By Dan Rafter
Midwest Real Estate News recently spoke with three CRE pros from St. Louis’ Sansone Group, James Sansone, principal; Mark Kornfeld, senior associate for retail and new development; and Jake Corrigan, an industrial specialist with the company. All three said that commercial activity is on the rise in the St. Louis market, which is good news for the Midwest.
Midwest Real Estate News: This is a broad question, but it’s a good starting point: Are you seeing more commercial sales and leases in the St. Louis market today than maybe last year or the year before?
James Sansone: The market has definitely been improving steadily across all the sectors that we work in, industrial, office and retail. Retail, we think, has particularly seen a boost this year. Office and industrial are seeing improvements, too, but in a steadier fashion. In 2013 we were already seeing more activity. This year, that continues, though the numbers with office and industrial are a bit flatter than they were in 2013. Overall, the market here is getting better and better.
Mark Kornfeld: When it comes to retail, the core markets in St. Louis have very little vacancy. When vacancies do show up in one of our good core markets, landlords don’t receive just one or two offers for a space. In certain circumstances they’ll receive three, four or five offers on that vacant space. Landlords have been able to drive up rental rates in the core markets. There is a strong need for new retail in those markets, and that is pushing rents up.
MREN: What about on the office side? I know that sector has been the slowest to recover across the Midwest.
Sansone: Brandon Wappelhorst, an office specialist with us, helped prepare some information for this interview. He told me that the office market has been a tenant’s market for some time now. However, it is now slowly turning and becoming more of a landlord’s market because of the lack of new product in the marketplace. That is creating more demand. Brandon says that the outlook for the office market is bright for the latter part of 2014 and into 2015.
MREN: Why do you think you are seeing this steady improvement in the St. Louis market today?
Sansone: There has been very little new development in our marketplace for a while now, especially in retail. The development side has slowed so much in our market that much of the vacancy has been absorbed. A lot of retailers are trying to grow in our market, but there is nowhere to put them.
Kornfeld: The city of Sunset Hills – in St. Louis County – is a good example. There is so much demand right now in that marketplace for retail. We could build 100,000-plus square feet there and fill it in a couple of months. The square footage isn’t there right now. There is so much more demand than there is supply for retail in many of our submarkets.
MREN: What are some of the positives that attract companies to the St. Louis market?
Sansone: The cost of living is very reasonable here in St. Louis. We don’t have the same dramatic ups and downs as we see on both coasts. It is more of a steady area. We have a good housing market. Homes here are very reasonably priced. We have good schools both from a public and private perspective. And we are located in the middle of the country. We have fairly easy access to other parts of the United States.
MREN: How strong is the industrial market in the St. Louis area today?
Jake Corrigan: The occupancy rate on the industrial side during the second quarter was high, at 92.5 percent. The big blocks of space in town are now mostly gone. That has created talk of spec development and talk of more build-to-suit activity, too.
MREN: Is spec industrial development on the way in St. Louis?
Corrigan: There are some proposed. We don’t know if they are going to happen, but they have been talked about. We will have to see what happens in the next year. Where the rates are now, it is justifiable to have conversations about spec projects and new build-to-suit projects. There is not enough product out there right now. That is a good problem to have.