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2020 Q1 Colliers St Louis Office Market Report

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The Calm Before The Storm

The St. Louis office sector began 2020 with positive momentum. However, the commercial real estate industry, along with the rest of the world, awaits the impact of COVID-19. The pandemic is influencing every aspect of daily life, both personal and professional. Commercial real estate advisors are working with landlords and occupiers to help them prepare and be in the best position possible when this crisis has passed. One of the big questions is, “What will be the new normal?”

Q1 Highlights:

  • The first quarter ended with slightly positive absorption. 
  • Overall office rents continue to inch upward as the direct average asking rent increased year-over-year by $0.17 to $20.70 per square foot (PSF). 
  • The St. Louis City office sector had a good quarter with both the Downtown Central Business District (CBD) and the Midtown submarkets posting healthy absorption numbers with Met Square and the Crescent accounting for most of the increase. 
  • The Clayton submarket remains the prime area for office space demand in the St. Louis region. Clayton Class A rents have increased by $2.48 PSF year-over-year to a historic high of $31.91 PSF. 
  • The Westport Class A submarket enjoyed the second largest gain in rental rates with an increase of $1.71 from the first quarter of 2019 to $23.39 PSF.
  • Tenants making moves in the market include the marketing firm of CPG which moved into 26,000 SF at 200 North Broadway. Potter Electric more than doubled in size to 24,000 SF in the Earth City submarket at Riverport Lakes East. In Midtown, Arch Oncology moved into a new 20,000-SF scientific research lab and office space at the recently completed Crescent Building within the Cortex District.

Office Investment:
Office sales activity was strong for the opening quarter of 2020. Investment sales accounted for over 95% of the 
1.1 million square feet (MSF) of activity. Two premier buildings in the Downtown CBD accounted for over 80% of total sales. 100 North Broadway, a 493,000 SF-office tower, was 50% occupied when it was purchased by the opportunity zone fund of Larson Capital Management and Hermann Cos. which announced it will be investing over $20 million dollars in capital improvements in the building. Peabody Plaza at 701 Market Street was acquired by the New York investment firm Briar Meads Capital. The 401,625-SF building was 80% leased at the time of purchase with Peabody Energy as the anchor tenant.

New Construction:
Construction remains a strong story for the St. Louis office market with several prominent towers under construction. The huge demand for office space in Clayton has resulted in the Forsyth Point project at 8049 Forsyth Point. This 450,000-SF property is already 80% leased. The Cortex District is adding two impressive towers along Duncan Avenue. In March, Washington University broke ground on its 609,000-SF neuroscience building and the partnership of Ventas, Inc. and Wexford Science + Technology has begun construction of an impressive, nine-story, 316,000-SF office/lab building. The City Foundry office building was the only major completion of the year so far. The 120,000-SF building will be home to a mix of office tenants including Bullhown, Orion Genomics, Gateway Blend and Great Rivers Greenway. The retail and entertainment portion of The Foundry has been delayed due to COVID-19 is expected to open later this year.

COVID-19:
The trajectory of the market will be significantly changed by the influence of the COVID-19 shutdown. As the world adapts to working from home, the way that businesses operate will be severely impacted. This market report reflects the state of the office market before the reality of coronavirus had truly set in. 
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 Office 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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