Construction cranes dot the St. Louis region. But that doesn’t mean that the area’s office market doesn’t face challenges, according to the latest research from Colliers International.
Colliers recently released its first quarter St. Louis office report. And the results show a market with both strengths and weaknesses.
On the downside, the St. Louis office market began this year with negative absorption, pushing the overall office vacancy rate to 13.5 percent. In the first quarter last year, this rate stood at 12.8 percent.
On the plus side, office asking rents remain strong. Colliers reported that the average overall market rent has remained above $20 a square foot since the third quarter of 2018.
Overall, the first quarter ended with 204,009 square feet of negative office absorption. The biggest reason? TD Ameritrade’s 2017 acquisition of Scottrade. This acquisition led to Scottrade vacating its offices at Corporate Hill IV in the first quarter, adding 179,000 square feet of newly empty office space to the market in the Manchester/I-270 submarket. This submarket’s vacancy rate had dropped to only 91 percent a year ago. The addition of the Scottrade space boosted that rate to 18.8 percent.
The Westport office submarket saw the largest year-over-year drop in vacancy, falling from 14.1 percent to 11.2 percent in the first quarter of this year. Credit much of this drop to Centene’s occupancy of the entire Woodlands Plaza buiding. This move brought nearly 88,000 square feet of positive absorption and brings Centene’s total footprint in St. Louis to nearly 1.2 million square feet.
Expect the office market to remain active in the St. Louis region throughout the year. Colliers reported that 1.23 million square feet of office space is now under construction. This is the highest this figure has been in more than 15 years. Speculative construction accounts for 42 percent of this development, evidence that investors and developers have confidence in the St. Louis office sector.
