ST. LOUIS—Like many Midwestern cities, St. Louis was hit hard by the recession, but in the past few years a real recovery got started and has helped revive both the office and industrial sectors. And JLL officials say that gathering strength will help them find a buyer for the Gateway Tower, a 213,228-square-foot, class A office tower located in downtown St. Louis next to the iconic Gateway Arch, one of the most recognizable structures in the US.
“The St. Louis office market has gotten significantly better, especially when it comes to leasing activity and the region's economic fundamentals,” Peter G. Harwood, executive vice president of capital markets at JLL, tells GlobeSt.com. Harwood and James Postweiler, also of JLL, will lead the just-launched marketing efforts for the building.
“Metro unemployment remains at a post-recession low of 6.5%,” the company noted in a report from earlier this year, “while professional and business services posted the highest year-over-year job growth since mid-2011 and financial services employment is as its highest level since 2000.” The regional office market added 7,000 white-collar jobs in just the last six months. And the downtown submarket has experienced positive direct net absorption in each of the last eight quarters, totaling more than 507,000-square-feet.
Furthermore, young people no longer interested in suburban lifestyles have started to pour into Midwestern downtowns, including St. Louis, transforming the CBD into a more livable space that in turn makes it more attractive to the office users. “A fair number of downtown buildings have been acquired for the purpose of conversion to residential,” Harwood says. In fact, during the past five years, the downtown population grew by over 28%, and in the last ten years it grew by more than 124%.
New downtown apartment properties currently under development include: The Tower at OPOP, the first new construction residential tower in 50 years; The Arcade, a historic rehab that will house over 200 artists; and The Alverne, another historic renovation that will offer two-story townhome style units. And the new Busch Stadium and the master planned Ballpark Village project, a $650 million mixed-use retail and entertainment and residential development, are both just one block west of Gateway Tower.
Perhaps most important to both the building's tenants and its future owner, a public-private partnership has already launched a $380 million renovation of the Gateway Arch. The project, called CityArchRiver 2015, will for the first time connect the CBD to the riverfront and the park surrounding the Arch with one continuous greenway. For decades, office users had been cut off from these amenities by a highway. “The concrete is in place, and although they have not planted the grass yet, it is on schedule for completion in 2015,” Harwood says.
“Kansas City and St. Louis are the two Midwestern cities that have the most active downtown residential markets right now, but Kansas City is probably about 18 months ahead of the curve compared to St. Louis,” he adds. But once the CityArchRiver 2015 project is done, “I think there is going to be a tremendous in-migration of people into the downtown.”
The residential revival could have a big impact on the Gateway property. “This site was originally designed and zoned for two towers,” Harwood says, and even though the economy probably won't support a new office tower, he expects the residential market could eventually support a new apartment building.
Tenants currently occupy 85.7% of Gateway Tower, a number with long-term leases, and Harwood considers the building stable. “The current owner has renovated virtually every building system since acquiring it about ten years ago. It has a 60's look on the outside, but once you're in the building all the spaces show really well.” Therefore, “the value-add component here is going to be on the leasing side instead of a repositioning of the product.” All of the vacancies face the arch and adjoining park, and “there's no reason occupancy could not get well above 90%.”
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
