St. Louis Industrial Market – 1Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. February’s 3.5% unemployment rate was significantly lower than the 4.3% 10-year historical average. Year over year, job gains have been most pronounced in the services industry, which is still making up for lost ground during the pandemic. Education & Health led all sectors in job gains during the past 12 months. Industrial firms are continuing to adjust labor needs. Locally, two out of the three industrial sectors experienced growth during the past year: Construction, by 2.6% and Trade/Transportation/Utilities, by 1.2%.
Net absorption in the first quarter of 2024 totaled negative 1.1 million SF. Total net absorption during the past four quarters was 371,710 SF. The market is recalibrating as the economy slows and construction deliveries outpace net absorption, reversing the trend of the last two years. The 2.5-million-SF construction pipeline has trended downward over the past two quarters and is expected to accelerate towards 3.2 million SF in the next four quarters. Vacancy increased 60 basis points to 5.4% during the quarter as deliveries outpaced absorption. Asking rental rate growth for the overall market year over year has been below average, totaling only 1.7%.
- Average Asking Rent: $5.98/SF
- Vacancy Rate: 5.4%
- Net Absorption: -1.1M SF
St. Louis Office Market – 1Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. February’s 3.5% unemployment rate was significantly lower than the 4.3% 10-year historical average. Year over year, job gains have been most pronounced in the services industry, which is still making up for lost ground during the pandemic. Education & Health led all sectors in job gains during the past 12 months. Professional business and technology firms are continuing to adjust labor needs. Locally, employment growth across two of the three office-occupying sectors displayed declines compared to the prior 12 months.
Absorption in the first quarter of 2024 totaled negative 190,589 SF. This was a retraction from the fourth quarter of 2023, which realized the largest quarter of net absorption during the previous three years. Net absorption during the past four quarters totaled 379,299 SF. The non-owner-occupied construction pipeline has trended downward since the first quarter of 2023 due to recent deliveries and sharply decelerating new starts. There is currently 41,000 SF under construction. Vacancy increased 10 basis points to 14.6% during the quarter due to a slight decrease in leasing activity. Vacancy is expected to increase to 15.0% as the market continues to recalibrate. Asking rental rate growth for the overall market year over year has been stagnant, totaling only 0.2%.
- Average Asking Rent: $22.76/SF
- Vacancy Rate: 14.6%
- Net Absorption: -190,589 SF
St. Louis Retail Market – 4Q23
In the fourth quarter of 2023, St. Louis continued to see average asking rents climb as total vacancy rate remained low with small shop space averaging 2.0% and big box averaging 4.7% vacancy. Small shop space continues to see a wide variety of interest from service-based retailers (salon, nail, massage, etc.), boutique fitness, and fast casual food type users. Fitness, entertainment, and grocery have been the most active players in backfilling big box space. Drive-thru space, whether freestanding or end-cap, continues to be highly sought after by brands. In addition, QSR concepts are continuing to look for opportunities to convert or relocate spaces to a drive-thru concept.
- Average Asking Rent: $14.80/SF
- Vacancy Rate: 4.1%
- Net Absorption: 330,052 SF
St. Louis Capital Markets – 4Q23
The pace of investment activity in the St. Louis market slowed during the past four quarters, with sales volume totaling $1.9 billion, a decrease of 41.3% compared with the prior five-year average. As a leading second-tier market, the St. Louis Metropolitan area ranked sixth out of the largest 13 Midwest markets in total sales volume during the past 12 months, with multifamily and industrial assets combining for 71.7% of the Metro’s activity. Capitalization rates increased 85 basis points compared with the past 12 months, registering 7.5% in the fourth quarter of 2023. Top-quantile capitalization rates increased 47 bps compared with the past 12 months, registering 6.0% in the fourth quarter of 2023.
- Class A Capitalization Rates: 7.5%
- 12-Month Total Sales Volume: $1.9 Billion
- 12-Month Total Transactions Volume: 186 Transactions
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