As principal and chief development officer with St. Louis’ CRG, Chris McKee has led teams that have developed more than 5,000 acres of land and delivered more than 160 million square feet of assets totaling more than $9 billion in value.
He’s also a long-time St. Louis-area resident, someone who understands the ups and downs of the St. Louis market.
Midwest Real Estate News recently spoke with McKee about the strength of St. Louis’ commercial real estate market, its strong industrial and multifamily sectors and the future of this key Midwest city’s CRE business.
Let’s start with the obvious question: How strong is the St. Louis commercial real estate market today?
Chris McKee: The market is good. It never gets super bad and never gets crazy good. It’s very steady. The market, really, is very good in St. Louis. In comparison to some of the higher-growth markets across the country it might appear slow. But for St. Louis, the market is very strong today.
Why is the market so strong today?
McKee: It’s the economy, right? A rising tide raises all ships. The national economy is doing well. That has pushed the market in St. Louis, too. The other thing that has happened is that in the multifamily sector, St. Louis had long been underserved. After the recession, we saw a large number of new buildings and rental units hit the market. So some of the increased development here was because of the economy. But some of it was because St. Louis needed to catch up on its supply and react to a shortage of buildings.
Then there is our location. From an industrial standpoint, we have a very desirable location. We are located in the middle of the country. That makes St. Louis an attractive secondary market. You can access so much of the country from St. Louis.
Another positive is job growth. The job growth has been more modest in St. Louis than it has been in some other markets, but there has been enough that it is boosting the economy here and boosting commercial development, too. St. Louis continues to be a great bio-tech hub, a hub for scientific research. It’s also a healthcare and education hub. Those continue to drive real estate and construction activities across the board.
The multifamily sector is thriving across the country. How strong is it in St. Louis?
McKee: Multifamily in St. Louis has been strong across the board, both in the city itself and in the suburbs. In downtown, you have Ballpark Village, which has brought a lot of excitement. The One Cardinal Way multifamily tower is one of the largest multifamily projects hitting the downtown area in a long time. That will be a very successful project. We have seen a lot of multifamily development, too, further south, in areas like The Grove, Midtown, Central West End and the Cortex innovation community.
We are also excited about One Hundred Above the Park on Kingshighway in the Central West End. This development was designed by Jeanne Gang’s Studio Gang, and it’s a construction deal for us. This is going to be a great project for the area, too.
The growth in multifamily has reached all the way out into Clayton. I know of at least three or four multifamily projects being developed now in the Clayton market. There is talk of even more multifamily projects here. We have seen the growth in this sector across the board.
What about industrial? How strong is that sector?
McKee: It has been unprecedented. We have seen unprecedented growth and tenant demand in the industrial sector. In our market, the big-box, large distribution centers and ecommerce buildings tend to be on the Illinois side of the St. Louis market. The number of buildings built there and the absorption on that side has been incredible.
On the St. Louis side, we see some of the smaller industrial buildings. But that side of the market has been incredibly strong, too. The St. Louis side has seen really nice absorption. Tenant activity is strong. I don’t have the final numbers yet, but I am certain that they will show that 2019 was another big year for St. Louis.
We’ve already spoken about St. Louis’ great location in the center of the country. But what else makes the St. Louis industrial sector so strong?
McKee: We do have a great workforce here. Businesses have a great pool of workers to choose from in St. Louis. The competition for workers has become fiercer every single year. Companies can find workers here.
St. Louis being in the center of the country has something to do with the strong industrial market, certainly. But the infrastructure is here, too. We have strong rail infrastructure. The highway infrastructure is intensive. It allows the users to get to places quicker than they would otherwise. On the Missouri side, there is a good tax environment. That helps make the market attractive.
What are some of the big projects going on in the St. Louis market that you consider especially important today?
McKee: One thing that needs to be mentioned is the Next NGA West, the big construction project for a new government NGA facility in the north part of St. Louis. That project is so big it is creating demand for ancillary office space and other services in the region. That has become a part of the market in which we are taking a hard look. Is there something that we can do in the area surrounding that project? Is there something we can do to provide support space for what NGA’s mission is across the board?
But there are actually a number of potential projects that we are looking at in the St. Louis market right now. We can’t release that information yet. But you will hear from us in 2020 on some of these big projects.
We should ask, too, how strong is the office market in the St. Louis area?
McKee: The office market is very solid. The Clayton market is especially strong for office. Even with all the proposed new office space we’re seeing in that community, there is still high demand in Clayton, especially for smaller-size tenants. The big users are finding space. The 15,000-square-foot to 25,000-square-foot users, though, are struggling to find space in Clayton. We have looked for office space there ourselves. It is difficult to find. There is as much office building going on in the Clayton market as there has ever been.
The Interstate-40 corridor remains strong for office, too. The Chesterfield market is also strong. The office demand in the city itself is a little soft right now. I am seeing good signs that the city office market is starting to rebound now, though, as some of the empty space is getting absorbed. But when it comes to office, the shining star is still Clayton.