Vacancy rates keep rising in the St. Louis office market. This is no surprise: Office markets across the country continue to struggle as the work-from-home movement shows few signs yet of lessening.
CBRE recently released its first quarter 2023 St. Louis office market report, a report that highlights the challenges that this commercial sector still faces.
In a bit of good news, though, St. Louis office landlords have been able to raise their direct asking rates by an average of $0.52 since the end of the fourth quarter of 2022, according to CBRE.
The jump in asking rents is primarily driven by inflationary concerns among property owners, as well as the high rents commanded by prime assets in the area’s most desirable office submarket in Clayton, Missouri.
CBRE, though, predicts that this jump in asking rents is only temporary because of the sluggish leasing in most St. Louis submarkets.
How slow has leasing activity been? The St. Louis-area office market recorded an 80 basis point jump in vacancy rates in the fourth quarter, according to CBRE. This increase is largely because of the high number of companies that are downsizing as more employees continue to work from home. A high number of sublease listings expiring and transitioning to direct vacant space is another reason for the jump in vacancy rates.
Despite these challenges, St. Louis has delivered two new prime office assets in Clayton in the first quarter of 2023. Forsyth Pointe and Commerce Bank Tower have brought 500,000 square feet of amenity-rich space to the market.
These properties are expected to be in demand, too. Many companies are reducing their office footprints, but are also looking to lease less space in higher-quality office buildings. The buildings in Clayton qualify.
Sublease availability has also ramped up, with just under 400,000 square feet of this space added to the market. The majority of this space (50.7%) is located in the West County submarket. In contrast, Clayton, which is the strongest market in St. Louis, has only 78,000 square feet of available sublease space, representing just 3.3% of available sublease product.
This divide highlights the stark performance gap between traditional suburban office products and amenity-rich prime assets.
