Spec construction rising, vacancies falling in St. Louis industrial market

by Dan Rafter

The St. Louis industrial market got off to a hot start in 2017, with 1.69 million square feet of net absorption in the first quarter of the year, according to the latest research from Cushman & Wakefield.

The first quarter also saw developers deliver 1.74 million square feet of new industrial inventory to the St. Louis market.

Brian Ungles, managing principal of the St. Louis office of Cushman & Wakefield, said that during the last two years, developers have added 5.45 million square feet of speculative industrial inventory to the market. And this space has proven popular, with tenants leasing more than 3.63 million square feet — or 66.7 percent — of it already.

Ungles said that 2.84 million square feet of industrial space is now under construction in the St. Louis market. Of this space, a high 87.8 percent is being built on a speculative basis.

And this is just the start of the good news for the St. Louis industrial market. The sector’s vacancy stood at a low 6.7 percent at the end of the first quarter of this year. That’s far below the historic average for this sector of 8 percent.

St. Charles County was the most popular industrial submarket, seeing more than 1.1 million square feet of net absorption during the quarter. The North County submarket saw net absorption of 411,000 square feet, the second-busiest industrial market in the St. Louis area.

The average asking rent for industrial space here rose to $4.45 a square foot, a modest increase from $4.31 a square foot in the first quarter of 2016. That represents an increase of 3.25 percent year-over-year.

What does the future hold for the industrial market here? Cushman & Wakefield says that developers will bring more industrial space to the market throughout the rest of 2017. This is good news, but the company does warn that developers need to watch demand closely. There is a possibility that developers will add too much spec industrial space to this market.

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