St. Louis Office Insight: Asking rents move up as quality space remains limited

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The first quarter of 2018 brought negative absorption to the region for the first time since 2014. However, overall fundamentals remain strong, unemployment is below 4.0 percent and office occupying job growth continues to outpace the rest of the region. Both Kellwood and The Art Institute downsized this quarter, both vacancies are over 30,000 square feet. Leasing activity was led by American Family Insurance’s 80,000 square foot transaction at The Crossings at Northwest. The insurance company will join Charter and St. Louis County at the converted mall when it moves from Riverport (Northwest County) early next year. Local owners continue to be active as Scott Properties and Bamboo Equity Partners made acquisitions this quarter. The second phase of Ballpark Village broke ground in January. The building will give Downtown St. Louis its first new office building since the 1980’s. Accounting firm PwC is already signed on as an anchor in the 120,000 square foot building.

Class B landlords took advantage of tight conditions in the Class A market. Several buildings upped asking rates this quarter giving the region a 3.3 percent bump from the end of 2017. The move upped overall asking rates 3.0 percent from last quarter.

Outlook
With less than 10 Class A suburban vacancies over 20,000 square feet, the market remains tight. However, there is some vacancy on the horizon as TD Ameritrade recently announced further layoffs after acquisition of Scottrade. Two of its four buildings remain on the market for sale. Local pharmacy giant, Express Scripts just reached an agreement to be acquired by Cigna. Express Scripts occupies a significant amount of office space at its campus in Northwest County and the fate of its space is still unknown.

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