by Dan Rafter
The commercial real estate professionals working in the St. Louis region say that the city is on a solid winning streak when it comes to its economy and the number of commercial real estate sales, leases and developments it is seeing today.
Midwest Real Estate News recently spoke with one of these professionals, Doug Bock with Cresa St. Louis, about the strength of the commercial real estate market in his city. He had plenty to say about the bright future he sees for the St. Louis market.
Midwest Real Estate News: You specialize in the office market. How strong is that market in the St. Louis region today? Is it getting stronger?
Doug Bock: From the landlord’s perspective, yes, the office market is getting better. The market has tightened a little. The number of options available to tenants has decreased from a supply-and-demand perspective, and that will always push rents a little. That’s a positive for landlords.
However, the office market in St. Louis is an interesting one. It definitely is improving, but it’s not like the office markets in other parts of the country. St. Louis has a much steadier office market. The booms and busts here are not early as pronounced. But there is no question that the number of large-block spaces is more limited today. We have seen rental rates creep up a bit.
MREN: Are there any submarkets in the St. Louis region that are performing better than others?
Bock: The Clayton and Highway-40 corridor are the best-performing markets today. The downtown continues to struggle a bit. There hasn’t been as much absorption as we’d like to see in downtown when it comes to the office market. But Clayton and the Highway-40 corridor – and other areas of the market – are all seeing improvements in office activity.
MREN: Why are those submarkets performing so well today?
Bock: The office product tends to be newer in those submarkets. Clayton has always been our best-performing market. It is a strong central business district away from our downtown. The property values are the highest in those markets, and that justifies new development. There have been some key deals in the last few years in those submarkets.
MREN: We are seeing developers in many Midwest markets converting old office space into multifamily developments. Is that happening at all in downtown St. Louis as a way to remove some of the outdated office product from the market?
Bock: If you own an office building in downtown and you are struggling to get tenants, it often does make sense to think about converting that building into apartments. A lot of that was done here before urban downtowns. Many of the young people today want to live in an urban environment. The pace of that in St. Louis has accelerated a bit recently. It’s not like how it is in Chicago, Denver or Cleveland. But it is a trend that is gaining strength here.
MREN: What has to happen for the commercial real estate market in St. Louis to gain even more momentum than it already has today?
Bock: Several key things have hurt St. Louis over a long period of time. The corporate acquisitions we have seen here have contributed a little bit to some of the stagnation we have seen. Think about 50 years ago and you had McDonnell Douglas, Anheuser-Busch, AT&T and other large companies that had their corporate headquarters here. For various reasons, including companies that have been sold or those that have relocated, many of those companies have left. That has decreased the demand for office space over a long period of time.
You couple that with other factors in the region, like losing TWA as an airport hub in our airport, it has put downward pressure on the entire market.
MREN: Of course, office activity is strengthening, as we’ve mentioned. What makes St. Louis a good place for companies?
Bock: It is such a fantastic place to live. I do quite a bit of real estate work outside of St. Louis for some of my portfolio clients. I see firsthand how St. Louis compares when it comes to work/life balance and amenities. This is a very good place to live if you are raising a family. We don’t have one fantastic thing here, but we have many very, very good things. Our zoo is so nice. We have the Arch. We have different neighborhood districts for food and entertainment. I think those have all contributed to making this such a nice spot to live. It helps, too, that are commutes are not horrific like they are in some cities.
There are a lot of positives here. The Cortex tech hub is just one example. That tech district is very active. The St. Louis area has become more vibrant. A lot of people want to live in the downtown and its surrounding neighborhoods today.