ST. LOUIS—As reported yesterday in GlobeSt.com, in the first quarter the industrial market in the St. Louis metropolitan area recorded 1,795,283-square-feet of positive absorption. “That is more than in all of 2013,” Ed Lampitt, vice president and principal of Cassidy Turley in St. Louis, tells GlobeSt.com. “And 2013 was an awfully good year.”
“We haven’t had that kind of absorption since 2004,” adds Alex Cain, a financial analyst in the St. Louis office.
Lampitt attributes that huge number in part to the increasing activity in modern bulk distribution buildings. Online sales and the strengthening economy have increased demand for all kinds of consumer products and distributors across the I-70 corridor, which stretches from the Metro East area in Illinois to the North County and St. Charles County submarkets, have responded by taking more space.
The North County submarket saw the most activity. True Manufacturing signed the largest new lease with 542,600-square-feet at 13330 Lakefront Dr., and SSM Health Care signed a lease with 96,480-square-feet at DukePort VIII. In total, North County saw 858,841-square-feet of positive absorption in the first quarter.
Furthermore, much like it has done in the Kansas City region, GM has launched a major expansion of a local auto plant, Lampitt points out. And the $133 million expansion of the plant in suburban Wentzville has parts suppliers, eager to feed their products into the growing factory, flocking to the area.
The big quarter for industrial property was not exactly a surprise. “We’ve been feeling for a year that there has been pent-up demand,” he says. For example, as reported in GlobeSt.com last October, North County had 345,000-square-feet of net absorption in the third quarter, followed by St. Charles County which netted 174,000-square-feet. The vacancy rate hit 8.1% back then, and by this quarter sank to 7.2%.
“We are following the national trends in industrial real estate,” Lampitt says, and like many other cities, “we’re just getting to the tipping point where we will see new construction.”
In fact, St. Louis-based TriStar Properties recently began development on the first speculative industrial building to be constructed in the St. Louis metro area since 2007. Lampitt will lead the leasing effort for the 672,000-square-foot facility at Gateway Commerce Center, a big-box industrial park in Edwardsville, IL, at the intersection of I-270 and I-255 just east of St. Louis. The developers will have the class A building ready for occupancy in 2014 and have the capability to expand it to more than 1-million-square-feet.
“I believe we will see additional announcements of new developments in the near future,” Lampitt says.
KP Development, a St. Louis-based build-to-suit developer, for example, has the 294-acre former Chrysler plant in Fenton under contract and will develop a master plan for its redevelopment. Lampitt says the lack of suitable land in this submarket has historically resulted in a very low vacancy rate. “This development will do extremely well.”
Neither Lampitt nor Cain expects the next three quarters to generate the same level of absorption as the first. “The stars aligned in the first few months of this year,” says Lampitt, and many deals got signed at nearly the same time. “If we end up at 2.5-million-square-feet by the end of the year that would be great.”
“If we tip over 2-million-square-feet, that would be the most we’ve seen since 2004,” adds Cain.