ST. LOUIS—Industrial users in the St. Louis area absorbed more than five million square feet in 2014, a record amount, and although it's improbable the region will hit those heights again in the near future, in 2015 vacancy rates continued to plunge below the historical average and developers have not had much trouble filling new spaces.
The regional industrial market recorded net occupancy gains of 626,000 square feet in the third quarter bringing the year-to-date total to 2.05 million square feet of positive absorption, according to a new report from Cushman & Wakefield. Throughout the year, bulk warehouses have led the way, and in the third quarter accounted for 446,000 square feet of the absorption. The overall vacancy rate dropped another 30 bps and now stands at just 6.0%, the lowest since 2008 and far below the historical average of 10.6%.
“In 2014, there was just so much pent-up demand,” Edwin C. Lampitt, an industrial specialist with C&W, tells GlobeSt.com. “There were multiple, multiple, 100,000-plus deals throughout last year. We're having a great year, but it won't match 2014.”
“The big story for this year,” he adds, has been the quick lease-up of two massive speculative developments. The new 673 building at Gateway Commerce Center in Illinois' Metro East submarket, for example, was the region's first speculative building since 2007, but this year Saddle Creek Corp. agreed to occupy all 673,137 square feet.
And the 535,500 square foot Aviator Distribution Center VII in suburban Hazelwood was the first speculative structure on the Missouri side of the river since 2007, but Silgan Plastics and Weekends Only recently took 335,250 square feet and 133,500 square feet respectively.
Developers have been relatively cautious due to the recession, Lampitt says, but these lease deals “will help kick off a good amount of development next year.”
The robust demand has already boosted development activity. Last year at this time, developers had about two million square feet under construction, but this year that number has increased to four million, he says. “That's a really positive sign.” And of the 2.2 million square feet under construction in the North County submarket, 94% is already leased.
Developers in Metro East have two speculative modern bulk buildings under construction, each between 700,000 square feet and 800,000 square feet, and Lampitt is not sure if these projects together will meet or surpass the demand for space on that side of the river. “We've always been short-supplied in Metro East, so that question has never been answered.” It's still not known if the developers will both go for single-users or divide the properties. “My guess is that they will divide them up and that both will do well in 2016.”
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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.
