St. Louis Industrial Market – 3Q24
The region’s labor market remains historically strong amid shifting macroeconomic conditions. August’s unemployment rate of 3.9% was 30 basis points lower than the 10-year historical average of 4.2%. Year-over-year, job growth has been most pronounced in the services sector, which is still recovering from the pandemic. The Leisure and Hospitality sector, followed by Education and Health, led all industries in job gains over the past 12 months. Industrial firms are adjusting their labor needs. Locally, employment in all three industrial-occupying sectors experienced growth during the past year: Manufacturing by 2.0%; Construction, by 1.8%; and Trade/Transportation/Utilities, by 1.1%.
Net absorption in the third quarter of 2024 totaled 2.0 MSF, the highest amount since 2Q22. Vacancy decreased driven by positive net absorption in various mid-sized deals and no new deliveries to the market. The lower vacancy rate supports rental rate growth fundamentals and is likely to motivate developers to break ground in 2025. The 2.4-MSF construction pipeline has trended downward since its peak in 4Q21 but is expected to accelerate towards 3.0 million SF during the next four quarters. Vacancy remained decreased to 4.7% during the quarter and 10 basis points over the past four quarters as absorption outpaced deliveries. Asking rental rate growth for the overall market year-over-year has been nonexistent, totaling negative 3.1%.
- Average Asking Rent: $5.95/SF
- Vacancy Rate: 4.7%
- Net Absorption: 2.0MSF
St. Louis Office Market – 3Q24
The region’s labor market remains historically strong amid shifting macroeconomic conditions. August’s unemployment rate of 3.9% was 30 basis points lower than the 10-year historical average of 4.2%.Year-over-year, job growth has been most pronounced in the services sector, which is still recovering from the pandemic. The Leisure and Hospitality sector, followed by Education and Health, led all industries in job gains over the past 12 months. Professional business and technology firms are adjusting their labor needs. Locally, employment in two of the three office-occupying sectors has declined compared to the previous 12 months.
The market softened with negative 134,891 SF of net absorption during the quarter, bringing the total to negative 226,504 SF over the past year. The market has now seen three consecutive quarters of negative absorption, as tenants continue to downsize their space in favor of higher-quality options. The non-owner-occupied construction pipeline has been inactive since the third quarter of 2022, with only 41,000 SF currently under construction. Vacancy increased by 20 basis points, reaching 14.6% for the quarter, and is projected to rise towards 15.0% as the market continues to adjust. Year-over-year rental rate growth has remained flat, with asking rents declining by 1.2%.
- Average Asking Rent: $22.96/SF
- Vacancy Rate: 14.6%
- Net Absorption: -134,891 SF
St. Louis Retail Market – 3Q24
Consumer habits combined with market demands for retail space will continue to be a driving force behind the acquisition and use of space. Location has always been a dominating factor in site selection, but a lack of desirable locations is leading to more flexibility in prototypes. Retailers are adjusting to smaller formats both in the food service and soft goods retail sectors. They are also moving away from a strict template as far as size and store frontage width, and stressing design of the space and how it translates to the brand, marketing and relevance among social media and consumers. We anticipate this continues to be a priority for retail and restaurants as vacancy will remain tight for the foreseeable future.
- Average Asking Rent: $14.82/SF
- Vacancy Rate: 3.6%
- Net Absorption: 132,106 SF
St. Louis Capital Markets – 3Q24
The pace of investment activity in the St. Louis market slowed during the past four quarters, with sales volume totaling $2.4 billion, a decrease of 23.1% compared with the prior five- year average. As a leading second-tier market, the St. Louis Metropolitan area ranked fifth out of the largest 13 Midwest markets in total sales volume during the past 12 months, with multifamily and retail assets combining for 66.0% of the Metro’s activity. Capitalization rates increased by four basis points compared with the past 12 months, registering 7.3% in the third quarter of 2024.
- 12-Month Capitalization Rates: 7.3%
- 12-Month Total Sales Volume: $2.4 Billion
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