Market Overview

Like most of the U.S., both the economy and the real estate markets of the St. Louis region continue to sputter. There is some good news, but lack of job growth continues to be a challenge for both the economy and real estate markets. The August 2010 unemployment rate was 9.9%, down from 10.1% in August 2009. The number of unemployed remained about the same over the year.

Residential sales were down 23.0% through August 2010 compared to the same period in 2009. The local median housing price rose 7.1% between second quarters 2009 and 2010 to $143,100. For the same period, the U.S. median housing price increased 1.5% to $176,900. Foreclosures in the region were up in July and August (the highest month ever). St. Louis is receiving $6.2 million in foreclosure relief from the federal government. Permits for new single family housing rose 23.9% for January through August 2010 over the same period of 2009. However, the total number of permits was dismal.

Construction permits for multifamily on the Missouri side of the region increased by 297 to 1,212 permits for January through August 2010. Nearly 80% of the permits were rehab units, including the Laurel, in downtown St. Louis. The vacancy rate and average monthly rent for apartments remains stable because of the economy and competition from available condominium units. At second quarter 2010, overall vacancy was 8.8% and average monthly rent was $726. In O’Fallon, Illinois, a new 223-unit upscale apartment complex is being constructed. Multifamily complex sales continue only where the developments had assumable long-term financing or provide large down payments.

All of the commercial real estate markets are stressed although to varying degrees. The industrial market is showing some improvement as demand has increased and new supply remains limited. Overall, loans need refinancing, and financing remains tight. Tenants are negotiating for lower lease rates and considering longer terms due to the attractive lease rates. Virtually all office construction has stopped. A small number of retail facilities, mostly national chain restaurants and drug stores, are being built.

At second quarter 2010, the estimated vacancy of the retail market ranged from 9.0% to 10.3%, depending upon the source. The highest vacancies are in St. Charles County. Quoted rental rates have been declining since early 2009, with average overall estimates ranging from $12.00 to $13.50 per sq. ft. Many concessions and shorter terms are necessary to get a lease signed. Lower asking rents have existing tenants asking for rent reductions.

A Nordstrom’s Rack in Brentwood Square Shopping Center and a Von Maur department store in The Meadows at Lake Saint Louis opened in September. The Galleria will add Nordstrom’s second store in the region and 17,000 sq. ft. of additional retail space in September 2011. Plaza Frontenac has announced plans for two free-standing buildings, a 4,300 sq. ft. St. Louis Bread Company (Panera) and a second 7,000 sq. ft. building for a shop or restaurant.

The overall industrial vacancy rate ranges from 8.0% to 11.0% depending upon the source. The vacancy rate jumped last year because of the addition of 6 million sq. ft. at the shuttered Chrysler plants and their suppliers. Various governments will spend $2.3 million in cleaning, positioning and marketing of the shuttered plants. Industrial sales prices and lease rates have fallen, and new construction is minimal. Brokers report, however, that absorption has been positive for 2010 through third quarter despite Proctor & Gamble’s vacating of 479,000 sq. ft. in Edwardsville, Illinois.

While the St. Louis office market is healthier than many other regions of the U.S., demand has not kept pace with supply; vacancies are up, rental rates down. Large blocks of office spaces are available in both the suburban and downtown markets. Financing remains tight. No major building is underway. The most recent delivery to office inventory was Centene Plaza in Clayton which opened this summer at nearly 100% leased.

Tenants are taking advantage of deals in the marketplace or renegotiating existing leases with different rate and terms. Tenants are occasionally using lower lease rates to move to better quality buildings. In some submarkets, Class B office space, however, is more active than Class A space. Owners are giving concessions, mostly free rent, and trying to meet tenant demands for higher improvement allowances. Some landlords appear to have reached a limit in the amount of concessions and tenant improvement allowances that they will finance.

Total available office space rose to 13.4 million sq. ft., or 17.4% of inventory during third quarter 2010, up from 16.3% at year-end 2009. Overall absorption through the first three quarters of 2010 was a negative (587,000) sq. ft. All submarkets experienced negative overall absorption except Midtown and South County. Average asking rent for all properties was $17.83 per sq. ft., continuing a decline that began at second quarter 2008.

Class A availability declined slightly to 17.0% during third quarter 2010, but remained above 6.0 million sq. ft. Absorption for Class A properties in 2010 is currently a negative (290,000) sq. ft. The Downtown Class A availability rate increased to 20.0% or 2.0 million sq. ft. at third quarter 2010 from 19.3% at second quarter 2010. Availability in the suburban markets decreased to 15.8% or 4.0 million sq. ft. at third quarter 2010 from 16.1% at second quarter 2010. Average Class A asking rents have declined to $21.42 per sq. ft. at third quarter 2010, from $21.68 per sq. ft. at year-end 2009 and from over $22.00 per sq. ft. at first quarter 2009 and most of 2008.

Class A sublease space decreased during third quarter 2010, dropping to 761,400 sq. ft. or 12.6% of all available Class A space from 949,000 sq. ft., or 15.7% at second quarter 2010. The largest amounts of available Class A sublease space are in the West County (211,400 sq. ft.), South County (139,800 sq. ft.) and St. Charles County (104,300 sq. ft.) submarkets. Class A sublease space in the South County submarket dropped by 194,800 sq. ft. during third quarter 2010. Available sublease space could actually be higher as some companies appear to be retaining underutilized space while awaiting economic recovery.

The availability rate for Class B office space rose during the third quarter 2010 to 18.5% or 5.1 million sq. ft. Absorption through third quarter 2010 jumped to a negative (206,400) sq. ft. from (95,400) at second quarter 2010. Class B asking average rent continued its decline falling to $17.12 per sq. ft. at third quarter 2010. Average asking rent had been $18.00 per sq. ft. or better from third quarter 2007 to year-end 2008.

The availability rate for Class C space increased slightly to 16.1% or 2.3 million sq. ft. at third quarter 2010 from 15.9% at second quarter 2010. Class C absorption during 2010 is now a negative (90,800) sq. ft. The CBD has the most Class C space available with 1.3 million sq. ft. The average asking rental rate for Class C space had hovered in the mid to upper $16 per sq. ft. during 2008, but has since declined to $14.95 per sq. ft. as of third quarter 2010.

With the national credit crunch, the investment office market has slowed, but more purchases are anticipated with coming defaults and foreclosure. The largest real estate transaction in 2010 is Monsanto’s purchase of the 1.3 million sq. ft., 210-acre Chesterfield Village Research Center from Pfizer for $435 million. New office investment purchases have increased, and sales totaled $134.8 million for the first half of 2010, up 320% from the $41.9 million for the same period in 2009.

Construction on the new toll-free, four-lane, bridge north of Downtown St. Louis has begun, and the bridge should be completed by 2014. Other large public and private projects in Missouri include millions being spent by Metropolitan Sewer District (MSD) and Missouri American Water Company on aging infrastructure and Webster and Washington Universities and medical centers in new buildings. The first phase of the $102 million National Archives and Records Administration military personnel facilities is to be completed by fall 2011. Cultural projects include a $130.5 million expansion at the St. Louis Art Museum and a $9.5 million exhibition hall at the St. Louis Science Center. Ameren Corp. is forming a new transmission subsidiary to build high voltage power lines across Missouri and Illinois. The company has identified $3 billion worth of projects to develop over the next 15 years.

Lambert St. Louis International Airport has established a $1.7 million airline incentive program to attract replacement airlines for cuts by American Airlines made in April 2010. Delta Airlines will add four daily flights between St. Louis and Washington, D.C., making Delta the second most active airline at Lambert with 38 flights per day. Southwest is number one with 83 flights a day. A Missouri commission is working to establish an air cargo route between Lambert and China. In Illinois, a trial flight from Sanghai Pudong Airport has already occurred at St. Louis MidAmerica Airport.

In addition to an agreement with the U.S. Navy for 124 Boeing F/A-18 Sniper Hornet planes, Saudi Arabia is said to be purchasing 84 F-15 fighter jets from Boeing. All the planes would be assembled in St. Louis. Also, Boeing will open a new manufacturing facility with 75 new employees at MidAmerica Airport in leased space. Monsanto, having acquired the Chesterfield Village Research Center, will invest $65 million in improvements. Most of the R&D functions and about 400 employees will be relocated to the campus.

Stimulus money is providing funds for several planning and construction projects. High-speed rail between St. Louis and Chicago will get $1.1 billion boost in federal stimulus funding for planning. Construction began in September on a section of the 110 mph rail line. Another $31 million will upgrade passenger service between St. Louis and Kansas City. Expansion of the Social Security Administration complex in the city of St. Louis will add 200 employees.

Tri City Regional Port District received $6 million in stimulus funds to expand the port. In Missouri, the City of St. Louis received $15.6 million (and added another $3.9 million) to replace the south dock at the municipal river terminal. The North St. Louis port redevelopment area received a $600,000 grant (along with $200,000 from the City) to decrease the port’s vulnerability to flooding and to attract new businesses.

In Illinois, work continues the Conoco and EnCana’s Conoco Phillips $4 billion Wood River refinery expansion, Albingoa Bioenergy’s $200 million ethanol production facility, and the $2.9 billion Prairie State Energy synthetic natural gas plant about 40 miles southeast of St. Louis. About $160 million of construction is expected to be completed at Scott Air Force Base in 2010. A one-fourth cent sales tax is being collected in Madison, St. Clair and Monroe counties to pay for mandatory flood insurance in the Missouri Bottoms. A 100-year flood levee is expected to cost $160-170 million.

Market Highlights

• The overall availability rate continued its rising trend during third quarter 2010 and is now at 17.4%.
• Class A sublease space fell by 3.1% during third quarter 2010 to 761,400 sq. ft. or 12.6% of available inventory.
• Class A average asking rents fell again during third quarter 2010 to $21.42 per sq. ft. with the Clayton submarket’s average rent at $26.19 per sq. ft.
• Class A absorption improved this quarter to (298,800) sq. ft. from negative (520,400) sq. ft. one year prior 
• Tenants continue to demand free rent.
• No new Class A developments are on the horizon.

Market by Market Review

Central Business District

Total Inventory: 25.1 mil. sq. ft.
No. of Buildings: 195
Average Asking Class A Rent: $17.58
Average Asking Class B Rent: $14.04
Availability Rate: 23.4%
Available Space: 5.9 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (140,100) sq. ft.

Several long term projects have moved beyond planning and are now underway. Work has started on the $31 million renovation of the St. Louis Centre, the former downtown retail mall, into 750 parking spaces and up to 100,000 sq. ft. of ground floor retail space. Tenants are moving into the 600 Washington building (formerly One City Centre) as renovation is completed. Workers are coming daily to The Laurel, a rehab of the former Dillard’s department store into 205 apartments, a 212-room Embassy Suites hotel and inside parking for 320 vehicles and to Roberts Tower, a $70 million, 55-unit condominium building. South of Downtown, Nestle Purina has broken ground for a 56,000 sq. ft., 4-story, $15 million building at Checkerboard Square.

West of Tucker Boulevard, activity has accelerated. Work has also commenced on Park Pacific, a rehab of the former Union Pacific building, into 232 apartments, 45,000 sq. ft. of office space and 33,000 sq. ft. of ground floor retail. The Cass Gilbert-designed Central Public Library has been closed until 2012 for a $75 million renovation and addition. Confluence Preparatory Academy will open in the library-owned Farm Credit Bank building nearby. Work has begun on the $74 million renovation of Kiel Opera House into Peabody Opera House, an entertainment/sports/art venue. Mills Properties has purchased the 911-units in five buildings at City View apartments (formerly Plaza Square, built in the 1960s), and plans to rehab three of the buildings.

Other developments planned include the $1.6 million rehab of a factory into the downtown campus of Patricia Stevens College, the conversion of 1224 Washington and 1111 Olive into office space (X101NK has moved its headquarters into 1111 Olive), and the power updating of San Francisco-based Digital Realty Trust’s space at 210 N. Tucker for a data call center. Unisys Corp. plans to open an IT center in the 555 Washington building. The 1300 Market building (former Municipal Courts building), and the Railway Exchange building are planned as office and retail rehab. Work on the Railway Exchange building includes reducing the size of Macy’s department store to three floors (about the size of its new stores).

Big Shark Bicycle will open its second store in the 411 Building adjacent to the Downtown Bicycle Station. The Station will have lockers, racks, showers and lockers rooms for bike computers.

Work on the proposed $376 million first phase of the multi-use Ballpark Village remains stalled, waiting for the financial markets to improve. The developer, Cordish Company and the St. Louis Cardinals, have said that they will delay the sale of over $100 million in bonds for the first phase until the municipal bond market improves.

The CBD has some large contiguous spaces readily available in Metropolitan Square, 600 Washington, 1010 Market, 500 N. Broadway, Laclede Gas and the 700 Market buildings. Several downtown buildings are on the market including 535 and 505 Washington, 700 Market, and 500 Broadway.

Overall availability of CBD space is now 5.9 million sq. ft. or 23.4% of inventory. Overall absorption for year-to-date 2010 was a negative (140,100) sq. ft. Available Class A space is now 2.1 million sq. ft. or 20.0% of available space, up from 19.3% at second quarter 2010. Available Class A sublease space dropped to 84,800 sq. ft. or only 4.1% of available Class A space. Class A space is experiencing negative absorption of (54,000) sq. ft. during year-to-date 2010 after positive absorption of 36,200 sq. ft. for year 2009. Average asking rent for Class A space, after hovering around $18.00 per sq. ft. for the last year, is now $17.58 per sq. ft.

Currently, available Class B space totals 2.5 million sq. ft. or 29.2% of inventory. Absorption for year-to-date 2010 was a negative (63,800) sq. ft. Another 1.3 million sq. ft. or 20.9% of Class C space is available. Class C space absorption is a negative (22,400) sq. ft. for year 2010. Average asking rent for Class B space declined to $14.04 per sq. ft. at third quarter 2010 from $15.22 per sq. ft. at year-end 2009. Class C space average asking rent decreased further to $12.08 per sq. ft. Rents in the CBD are the lowest in the region and the best bargain for tenants in the market.

South of Downtown, DynaLabs, a pharmaceutical testing company, is moving into Chourteau Crossing, a rehab development. Chouteau Crossing will also be the home of the Sheet Metal Workers Union’s $15 million, 96,000 sq. ft. headquarters.

North of Downtown, Paul McKee and North Side Regeneration continue to work on its plan for 4.5 million sq. ft. of new commercial buildings and 10,000 new homes north of Downtown. Infrastructure, parks and other amenities would be added over the next 15 years on roughly 500 acres. The City has authorized $390 million in tax-based financing, but a judge recently ruled that the authorization took the TIF beyond current limits. Negotiations continue between the parties in the lawsuit.

Midtown

Total Inventory: 1.2 mil. sq. ft.
No. of Buildings: 19
Average Asking Class A Rent: $21.50
Average Asking Class B Rent: $12.18
Availability Rate: 6.3%
Available Space: 0.1 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): 19,900 sq. ft.

This small submarket has the lowest availability rate of all the submarkets. Total available space is 72,600 sq. ft. or 6.3% of total inventory. Available Class A space is only 30,900 sq. ft., none of which is sublease space. Class A average asking rents remain stable at $21.50 per sq. ft. Average asking rental rates for the 32,500 sq. ft. of available Class B space decreased to $12.18 per sq. ft. at third quarter 2010 from $15.20 per sq. ft. at year-end 2009, reflecting the quality of the space now available.

The Grand Center cultural district is getting several new activities. Besides a new building for the University of Missouri’s KWMU building, KDHX, an independent radio station and media arts organization, will move into a renovated building. The Beaux Arts building in Grand Center is being converted into the first charter visual and performing arts school in Missouri. West on Forest Park Parkway, BJC Healthcare is completing a new $75 million headquarters. A Best Western hotel will be built along the Parkway to service the cultural, medical and technology areas of Midtown.

CLAYTON

Total Inventory: 9.4 mil. sq. ft.
No. of Buildings: 118
Average Asking Class A Rent: $26.19
Average Asking Class B Rent: $19.92
Availability Rate: 16.0%
Available Space: 1.5 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (137,100) sq. ft.

Even with an overall availability of 16.0% or 1.5 million sq. ft., the Clayton submarket is still considered a healthy market. The overall average asking rental rate at $21.36 per sq. ft. is the highest in the region. Large vacancies generally lease quickly, and office buildings in the submarket are popular with institutional investors. The only new major office building development in the region is the first building of Centene Plaza which opened recently with nearly 100% occupancy.

During third quarter 2010, average asking rent for Class A space rose to $26.19 per sq. ft. from $25.16 per sq. ft. at second quarter 2010. Class B average asking rent decreased to $19.92 per sq. ft. at third quarter 2010, the first time below $20 since the second quarter of 2009. In the small Class C market, average asking rent fell to $17.96 per sq. ft. at third quarter 2010.

Third quarter 2010 Class A numbers indicate improvement in this submarket. Class A availability fell to 15.0%, down from 16.1% at second quarter 2010. Nearly 0.8 million sq. ft. of Class A space is now available. Available sublease Class A space decreased to 41,800 sq. ft. or 5.5% of total Class A space. Absorption for year-to-date 2010 improved to negative (18,500) sq. ft. The availability rate for Class B space rose to over 0.5 million sq. ft. or 19.3% during third quarter of 2010 from 14.5% or 0.5 million sq. ft. at year-end 2009. Class B absorption for year-to-date 2010 was a negative (84,400) sq. ft. Only 180,000 sq. ft. of Class C space is available in the submarket or 12.5% of inventory. A negative (34,200) sq. ft. was absorbed in year-to-date 2010.

A number of other office developments have been discussed, but none will be underway until financial markets improve and significant pre-leasing occurs. A second 10-story building is planned for Centene Plaza at some later date. The development arm of Sikeston-based Montgomery Bank and St. Louis County had announced plans for a 25-30 story mixed-use building. The $568 million mixed-use development for Brown Group has also been placed on hold as has a building by Koman Properties and Apex Oil. A vacant commercial site, also in “Downtown” Clayton is being marketed for $2.75 million. Outside Downtown, a 3.3 acre tract (formerly a Schnucks supermarket) at Hanley and Clayton Roads is no longer under contract.

Creve Coeur/Westport

Total Inventory: 10.5 mil. sq. ft.
No. of Buildings: 132
Average Asking Class A Rent: $22.19
Average Asking Class B Rent: $17.75
Availability Rate: 15.9%
Available Space: 1.7 mil. sq. ft.
New Deliveries: 0 mil. sq. ft.
Net Absorption (YTD): (36,100) sq. ft.

The Creve Coeur/Westport office submarket has experienced ups-and-downs over the last couple years, but the market basically remains flat. The overall availability rate has been in the mid-15% since the third quarter of 2009. Overall available space is 1.7 million sq. ft. Overall absorption through third quarter 2010 was a negative (36,100) sq. ft. Remaining stable, the average asking rental rate for Class A space is now $22.19 per sq. ft. During the quarter, average asking rent for Class B remained stable at $17.75 per sq. ft., and Class C average asking rent declined to $13.70 per sq. ft.

The amount of available Class A has been over 0.8 million sq. ft. since year-end 2009. Year-to-date Class A absorption was a negative (24,200) sq. ft. The Class A availability rate was 14.3% at third quarter 2010, about the same as second quarter. Available Class A sublease space declined to 79,500 sq. ft. or 9.5% of Class A available space. Class B absorption was a negative (54,300) sq. ft. for year-to-date 2010. Available Class B space is over 0.6 million sq. ft. or 17.0% of total inventory, about the same as all of 2009. Little change occurred in the Class C available space during third quarter 2010. Currently, there is 215,100 sq. ft. available with a 21.7% availability rate. Year-to-date 2010 Class C absorption was a positive 42,300 sq. ft.

The Danforth Plant Science Center has received a Commerce Department grant for a third greenhouse. Several speculative buildings have been announced for the submarket, but none are under construction.

North County

Total Inventory: 9.6 mil. sq. ft.
No. of Buildings: 111
Average Asking Class A Rent: $19.82
Average Asking Class B Rent: $16.53
Availability Rate: 12.9%
Available Space: 1.2 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (35,400) sq. ft.

Access to interstates and highways and availability of large acreages (and large parking lots) has made the North County submarket successful. In the future, the extension of Highway 141 from I-64/Highway should improve traffic and attract additional businesses to the submarket.

During the third quarter of 2010, overall available space remained at slightly over 1.2 million sq. ft. or 12.9% of inventory. Overall absorption for year-to-date was a negative (35,400) sq. ft. Overall average asking rent declined to $17.11 per sq. ft. at third quarter 2010 from $17.33 per sq. ft. at year-end 2009.

The average asking rent for Class A space remained stable after three quarters of 2010 at $19.82 per sq. ft. For the third quarter 2010, Class B average asking rent declined to $16.53 per sq. ft. from $16.99 per sq. ft. at second quarter 2010. With limited availability, Class C average asking rent continues to decrease and is now $14.99 per sq. ft. Class A rents in the North County submarket are the least expensive of the suburban markets.

Available Class A space remains at 0.6 million sq. ft. or 21.2% of inventory, 15.7% or 99,800 sq. of which is sublease space. Absorption for Class A space for year-to-date 2010 was a negative (85,300) sq. ft., having no change since first quarter 2010. The Class B space was the more active market. Absorption for year-to-date 2010 for Class B space was a positive 51,500 sq. ft. About 0.3 million sq. ft. or 7.5% of Class B space is available. With only 260,900 sq. ft. of Class C space available; Class C absorption was a negative (1,600) sq. ft. during year-to-date 2010.

A $60 million, 221,000 sq. ft. high-volume prescription fulfillment center is under construction in NorthPark for Express Scripts. No other build-to-suit or speculative office buildings are now under construction. Rankin Jordan pediatric hospital will add a $20-30 million expansion. SSM DePaul Medical Center is building a 67,000 sq. ft., $18 million rehab facility.  

south County

Total Inventory: 8.4 mil. sq. ft.
No. of Buildings: 155
Average Asking Class A Rent: $21.09
Average Asking Class B Rent: $18.97
Availability Rate: 13.4%
Available Space: 1.1 mil. sq. ft.
New Deliveries: 0
Net Absorption (YTD): 33,500 sq. ft.

The South County office submarket appears on the road to recovery. Available office space in 2009 was 1.2 million sq. ft. with major subleases placed on the market. Available office space is now 1.1 million sq. ft., and availability is 13.4% of total inventory. Net absorption for year-to-date 2010 was positive 33,500 sq. ft. at the end of the quarter.

Almost 0.6 million sq. ft. of Class A space is currently available, 139,800 sq. ft. or 24.3% of which is sublease space. Average asking rent for Class A space is now $21.09 per sq. ft. As of third quarter 2010, available Class B space is nearly 0.4 million sq. ft. or 10.3% of inventory. Average asking rent for Class B space rose to $18.97 per sq. ft. at third quarter 2010 from $18.60 per sq. ft. at second quarter 2010. Available Class C space is minor in the submarket but increased during the third quarter to 199,000 sq. ft. or 9.6% of inventory. Average asking rent for Class C space was $15.33 per sq. ft. at third quarter 2010, down from $16.30 per sq. ft. at second quarter 2010. Absorption for year-to-date 2010 was a positive 54,200 sq. ft. for Class B space and a negative (60,300) sq. ft. for Class C space.

Siteman Cancer Center has purchased 16 acres at Butler Hill and I-55 for a 40,000 sq. ft. outpatient facility. A master plan for the 1,000 acre, 189-year-old Jefferson barracks military complex has been completed. The park will add a Ulysses S. Grant museum, remaking the park into a national attraction.

West County

Total Inventory: 8.3 mil. sq. ft.
No. of Buildings: 128
Average Asking Class A Rent: $22.70
Average Asking Class B Rent: $19.84
Availability Rate: 16.8%
Available Space: 1.4 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (262,200) sq. ft.

The West County submarket continues to add available space because of consolidation of offices and the move of Centene to its new headquarters in Clayton. At third quarter 2010, 1.4 million sq. ft. is available or 16.8% of inventory, up from 1.1 million sq. ft. and 13.7% at year-end 2009. Year-to-date overall absorption was a negative (262,200) sq. ft.

Available Class A space is over 0.9 million sq. ft. or 17.7% of total inventory, up from 0.8 million sq. ft. or 14.6% at first quarter 2010. Available sublease space jumped during third quarter 2010 to 211,400 sq. ft. or 23.0% of inventory, up from 136,400 sq. ft. or 15.8% at second quarter 2010. Class A absorption during year-to-date 2010 was a negative (163,700) sq. ft. Average asking rent for Class A space continues its slow decline and was $22.70 per sq. ft. at third quarter 2010.

Year-to-date 2010 absorption for Class B and Class C space was a negative (87,700) sq. ft. and negative (10,700) sq. ft. respectively. Available Class B space is now 0.4 million sq. ft. or 16.6% of inventory, while available Class C space is only 50,800 sq. ft. or 9.0% of inventory. Average asking rent for Class B space was $19.84 per sq. ft. at third quarter 2010. The average asking rent for the small amount of Class C space has fallen to $16.43 per sq. ft. after being above $18.00 per sq. ft. for a year.

Speculative office space appears to awaiting improvements in economic conditions including Sachs Properties’ second building of 150,000 sq. ft., Central Square II, in Chesterfield Village. Additional buildings have been announced for the former County jail site and in business parks near the Spirit of St. Louis Airport in the Chesterfield Valley. Several large acreages (75-130 acres) have been approved for mixed-use development in the Valley, including office, retail and industrial space.

St. Louis County Library Foundation is designing a 60,000 sq. ft. Family History Center for West County. The library will be one of only five free-standing genealogical libraries in the nation. Monsanto has purchased Chesterfield Village Research Center from Pfizer for $435 million and plans $65 million in updates and additions.

st. Charles

Total Inventory: 4.5 mil. sq. ft.
No. of Buildings: 66
Average Asking Class A Rent: $20.27
Average Asking Class B Rent: $17.74
Availability Rate: 11.7%
Available Space: 0.5 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (29,300) sq. ft.

The St. Charles office market was stable during third quarter 2010. Overall year-to-date absorption was a negative (29,300) sq. ft. At third quarter 2010, overall availability was 0.5 million sq. ft. or 11.7% of inventory, about the same as second quarter 2010. Available Class A space is now 203,100 sq. ft. or 7.9% of inventory, again about the same as second quarter 2010. Class A sublease space was 104,300 sq. ft. or 51.3% of available Class A space. Class A absorption at third quarter 2010 was 6,100 sq. ft. The average asking Class A rent is now $20.27 per sq. ft. down from $21.19 per sq. ft. at year-end 2009.

Class B availability increased to 232,300 sq. ft. or 17.0%, up from 225,200 sq. ft. or 16.5% of inventory at second quarter 2010. Absorption for year-to-date 2010 was a negative (31,600) sq. ft. The Class B average asking rent rose to $17.74 per sq. ft. after declining in the second quarter of 2010 to $16.95 per sq. ft. Class C available space is only 92,200 sq. ft. Absorption year-to-date for Class C space was a negative (3,800) sq. ft. Average asking rent for Class C space is up-and-down, ranging from the low $13.00 per sq. ft. to $14.00 per sq. ft., and is currently $13.20 per sq. ft.

Several speculative buildings have been announced, but none are under construction. St. Charles backed $40 million in bonds for the proposed $385 million Streets of St. Charles development, and ground work for the project started again this summer. The initial phase includes 293,000 sq. ft. of commercial and retail space on the first floor and 196 residential units on the second floor.

O’Fallon has approved $24 million in bonds and a 50% tax break over 10 years for a 10,000 sq. ft. data center for Centene, but residents are disputing the decision. In addition, O’Fallon is seeking approval from the St. Charles County Road Board to build a service road south of I-60/Highway 40 from Highway DD westward. The road would then service what the city is calling O’Fallon Renewable Energy Research & Development Park. THF Properties currently owns the property. 

Major Office Acquisitions

To view historical building sales information, please visit St. Louis market transactions.

Significant Leasing Activity