St. Louis Industrial Market – 2Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. May’s 3.5% unemployment rate was 50 basis points lower than the 4.0% 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. Leisure/Hospitality, followed by Education & Health, led all sectors in job gains during the past 12 months. Industrial firms are continuing to adjust labor needs. Locally, all three industrial sectors experienced growth during the past year: Construction, by 2.1%; Trade/Transportation/Utilities, by 1.5%; and Manufacturing, by 0.9%.
Net absorption in the second quarter of 2024 totaled 637,424 SF. Total net absorption during the past four quarters was 644,786 SF. The market is recalibrating as the economy slows and construction deliveries outpace net absorption, reversing the trend of the last two years. The 2.2-million-SF construction pipeline has trended downward over the past three quarters but is expected to accelerate towards 3.0 million SF in the next four quarters. Vacancy remained flat at 5.3% during the quarter but increased 60 basis points over the past four quarters as deliveries outpaced absorption. Asking rental rate growth for the overall market year over year has been nonexistent, totaling negative 0.2%.
- Average Asking Rent: $5.92/SF
- Vacancy Rate: 5.3%
- Net Absorption: 644,786 SF
St. Louis Office Market – 2Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. May’s 3.5% unemployment rate was 50 basis points lower than the 4.0% 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. Leisure/Hospitality, followed by 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 all three office-occupying sectors displayed declines compared with the prior 12 months.
Absorption in the second quarter of 2024 totaled negative 283,619 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 negative 13,575 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 are currently 41,000 SF under construction.
Vacancy increased 40 basis points to 14.9% during the quarter. 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 nonexistent, totaling negative 0.9%.
- Average Asking Rent: $22.80/SF
- Vacancy Rate: 14.9%
- Net Absorption: -283,619 SF
St. Louis Retail Market – 1Q24
The St. Louis retail landscape continues to see high demand for prime retail space in both the suburban and urban areas of the market. Tenants are right sizing their spaces, refining their real estate site selection process, and actively expanding where space is available. As the economy has shifted, we are seeing trends in Landlord’s providing concessions more in the form of free rent versus increasing out of pocket TI Allowance funds. Demand for retail space along the main corridors, with excellent visibility and strong co-tenancy, is at an all-time high and availability is extremely limited. This environment is creating premium rents across the board for retail space. A leveling-out is anticipated to start as we approach 2025.
- Average Asking Rent: $14.71/SF
- Vacancy Rate: 4.0%
- Net Absorption: 199,044 SF
St. Louis Capital Markets – 1Q24
The pace of investment activity in the St. Louis market slowed during the past four quarters, with sales volume totaling $2.0 billion, a decrease of 36.3% 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 66.1% of the Metro’s activity. Capitalization rates decreased by seven basis points compared with the past 12 months, registering 7.1% in the first quarter of 2024.
- 12-Month Capitalization Rates: 7.1%
- 12-Month Total Sales Volume: $2.0 Billion
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