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4Q19 St Louis Office Report Colliers

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The St. Louis office market ended the last year of the decade on a high note.

The St. Louis office market ended the last year of the decade on a high note. Construction completions, overall net absorption, and asking rent landed at historic highs. This positive momentum is carrying forward into 2020 with construction activity remaining at elevated levels. Leasing activity over the next year will indicate if this growth is sustainable as St. Louis City submarkets get more attention and as Clayton gains new office construction.

The St. Louis market as a whole recorded 859,706 square feet (SF) of positive overall net absorption for 2019. This is nearly 700,000 SF higher than 2018 and is the highest absorption rate since 2013. The main driver for the absorption activity was the increased construction activity. Centene Centre hit the market full leased; 70% will be occupied by the ever-growing Centene with Morgan Stanley, Earnst & Young, and Thompson Street as the other major tenants. This 27-story, 640,000-SF Class A office tower is the largest multi-tenant office building in the St. Louis suburban office market. In St. Louis City, the PwC Pennant Building at Ballpark Village was delivered in 2019, making it the first significant office building in downtown since Met Square was built thirty years ago. PricewaterhouseCoopers (PwC) occupies 44,770 SF and moved from Bank of America Plaza in the fourth quarter. The Streets of St. Charles added 1450 Beale Street. The 60,000-SF building is anchored by a 36,000-SF lease with Elekta and was the first Class A building delivered in the St. Charles County submarket since 2012. 

Even with the significant construction completions adding to the inventory, vacancy rates decreased year-over-year. The overall vacancy rate dropped to 13.1% at the end of 2019 from 13.5% in 2018. The Clayton submarket continues to have the lowest vacancy rate decreasing to 6.15% in the fourth quarter. The Airport submarket has the highest vacancy rate in the market at 23.1%, followed by Downtown at 22.6%. The average direct rental is $20.97 per square feet (PSF) for the total market. This is an increase of $0.46 PSF from one year before but is a slight drop from $21.05 PSF in the third quarter of 2019. Class A rents have grown significantly for some submarkets over the last five years. Average Class A rents for the Clayton submarket crossed the $30.00 threshold in 2019 ending at $31.59 PSF. This is $5.00 PSF more than the average rate at the end of 2015.

The ongoing strength of the Clayton office submarket has attracted more development plans for the upcoming year. Initial plans for Forsyth Point were released in 2017. Based on the strength of office demand in the Clayton submarket, US Capital Development expanded the project from a 60,000-SF single tower building to a recently announced two-tower office complex consisting of 455,000 SF. Forsyth Point is nearly 85% leased. Both the market and occupiers responded quickly to the new plan, an encouraging sign for future projects. Excitement about new developments has also spread to the St. Louis City submarkets. The tech company Square will be relocating employees from the thriving Cortex district in Midtown to the former Post-Dispatch building at 900 North Tucker Boulevard. Square currently has 500 employees that will be relocated downtown, and that employee count could swell to 1,400 people. St. Louis City officials are hoping this starts the rise of an “innovation district” for the City that mirrors the success of the Cortex Innovation District in the Midtown submarket. 

The office market had some large investment purchases throughout 2019. The biggest portfolio sale for the year was made by the partnership between Gershman Commercial and BurkHill Real Estate LLC. The group acquired The Sachs portfolio consisting of 860,000 SF of real estate portfolio in the Chesterfield submarket. In the Clayton submarket, the Lingerfelt CommonWealth Partners purchased both Pierre Laclede Centers, totaling 580,368 SF, in the second quarter. The healthy investment activity indicates the attractiveness of the St. Louis market to real estate owners. The high level of construction activity in the market, currently at 1.1 million square feet (MSF), is another positive sign of a robust office market.

Economic indicators remain positive at year-end. The Federal Reserve reported that the unemployment rate for the St. Louis region was 3.0% in November 2019. This is a slight rise from 2.7% in October of 2019 and 2.9% one year prior. The St. Louis unemployment rate is still lower than the U.S. rate which ended the year at 3.5%. According to the Department of Economic Development in Missouri, the state employment ranks grew by 37,100 jobs year-over-year in November, with 58% of those jobs in the St. Louis region. However, according to the Brookings Institute, almost half of the 18 to 64 year olds working in the U.S. are working low-wage jobs that pay a median of $18,000, meaning there is some important ground for job and wage growth to make up before more employees benefit from the growing economy in a substantive way.

4Q19 Office

4Q19 St Louis Office Report Colliers

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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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