The St. Louis industrial market started the year strong, according to the latest research from Colliers International. But as with all commercial real estate forecasts today, the future is fuzzy: No one knows yet how the COVID-19 pandemic will impact this sector in the second quarter of the year and beyond.
According to Colliers’ first quarter St. Louis industrial report, the industrial market in St. Louis started 2020 with positive momentum, boosted by a healthy construction pipeline and a historically low vacancy rate.
Colliers’ said that it is inclear what impact the COVID-19 shutdown will have on the supply chain, but the company did say that this supply chain is working hard today to keep up with increasing demand.
And for the foreseeable future? Colliers reports that until stay-at-home orders are lifted and governments and companies determine how to best operate in this environment, commercial real estate experts will work closely with occupiers and building owners to ensure that they can continue to operate when possible and will be able to bounce back when they are ready.
There’s no denying the quick impact that COVID-19 has already had on this market. As Colliers reports, the disruption to the supply chain has been immense. Domestic transportation has seen a surge in activity as demand spikes for inland trucking capacity so that grocers and retailers can restock their shelves with critical goods.
Distribution leaders such as Amazon are adjusting their operations to focus on shipping the most critical supplies, including baby products, health and household, beauty and personal care, grocery, industrial and pet supplies. Colliers predicts that the reliance upon online shopping could have long-term implications on both retail stores and delivery systems.
In St. Louis, the industrial sector enjoyed a healthy first quarter following the biggest year of construction completions ever recorded in the region. According to Colliers, 375,865 square feet of industrial space was completed in the first quarter of 2020 in the St. Louis region. The region has an additional 2.5 million square feet of industrial space under construction.
The overall industrial vacancy rate in the St. Louis market dropped to 5.89 percent compared to 6.18 percent at the start of 2019. This marks the first time the industrial vacancy rate for the St. Louis market fell below 6 percent in more than 15 years.
The largest industrial project completed in the first quarter in the St. Louis area was NorthPoint Development’s spec development in the Airport submarket at 133 James S. McDonnell Blvd. The 204,365-square-foot building was delivered vacant. Even with this new inventory, the Airport submarket saw a drop in its overall vacancy rate from 6.46 percent in the first quarter of 2019 to 5.28 percent in the first quarter of 2020.
Last year, TriStar Properties delivered two new facilities for World Wide Technology totaling more than 2 million square feet in the Gateway Commerce Center East. World Wide Technology has also renewed its 1.65 million square feet of leases in its existing facilities in Lakeview Commerce Center. This makes the company one of the largest occupiers of space in the St. Louis area with a total of 3.65 million square feet in the Metro East submarket alone.
Other notable deals in the first quarter included Pepsico’s lease of 269,000 square feet in North County, Sportsman’s Supply’s renewal and expansion of 145,809 square feet in Fenton, Missouri, and Walmart’s lease of 124,000 square feet in the Earth City submarket at 305-333 Rock Industrial Park Drive.
Sales activity remained strong in the St. Louis industrial market, too, with 1.9 million square feet of industrial space sold during the first quarter. Investment sales made up 85 percent of this activity. More than 60 percent of investment sales happened in the Metro East submarket.
