St. Louis Commercial Real Estate Market Poised for Strong 2016

Brian Kelly (@brpkelly)

ST. LOUIS (KMOX) – When it comes to the St. Louis area’s commercial real estate market in 2015 and 2016, “It’s a lot of blue sky.”

That’s according to Gershman Commercial’s Chris Fox, who co-chaired Tuesday’s SIOR (Society of Industrial and Office Realtors) Metro Market Forecast.

Fox says growth is being seen in the multi-family, commercial and industrial markets. He says much of it is being driven by outstate investors.

“It’s very geographically dispersed around the United States,” he says, “but the returns here in St. Louis are still seen as very favorable.”

“These investors are chasing yield right now,” says SIOR St. Louis Chapter President Jon Hinds, “and they’re finding they can get better returns on their investments in some of these smaller, Midwestern markets.”

According to Fox, the region is catching up with pent-up demand in all three sectors.

“Of the 2.2 million square feet of (industrial) space that was delivered new in 2015,” Fox says, “almost all of it was absorbed either before it was built or before it was delivered.”

Hinds says much of that space was built in the Metro East, including in the Gateway and Lakeview Commerce Centers near Edwardsville. He says there are also industrial projects underway or planned in north St. Louis County, St. Charles and Fenton.

The growth in employment over the past five-years is getting credit for the growth in office space construction.

“That resulting appointment growth, with very limited new construction, has caused both rising rents and rising occupancy,” Fox says.

Fox notes the new office construction along the Highway 40 corridor and in markets like Clayton and Chesterfield. He says most of the multi-family construction has been in the mid-St. Louis County area, including Clayton, University City and the city’s Central West End neighborhood.

As for downtown St. Louis, Fox believes it could get soon get its first newly constructed office building since Metropolitan Square opened in 1989.

“There’s no question the stock of our office buildings in St. Louis is very dated,” he says. “I think St. Louis will see the benefit of what would be a pretty significant occupier that chooses the city versus the suburbs.” He points to the trend toward urbanization. “Larger companies and the employees they’re trying to recruit and retain,” he says, “are valuing more and more that urban workplace environment. I think the city is positioned to capture some of that demand this year and beyond.”

And while he says there are blue skies now, Fox cautions that experts do see some clouds on the horizon.

“At a macro- and micro-level, we are definitely going to see some recessionary trend here,” he says. “The general consensus, though – it just won’t be in 2016.”

(TM and Copyright 2016 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2016 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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