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2020 Q1 Colliers St Louis Industrial Market Report

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The St. Louis industrial market started 2020 strong with positive absorption, a healthy construction pipeline and a historically low vacancy rate. However, it is unclear what impact COVID-19 shutdown will have on the industrial sector. Nevertheless, the supply chain, especially for consumer goods, is working hard to keep up with demand. Until the stay-at-home orders have ceased and governments and companies figure out how to best operate in this environment, commercial real estate experts are working with occupiers and building owners to ensure that they can continue to operate when possible and be able to bounce back when able. 

COVID-19 will have a significant impact on the world, both in the short- and long-term. Already, the disruption to the supply chain has been immense. Domestic transportation has seen a surge in activity as demand spikes for inland trucking capacity so grocers and retailers can restock their shelves with critical goods amid the COVID-19 outbreak. Domestic distribution leaders, such as Amazon, are adjusting their operations focus on shipping the most critical supplies, including baby products, health and household, beauty and personal care, grocery, industrial and pet supplies. The reliance upon online shopping could have long-term implications on both retail stores and delivery systems.

The industrial sector had a healthy first quarter following the biggest year of construction completions ever recorded in the region. Compared to the 6.29 million square feet (MSF) completed in 2019 (and 1.17 MSF completed in the first quarter alone of 2019), the 375,865 square feet (SF) completed this year might seem small. However, the region has an additional 2.5 MSF currently under construction. Despite the lower construction rate, absorption remained positive. The overall vacancy rate dropped to 5.89% compared to 6.18% at the start of 2019. This is the first time the industrial vacancy rate for the St. Louis market dropped below 6% in over 15 years. In Q1 the Metro East has the highest vacancy rate at 9.94%. This is expected to be a temporary increase resulting from the very high levels of new spec construction in this submarket over the last few years. The Metro East saw 6.29 MSF last year alone, over half of all 2019 deliveries. It is expected that a large e-commerce retailer will be increasing its footprint in the Metro East, which will lead to a decrease in the vacancy rate.

The St. Louis market currently has 2.49 MSF under construction. Activity is predominately in the Airport and St. Charles submarkets, each with 25% of current construction activity. The largest of these projects is the Aviator Business Park in the Airport submarket with a 415,439-SF speculative building to be delivered in the second quarter. Hazelwood TradePort IV is also scheduled for a second quarter delivery and is 407,552-SF. Neither building is pre-leased and they will hit the market unoccupied. Only 27% buildings under construction are built-to-suit projects. The largest of these is the new, 240,000-SF Cosmos Corporation headquarters located in the St. Charles County at 521 Pearl Drive. The largest project completed in the first quarter was NorthPoint Development’s speculative development in the Airport submarket at 133 James S. McDonnell Boulevard. The 204,365-SF building was delivered vacant. Even with the added vacant inventory, the Airport submarket saw a drop in the overall vacancy rate from 6.46% in the first quarter of 2019 to 5.28% in the first quarter of 2020. 

Last year, TriStar Properties delivered World Wide Technology’s (WWT) two new facilities totaling over 2 MSF in Gateway Commerce Center East. In addition, WWT has renewed 1.65 MSF of leases in its existing facilities in Lakeview Commerce Center. This makes WWT one of the largest occupiers of space in the St. Louis Area with a total of 3.65 MSF in the Metro East alone. 

Additional notable deals in the first quarter included Pepsico’s lease of 269,000 SF North County, Sportsman’s Supply’s renewal/expansion of 145,809 SF in Fenton and Walmart’s lease of 124,000-SF in the Earth City submarket at 305-333 Rock Industrial Park Drive.
Sales activity remained strong in the St. Louis region with 1.9 MSF. Investment sales made up 85% of this activity. The Metro East continues to prove attractive to investors as over 60% of investment sales occurred in this submarket. Duke Realty sold the 540,000-SF 3971 Lakeview Corporate Drive to Sealy & Company in the first quarter. This building is completely occupied by WWT. Stafford Barrett Commercial Brokerage purchased 315 Tolle Lane, also in the Metro East submarket. This 303,541-SF building is 100% occupied by IMC Outdoor Living. 

The St. Louis industrial market started 2020 with healthy market indicators and strong future growth potential. As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate. The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.
 

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2020 Q1 Colliers St Louis Industrial Market Report

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Molly Mastin

Senior Director - Marketing & Research

St. Louis - Clayton

As Senior Director of Marketing & Research in St. Louis, Molly is responsible for the implementation of the Colliers International brand standards, oversight of the creation and development of marketing-related materials, and strategic marketing initiatives. She specializes in new business proposals, client presentations, event planning and property marketing.

Molly has worked in the commercial real estate industry since 2003. She has been involved in a wide range of responsibilities in both the marketing and research departments. Prior to joining Colliers International, Molly worked as the director of marketing and research with Gateway Commercial, a Cushman & Wakefield affiliate. She is a licensed salesperson in the state of Missouri.

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