by Dan Rafter
Midwest Real Estate News recently spoke with Jeff Kaiser, managing director of the St. Louis office of CBRE, about the state of the commercial real estate market in St. Louis. His take? Things aren’t perfect in this key Midwest city, but real estate activity is definitely on the rise in all commercial sectors.
Midwest Real Estate News: Let’s start with the broad question: Are you seeing more activity in the St. Louis-area commercial real estate market?
Jeff Kaiser: We are seeing a huge uptick in activity in investment sales in the entire metropolitan area in all property types, office, industrial, retail and multi-family. Our investment sales activity is incredibly busy right now.
MREN: What is behind this increase in activity?
Kaiser: You can point to a couple of things: On the office, industrial and retail side, tenants are committing to longer leases. This is making these properties more desirable. That is certainly a big change. The other big change is the amount of international money that is coming into St. Louis. International investors are looking to put their money in our market. Not every international buyer can buy in Manhattan or San Francisco. The money is now coming to the secondary markets like St. Louis. Of course, multi-family remains one of the favored asset classes. There are multiple reasons why, many of them related to larger housing issues, but multi-family continues to be a strong performer in our market.
MREN: Industrial is always an important sector in the St. Louis market. How is this sector performing today?
Kaiser: Industrial is performing incredibly well. Vacancy rates are very low. This is causing developers to look at new speculative construction. We just saw a large industrial spec building open in our market at the Gateway Commerce Center near Edwardsville, Ill. That property, developed by TriStar, is in the Southern Illinois portion of our market. That property is the direct result of demand for industrial space in our market. The industrial market is a very good market for investors.
MREN: I know the office sector is a challenging one in many markets. How is it performing in your market?
Kaiser: When we look at office, we almost have to dissect it into two markets. You have the CBD, downtown market that operates almost independently of the suburban markets, which includes Clayton. Downtown continues to struggle when it comes to office. There are large blocks of vacancies in the downtown office market. And this might only get worse. We are anticipating that AT&T will vacate 1 million square feet in downtown in the near future. That will add additional vacancies to the market. The downtown operates under its own metrics.
MREN: What about the suburban office market?
Kaiser: The suburban office market, including Clayton, is performing much better. There are not many big blocks of space available for larger tenants. We are seeing a lot of tech companies take out space in our suburban markets. Tenants looking for office space in the suburbs are finding that they don’t have all that many options.
MREN: I know it’s difficult to predict, but do you think commercial real estate activity will continue to increase in the St. Louis market throughout the rest of this year and into 2015?
Kaiser: I’m on the board of the St. Louis regional chamber of commerce. We have seen a lot of entrepreneurs and start-up companies target the St. Louis market. That continues today. You look at the business incubators in this market, and you see a lot of enthusiasm and momentum. St. Louis is capitalizing on the strong intellectual base in the area. As these companies continue to evolve and grow, we think they will provide a great momentum swing for St. Louis. The future, from all the reports we have access to, looks to be very positive across all property types.