by Dan Rafter
You know your retail market is on the upswing when Swedish furniture giant Ikea is ready to move in.
And that’s what’s happening now in St. Louis.
Ikea in early December made it official: The furniture retailer — known for its some-assembly-required furniture and Swedish meatballs — announced during a Dec. 4 ceremony that it is opening a new store in St. Louis at Vandeventer and Forest Park avenues.
Construction on the new store will start in the summer of 2014, with the new location opening in the fall of 2015.
Josh Roedemeier, vice president of the St. Louis office of Cassidy Turley, says that Ikea’s move is further evidence that the city’s retail market is firmly in recovery mode.
“St. Louis doesn’t experience the hugh highs or huge lows of most other markets,” Roedemeier said. “It’s stable. It continues to slowly improve. We’re seeing the same users doing well in our market that you are seeing in most others: The food guys and grocery stores are doing especially well. We’ve seen a huge number of new grocery stores come to our market in the last year.”
This isn’t to say that all retailers are doing well in the St. Louis market. Roedemeier said that certain submarkets are performing well, areas such as the Brentwood, Richmond Heights and Galleria trade areas. Other areas, mostly in the suburbs or fringe areas, are improving but not quite as quickly.
St. Louis has also seen different classes of retailers performing better than others. Roedemeier points to Class-A retail space as doing especially well in today’s market, with vacancies falling and asking rents rising. The same isn’t true in Class-B and Class-C space, where rents are not yet moving up.
“Regardless of what submarket you are in, Class-C space continues to lag,” Roedemeier said. “The primary reason for that is that this market is made up of a lot of mom-and-pop tenants. And there aren’t a lot of those tenants moving right now.”
The performance of the residential housing market continues to impact the St. Louis-area market. Housing sales and values are rising in the St. Louis market. That has emboldened consumers, who are now willing to spend — at least a bit — more at their favorite retailers.
“Any time you get an increase in home values, that translates to stronger consumer spending,” Roedemeier said. “When you get the mom-and-pop users who so often tap into their homes’ equity to open new stores or make moves, that’s when you’ll see the final piece of the puzzle in retail. We believe that we’ll start to see this happening next year. That’s the last critical piece for the retail market.”
Roedemeier says that one more piece of evidence that the St. Louis retail market is on the way back is the strong performance of luxury retailers.
Roedemeier says that high-end retailers are finally doing well again in the market. Early in the recovery, the discount retailers were thriving. Now Roedemeier is seeing strong activity on both the discount and the luxury end of the retail market.
What isn’t doing as well? Retailers who mostly target the middle-class of shoppers.
“It seems that the middle class is still largely in frugality mode,” Roedemeier said.
The new Ikea, though, might start attracting more of those middle-class dollars. The new St. Louis store will cover 380,000 square feet spread across two stories. The project will also include a 1,250-space parking garage one level below the store.