2019-07-10_DTZ戴德梁行_Office_Q1_2019_St.Louis_4页_637kb

St. Louis Office Market Q1 2019 Summary

Core Content Overview

This report provides an analysis of the St. Louis office market for the first quarter of 2019, highlighting economic indicators, market performance, submarket trends, and key transactions. The overall market remains stable, with a slight increase in vacancy and a decrease in net absorption, primarily driven by corporate activity.

Economic Indicators

• St. Louis Employment: Increased by 14,000 jobs year-over-year, with a quarterly average of 1,398,000.
• St. Louis Unemployment: Remained at 3.6%, marking the eighth consecutive quarter below 4.0%.
• U.S. Unemployment: Decreased to 3.8% from 4.1%, indicating a stronger national labor market.
• FOMC Outlook: The Federal Open Market Committee indicated a suspension of rate hikes for 2019 and completion of the balance sheet roll-off program by Q3 2019.

Market Overview

• Vacancy Rate: Increased to 12.4% in Q1 2019, up from 11.4% in Q1 2018, but still relatively low compared to historical levels.
• Net Absorption: Recorded a negative net absorption of -281,000 sf, the third time in five years.
• Under Construction: Increased to 1.5M sf, showing a growing supply pipeline.
• Average Asking Rent: Rose to $20.02 psf/year, reflecting strong demand for quality office space.

Submarket Analysis

St. Louis City

• Vacancy Rate: 17.4%, the lowest in over 15 years.
• Net Absorption: Positive at 2,363 sf.
• Key Transaction: Phoenix Creative leased 10,000 sf at 555 Washington Avenue.
• Future Developments: Signature projects like the Armory, City Foundry, Ball Park Village, and Crescent Building are expected to be delivered in late 2019 and early 2020, which will likely boost market fundamentals.

Clayton

• Vacancy Rate: 5.8%, one of the lowest in the metro.
• Net Absorption: Negative at -28,729 sf.
• Rental Rates: Class A rents increased to $30.25 psf/year.
• Development Impact: The delivery of Centene Plaza Building C is expected to further elevate rental rates and solidify Clayton's status as a top submarket.

West County

• Vacancy Rate: 12.3%, slightly higher than previous quarters due to TDA move-outs.
• Net Absorption: Negative at -132,520 sf, but excluding TDA, it shows positive absorption of 46,000 sf.
• Rental Rates: Class A rents increased by $0.13 psf, indicating strong demand despite increased vacancy.
• Available Space: Only five contiguous blocks of class A space greater than 30,000 sf are available.

Mid-County

• Vacancy Rate: 5.1%.
• Net Absorption: Negative at -36,010 sf.
• Rental Rates: Class A rents are not available for reporting.

North County

• Vacancy Rate: 15.6%.
• Net Absorption: Negative at -126,078 sf.
• Rental Rates: Class A rents increased to $21.05 psf/year.

South County

• Vacancy Rate: 10.1%.
• Net Absorption: Positive at 13,711 sf.
• Rental Rates: Class A rents increased to $24.69 psf/year.

St. Charles

• Vacancy Rate: 11.3%.
• Net Absorption: Positive at 26,734 sf.
• Rental Rates: Class A rents increased to $20.96 psf/year.

Market Outlook

• Opportunity Zones: Legislation around Opportunity Zones could significantly impact capital markets by encouraging investment in historically disinvested areas, including four downtown St. Louis tracts.
• Vacancy Trends: Increased vacancy due to corporate activity is expected to decline as newly available space gets leased.
• Rental Growth: Continued demand for quality space and a controlled construction pipeline will support rental rate increases.
• Class A Availability: Few large blocks of class A space are available, with only five blocks exceeding 30,000 sf in West County.

Key Lease Transactions Q1 2019

• 901 N. Tenth: 73,000 sf leased by St. Louis Post-Dispatch in Downtown.
• 3301 S. Rider Trail: 46,406 sf renewed by US Bank in Earth City.
• 1450 Beale St.: 40,000 sf leased by Elekta in St. Charles I-70.

Key Sales Transactions Q1 2019

• West Park I & II, Pine View Pointe: 299,985 sf sold by Fulcrum to Larson Financial in Creve Coeur.
• Westline Corporate Campus Building 1-3: 124,963 sf sold by Sara Investment Real Estate to Summit Development in Westport.
• Progress Point Center: 123,023 sf sold by Sara Investment Real Estate to Bamboo Equity Partners in St. Charles I-64.

Summary of Vacant Space by Submarket

• St. Louis City: Contains 31.3% of the total vacant space in the metro.
• Submarket Comparison: Suburban class A occupancy currently exceeds 90.8%, indicating strong demand in these areas.

Conclusion

Despite the negative net absorption in Q1 2019, the St. Louis office market remains resilient, with strong demand for quality space and a controlled supply pipeline. The impact of corporate activity, particularly from TDA, is temporary, and the market is expected to recover and stabilize in the mid-term. Opportunity Zones and new developments are likely to play a significant role in shaping future market dynamics.