highlights key trends in employment, vacancy rates, net absorption, and rental rates across various submarkets. The report also includes insights on key lease and sales transactions, as well as the outlook for the market in 2019.

Main Economic Indicators

• The St. Louis labor market showed continued growth and optimism, with unemployment reaching a historical low of 3.3% in Q4 2018.
• The U.S. unemployment rate also declined, reaching 3.7%.
• The Federal Open Market Committee (FOMC) raised interest rates by 25 bps in December 2018, marking the fourth increase of the year and setting a new range of 2.25% - 2.50%.
• The FOMC projected two rate hikes for 2019, down from three previously.

Office Market Overview

• Overall Net Absorption: 73,000 sf in Q4 2018, totaling 228,000 sf for the year.
• Vacancy Rate: Increased slightly to 11.8% in Q4 2018, up from 11.7% in Q4 2017.
• Under Construction: 1.4 million sf in Q4 2018.
• Average Asking Rent: Rose to $19.40 psf/year, up from $19.61 psf/year in Q4 2017.
• Occupier Demand: Continued to drive up rental rates, which increased by 2.6% over the past three quarters.

Submarket Analysis

St. Louis City

• Vacancy Rate: 18.2%, the lowest since 2002.
• Net Absorption: 18,373 sf in Q4 2018, with 262,335 sf for the year.
• Under Construction: 411,408 sf.
• Average Asking Rent: $17.21 psf/year (overall), $19.79 psf/year (Class A).
• Development Activity: Rising, with projects like the Armory, City Foundry, Ball Park Village, and Cortex expected to deliver by 2020.

Clayton

• Vacancy Rate: 5.4%, the tightest submarket with 3.1% Class A vacancy.
• Net Absorption: 51,883 sf in Q4 2018, 66,828 sf for the year.
• Under Construction: 604,508 sf.
• Average Asking Rent: $24.91 psf/year (overall), $30.14 psf/year (Class A).
• Key Development: Centene's new 27-story office tower with Bank of America as a tenant.

West County

• Vacancy Rate: 11.4%, up from 11.7% in Q4 2017.
• Net Absorption: 24,268 sf in Q4 2018, 34,746 sf for the year.
• Under Construction: 280,000 sf.
• Average Asking Rent: $21.74 psf/year (overall), $25.64 psf/year (Class A).
• Vacancy Impact: Due to TD Ameritrade's office space consolidation, leading to significant vacancies.

St. Charles County

• Vacancy Rate: 11.2%.
• Net Absorption: Negative 41,403 sf in Q4 2018, -140,988 sf for the year.
• Under Construction: 40,000 sf.
• Average Asking Rent: $19.24 psf/year (overall), $20.75 psf/year (Class A).

South County

• Vacancy Rate: 10.6%.
• Net Absorption: 9,818 sf in Q4 2018, 46,314 sf for the year.
• Under Construction: 0 sf.
• Average Asking Rent: $21.39 psf/year (overall), $24.70 psf/year (Class A).

North County

• Vacancy Rate: 12.2%.
• Net Absorption: 5,237 sf in Q4 2018, -29,685 sf for the year.
• Under Construction: 0 sf.
• Average Asking Rent: $16.14 psf/year (overall), $20.90 psf/year (Class A).

Key Lease Transactions Q4 2018

Key Sales Transactions Q4 2018

Outlook

• Opportunity Zone Legislation: Expected to have a significant impact, with four large downtown St. Louis tracts listed as top Opportunity Zones in Missouri.
• Rental Rates: Anticipated to continue growing in 2019.
• Vacancy Rates: Expected to decline further as occupier demand increases.
• Speculative Development: Controlled, which supports a stable market environment.
• Urban Core Transformation: Expected to be significantly reshaped by new developments by the end of 2020.

Vacant Space Distribution

• St. Louis City contains 35.0% of the vacant space in the metro area.
• Class A Submarket Occupancy: Exceeds 92.4%.
• Few Large Blocks of Class A Space Available: Indicates a tight market for large tenants.

Conclusion

The St. Louis office market in Q4 2018 showed a mix of positive net absorption and slight increases in vacancy, driven by occupier demand and supply-side activity. While some submarkets like West County faced challenges due to large-scale consolidations, others such as Clayton and St. Louis City remained tight with low vacancy rates. The market is expected to continue its upward trend in 2019, supported by a strong economic outlook and controlled development.