Signs of stability. That’s what Intelica CRE says it is seeing in St. Louis’ office sector.
In its second quarter St. Louis office report, Intelica says that during the past year, demand for office space has reached 860,000 square feet. That marks a solid increase after a prolonged period of occupancy declines.
This doesn’t mean that the St. Louis office market doesn’t face challenges. As Intelica notes in its report, the first two quarters of 2024 have seen negative absorption rates.
On the positive side? Washington University and other companies have increased their office space usage. The sublease market has also improved, with sublet space declining from 2.5 million square feet last year to 2 million at the end of the second quarter of this year. About 25% of office sublet space is expected to become direct by 2025, Intelica reported.
Intelica said that office rental rates remain low in St. Louis, averaging $24.22 a square foot. Not all sectors are equal, though. Intelica said that asking rates for office space in areas like Clayton, Missouri, have increased to about $40 a square foot. Rates in the St. Louis Central Business District, though, have fallen because of weak tenant demand.
And as in most markets, the number of office sales in St. Louis has plummeted, with investor sales reaching a decade low in 2023, according to Intelica’s research.
Overall, the direct office market vacancy rate stood at 11% in the second quarter, according to Intelica. Year-to-date, this sector has seen negative 710,906 square feet of net absorption.
There won’t be much new supply added to the market, either, with Intelica reporting that only 832,500 square feet of new office space was under construction in the St. Louis market as of the second quarter.
