Office Market Holds Steady, According to Numbers

Vacancy rose slightly in the second quarter to 15.3% from Q1's total of 15.5%. The availability rate however rose from 18.8% in Q1 to 19.8% in Q2, with nearly 850,000 square feet of sublease space on the market.

After losing a number of law firms to the suburbs, downtown office owners have started to aggressively pursue tenants through rent concessions. It is not uncommon to offer months of free rent; and some companies have managed to land up to two years of free rent.

"Downtown is in a holding pattern right now," Jeff Kaiser, first vice president at CBRE, tells GlobeSt.com. With the move of Husch Blackwell Sanders LLP and Armstrong Teasdale LLP to Clayton, "Downtown ends up losing about 180,000 square feet of tenants and gaining about 40,000 square feet of tenants. Those numbers won't start to be reported in most market summaries until next year when the moves take place. And even then, when you put those figures into a market that has more than 13 million square feet of office space, it doesn't make a large impact on the vacancy numbers."

The upside of the downtown market is that most suburban locations no longer have large blocks of space to offer tenants which will force companies to look downtown. "Unfortunately, with the economy staying slow, those firms are taking their time making any expansion or relocation decisions," Kaiser says.

Tom Ray, VP for CBRE, tells GlobeSt.com that St. Louis is not seeing large tenants searching for space at the moment, with the exception of one major life sciences tenant. "But one or two tenants is not going to make a large difference in the overall vacancy rate. There's really no internal driver right now for companies to pick up and move," Ray says. "Most companies are fine in the amount of space they are already in, and with the economy still uncertain, many firms are taking a wait and see approach to find out exactly how much space they will need when we do come out of this downturn."

Recovery doesn't seem likely in the near future. "As long as unemployment is trending upward, we're in dangerous territory," Ray says. "Most of our job losses in this area have come on the industrial and retail sides, and we hope that the exposure of the professional services will be limited. But we do expect a somewhat higher vacancy rate by the end of the year."