Office Market Snapshot St. Louis • Second Quarter • 2013
Market Tracker *Arrows = Current Qtr Trend
Vacancy
Net Absorption
Deliveries
Asking Rent
16.0%
247,000 SF
0 SF
$18.54 FS
Strong Second Quarter Lowers St. Louis Office Vacancy to 16% The St. Louis office market had a very strong second quarter realizing 281,000 square feet of positive absorption. As a result, the St. Louis office vacancy rate decreased to 16.0%, a level not seen since the first quarter of 2011. The second quarter figures were closely watched after the first quarter disappointed with 34,000 square feet of negative absorption. ST. LOUIS OFFICE
Economic Indicators Q2 12
Q2 13
St. Louis Employment
1310.4
1319.8
St. Louis Unemployment
7.30%
7.00%
65.4
81.4
8.20%
7.60%
U.S. CCI U.S. Unemployment
300
300,000
200
200,000
100
100,000
0 (100,000) (100) (200,000) (200)
2008
2009
2010
2011
2012
2013
Vacancy Rate Net Absorption 20% 20% 15% 15%
10% 10% 5% 5% 0% 0% 2008 2008
2009 2009
The absorption gains in the second quarter were widespread with only the Clayton and St. Charles County markets realizing negative absorption (-4,000 and -17,000 square feet, respectively). This marks the second quarter in a row that the usually resilient Clayton market experienced negative absorption despite Fifth Third Bank increasing their presence in Clayton by 23,000 square feet during the quarter. However, the concern in Clayton will be short-lived as a number of large deals were consummated in the second quarter that have yet to impact the market fundamentals. The West County market had the most significant growth in the region, realizing 220,000 square feet of positive absorption in the quarter, the majority of which was located in the Chesterfield and Creve Coeur submarkets. The most significant transactions that led to this growth were Cequel Communications leasing 46,000 square feet at 575 Maryville Centre Drive, 58,000 square feet at 520 Maryville Centre Drive and the 55,000 square foot relocation of Brown Smith Wallace LLC to Creve Coeur from Olivette.
Net Absorption
(300,000) (300)
The bifurcation of class A and class B office vacancy continued in the second quarter with class A space realizing 295,000 square feet of positive absorption while class B space had negative absorption of 14,000 square feet. The varying performance between the two classes is representative of a flight to quality as tenants use aggressive rental rates to upgrade the quality of their space. At of the end of the second quarter, vacancy in class A space was 12.0%, which is significantly better than the 21.7% vacancy in class B space. Furthermore, the spread in vacancy between class A and class B space has grown to 9.7%, which is significantly higher than the 10-year average spread of 7.3%.
2010 2010
2011 2011
2012 2012
2013 2013
The Downtown market continued to strengthen in the second quarter with 26,000 square feet of positive absorption, giving Downtown three consecutive quarters of growth. Although Downtown continues to have the areas’ highest vacancy rate at 20.7%, the fundamentals have been steadily improving. The North County and Mid-County markets both realized positive absorption in the quarter with Mid-County absorbing 10,000 square feet and North County absorbing 39,000 square feet. North County should continue this positive trend as Equifax, Charter, and U.S. Bank all signed deals in the second quarter that will impact the submarket through the end of the year. The health of the St. Louis commercial real estate industry is often determined by the amount of available contiguous office space. In comparison to this time last year, the amount of available large blocks of space greater than 50,000 square feet has diminished by about 33% as more local companies relocated or expanded within our city. As a result, the demand for these spaces increasing. This is particularly true for North and West County where these available blocks of space have decreased from 15 blocks to ten throughout the past year. Eighty percent of the diminished space has been class A.
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Cassidy Turley Office Market Snapshot St. Louis, Missouri • Second Quarter • 2013
TOTAL BLDGS
INVENTORY
SUBLET
DIRECT
VACANCY
VACANT
VACANT
RATE
CURRENT NET
YTD NET
ABSORPTION ABSORPTION
AVERAGE
UNDER CONSTRUCTION
AVERAGE
ASKING RENT ASKING RENT (ALL CLASSES)
(CLASS A)
SUBMARKET Downtown
59
11,124,000
18,000
2,280,000
20.7%
26,000
77,000
-
$16.61
$19.47
Clayton
64
6,831,000
40,000
848,000
13.0%
(4,000)
(36,000)
-
$23.44
$25.24
Mid-County
62
2,204,000
10,000
368,000
17.2%
10,000
(28,000)
-
$16.71
$19.91
West County
249
16,199,000
144,000
2,060,000
13.6%
220,000
156,000
405,000
$20.40
$23.39
North County
57
5,346,000
57,000
987,000
19.5%
39,000
28,000
-
$17.24
$20.42
South County
59
2,514,000
-
369,000
14.7%
6,000
34,000
-
$20.19
$22.07
St. Charles County
87
4,136,000
8,000
535,000
13.1%
(17,000)
15,000
-
$15.55
$18.51
Class A
255
28,545,000
224,000
3,206,000
12.0%
295,000
262,000
405,000
$21.80
Class B
382
19,807,000
52,000
4,242,000
21.7%
(14,000)
(15,000)
-
$16.09
637
48,353,000
275,000
7,447,000
16.0%
281,000
247,000
405,000
$18.54
MARKET TOTALS
TOTAL
Office Submarkets
Key Lease Transactions 2Q 2013 PROPERTY
$21.80
SF
TENANT
TRANSACTION TYPE
SUBMARKET
3470 S. Rider Trail
99,000
Equifax
New
Earth City
Solutia
92,000
Savvis
Renewal & Expansion
Chesterfield
13022 Hollenberg Dr.
78,000
Charter Communications
New
Hazelwood
Maryville 520 Building
58,000
Cequel III
New
Chesterfield
101 South Hanley Corporate Center
58,000
NISA
New
Clayton
3301 S. Rider Trail
46,000
US Bank
New
Earth City
Solutia
46,000
Cequel III
New
Chesterfield
The Woodfield Building
42,000
SSM Health Care
Renewal & Expansion
Olivette
Laumeier Office Pk II
42,000
New Balance
New
Kirkwood South
Riverport Tower
31,000
Altisource Solutions Inc.
New
Earth City
10 South Broadway Building
17,000
Hawkins, Parnell & Thackston LLP
Renewal
Downtown
St. Louis, Missouri
2
70
64
1 270
4
170
8
5
3 44
1. 2. 3. 4.
St. Charles County North County West County Mid County
5. 6. 7. 8.
7
6
55
St. Louis City Downtown South County Clayton
Tim Walsh
About Cassidy Turley
Managing Principal
Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. Based in Washington, DC, the company represents a wide range of clients— from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.
7700 Forsyth Boulevard 9th Floor St. Louis, Missouri 63105 Tel: 314.746.0326 Fax: 314.862.1648 Email: tim.walsh@cassidyturley.com The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright © 2013 Cassidy Turley. All rights reserved.
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