Absorption Drives New Construction

1. 1COLLIERS INTERNATIONAL St. Louis, MO Research & Forecast Report | Industrial 3Q 2019
Research & Forecast Report
ST. LOUIS, MO | INDUSTRIAL
Third Quarter 2019
Absorption Drives New Construction
Heavy absorption and leasing activity are stimulating a
continued construction boom in St. Louis, bringing even
more new spec construction onto the market. Yearly
absorption numbers have been positive since 2010 and
the third quarter ended with historically low vacancy rates.
Direct asking rental rates are approaching pre-recession
levels, trending upward due to heavy absorption and leasing
activity. There are reasons for caution, however, as pipeline
activity appears to be slowing and average asking rental
rates have decreased over the first three quarters of 2019.
Heavy industrial absorption continues with year-to-date
overall absorption at nearly 3 million square feet (MSF) for
the entire market. Much of this absorption can be linked to
new construction projects that have been delivered fully
or partially leased. This activity pushed overall vacancy
to 6.04%, the lowest recorded vacancy rate since 2006.
Performance varied between submarkets with some smaller
submarkets reaching vacancy rates close to one percent.
The Hanley/Brentwood submarket dropped to 0.98% while
Jefferson County held steady at 1.16%. North County has the
highest vacancy rate of any St. Louis submarket at 11.90%.
This high rate is attributed to several large available spaces
including 269,000 SF at NorthPark DC 1, 234,000 SF at
Hazelwood TradePort III and 241,000 SF still available in
1609 Park 370 Place.
St. Charles County has seen many significant new
construction deliveries thus far in 2019 totaling 1.85 MSF. A
number of these new deliveries have been in or near Premier
370 Business Park including the 855,080-SF Amazon
YEAR-TO-DATE CONSTRUCTION & ABSORPTION
YEAR-TO-DATE CONSTRUCTION COMPLETIONS
MARKET INDICATORS
ABSORPTION
RENTAL RATE
CONSTRUCTION
VACANCY
Q2 2019 Q4 2019
FORECAST
Q3 2019
Build-to-Suit Speculative
28%
72%
Total WD Total OS Total MF
97%
1% 2%

2. 2COLLIERS INTERNATIONAL St. Louis, MO Research & Forecast Report | Industrial 3Q 2019
HISTORIC SALES & LEASING ACTIVITY
fulfillment center, Duke Realty’s 375,000-SF Premier 1001
spec building and FedEx’s 490,000-SF distribution facility.
The largest delivery in the entire St. Louis industrial market
was TriStar’s delivery of the first 1-MSF distribution facility
of World Wide Technology’s 2-MSF campus in Gateway
Commerce Center East.
As more speculative construction is delivered through the
end of 2019 and into 2020, vacancy rates are expected
to increase. Spec buildings make up 61% of current
construction activity. Of this space, 89% is still available
for lease. Absorption is expected to remain positive for
the foreseeable future but at potentially slower rates.
The St. Louis market has seen positive absorption every
year since 2012 with some recent years over 4 MSF. The
average asking rental rate is currently $4.29 per square foot
(PSF) which, although higher than the five-year average of
$4.19 PSF, is down from $4.86 in Q1 of this year. This could
be due to the rate reductions by landlords competing with
tax abatement and the introduction of several new 500,000
SF to 770,000 SF spec warehouses of in the Metro East
with asking rates below $4.00 PSF. Although the market
generally appears to be slowing, third quarter saw notable
new deal activity in the 300,000-SF to 400,000-SF range.
The economy still appears strong as we approach the end of
2019 but with some caution related to tariffs and a potential
trade deal with China. According to the Federal Reserve,
the St. Louis unemployment rate dropped to 3.3% in August
from 3.6% earlier this year. The local rate is below the
national unemployment rate of 3.7%. The U.S. Bureau of
Labor Statistics reported that nonfarm employment grew
1.9% for the St. Louis region from August 2018 to August
2019. This growth rate is tied with Nashville and higher
than Kansas City (1.8%), Chicago (1.0%), and the nation as a
whole (1.4%). However, a slowdown in U.S. Gross Domestic
Product (GDP) growth is expected per the monthly national
economic forecast conducted by The Wall Street Journal. The
forecasted rate for 2019 is 2.2% with economists predicting
1.7% growth for 2020 and 1.9% in 2021. The Federal
Reserve Bank cut interest rates in both July and September
of this year as a preemptive move to hold off a potential
UNDER CONSTRUCTION BY BUILDING TYPE
RECORD LEVELS
UNDER CONSTRUCTION
market downturn. An additional cut may be imminent. The
Commerce Department reported that durable goods orders
dropped by 1.1% in September after another large drop of
2.3% occurred in May. Market experts are cautious about
the national economy in 2020, but continuing eCommerce
and 3PL leasing activity across the U.S. will help buoy the
St. Louis market into the coming new year.
UNDER CONSTRUCTION BY SUBMARKET
Build-to-Suit Speculative
60% 40%
5.4 MSF
OF CONSTRUCTION IS EQUAL TO
3.65 Busch Stadiums
St. Charles
County
Airport
Earth City
Westport
St. Louis City Hanley
Metro East
North County
Fenton
43.4%
18.6%
12.3%
8.6%
6.8%
4.6%
3.7%
0.3%
1.7%

3. 3COLLIERS INTERNATIONAL St. Louis, MO Research & Forecast Report | Industrial 3Q 2019
INDUSTRIAL MARKET BY SUBMARKET
SUBMARKET
NUMBER OF
BUILDINGS
EXISTING
INVENTORY (SF)
OVERALL
VACANT SPACE
(SF)
OVERALL
VACANCY RATE
YTD NET
ABSORPTION
(SF)
UNDER
CONSTRUCTION
(SF)
YTD
DELIVERIES
QUOTED
RATES
Airport 211 18,981,001 1,067,193 5.62% (105,552) 1,014,019 0 $4.23
Earth City 289 24,476,622 2,132,999 8.71% (191,165) 250,000 0 $4.30
Westport 419 16,859,614 1,038,099 6.16% 240,870 92,450 0 $5.00
St. Louis City 859 62,315,733 2,695,936 4.33% (52,385) 201,337 33,000 $4.35
Metro East 249 34,041,211 2,461,334 7.23% 1,495,692 2,371,992 1,292,410 $4.08
Mid-County 464 19,836,017 823,281 4.15% (48,883) 0 0 $5.09
Chesterfield 129 4,572,323 297,182 6.50% (66,698) 0 20,000 $7.41
Hanley/Brentwood 188 5,458,269 53,751 0.98% 117,939 15,958 0 $7.73
Fenton 314 14,449,710 1,192,496 8.25% 143,884 372,750 169,000 $7.08
South County 195 8,180,583 390,136 4.77% (62,083) 0 0 $8.20
North County 67 6,280,968 747,301 11.90% 655,937 472,552 493,000 $4.39
West County 37 2,101,957 45,713 2.17% 17,360 0 20,000 $9.00
Jefferson County 69 2,516,667 29,186 1.16% 0 0 0 $2.25
St. Charles County 439 23,826,516 1,758,440 7.38% 841,168 673,200 1,847,851 $4.88
MARKET TOTALS 3,929 243,897,191 14,733,047 6.04% 2,986,084 5,464,258 3,875,261 $4.29
Q3 2019 Submarket Snapshot
SUBMARKET COMPARISONOVERALL VACANCY RATE & DIRECT AVG. RENTS
INDUSTRIAL MARKET BY PROPERTY TYPE
PROPERTY TYPE
NUMBER OF
BUILDINGS
EXISTING
INVENTORY (SF)
OVERALL
VACANT SPACE
(SF)
OVERALL
VACANCY RATE
YTD NET
ABSORPTION
(SF)
UNDER
CONSTRUCTION
(SF)
YTD
DELIVERIES
QUOTED
RATES
Warehouse/Distribution (WD) 211 18,981,001 1,067,193 5.62% (105,552) 1,014,019 0 $4.23
Office Service (OS) 289 24,476,622 2,132,999 8.71% (191,165) 250,000 0 $4.30
Manufacturing (MF) 419 16,859,614 1,038,099 6.16% 240,870 92,450 0 $5.00

4. 4COLLIERS INTERNATIONAL St. Louis, MO Research & Forecast Report | Industrial 3Q 2019
NOTABLE SALES TRANSACTIONS
PROPERTY SUBMARKET PRICE SF PRICE SF TYPE
21-27 Gateway Commerce Center Dr W Metro East $48,500,000 1,056,948 $45.89 WD
7100 Hazelwood Ave Airport $6,100,000 316,665 $19.26 WD
13333 Lakefront Dr Earth City $12,200,000 189,555 $64.36 OS
5531 Phantom Dr Airport $5,400,000 129,000 $41.86 WD
11100 Linpage Pl Mid-County $4,125,000 118,000 $34.96 WD
NOTABLE LEASE TRANSACTIONS
TENANT SUBMARKET PROPERTY RSF TYPE TRANSACTION
World Wide Technology Metro East Gateway Commerce Center 1,000,000 WD New Lease
World Wide Technology Metro East 3965 Lakeview Corporate Dr 540,000 WD Renewal*
Medline Industries, Inc. Metro East 1659 Sauget Business Blvd 300,481 WD Renewal*
Amcor Rigid Plastics Airport 5801 N Lindbergh Blvd 222,563 WD Renewal*
Legacy Pharmaceuticals Earth City 13333 Lakefront Dr 189,555 WD New Lease
*Renewals not included in leasing activity
TOP UNDER CONSTRUCTION PROJECTS
BUILDING NAME ADDRESS SUBMARKET TYPE CONSTRUCTION SF DELIVERY
WWT Facility 2 Gateway Commerce Center Metro East WD BTS 1,000,000 Q4 2019
Medline BTS Premier 370 - Lot 38 St. Charles County WD BTS 811,300 2020
Exeter - Building A
Gateway Commerce Center 1
100 Inner Park Dr Metro East WD Spec 674,752 Q4 2019
Gateway Tradeport-Building 1 5106 State Route 111 Metro East WD Spec 543,740 Q4 2019
Aviator 9 6201-6243 Aviator Dr Airport WD Spec 415,439 Q4 2019
TOP CONSTRUCTION COMPLETIONS
BUILDING NAME ADDRESS SUBMARKET TYPE CONSTRUCTION SF SF AVAILABLE
WWT Facility - 1 Gateway Commerce Center Metro East WD BTS 1,000,000 0
Premier 4000
Amazon Fulfillment
4000 Premier Pkwy St. Charles County WD BTS 855,080 0
Hazelwood Trade Port
Building III
1601 Tradeport Dr North County WD Spec 493,000 368,000
FedEx Distribution
Premier 370
10000 Elm Point Rd St. Charles County WD BTS 490,000 0
Premier 1001 1001 Premier Pkwy St. Charles County WD Spec 375,200 375,200

5. 5COLLIERS INTERNATIONAL St. Louis, MO Research & Forecast Report | Industrial 3Q 2019
270
170
70
64
44
55
55
255
270
AIRPORT
NORTH COUNTY
EARTH CITY
MID COUNTY
HANLEY
FENTON
SOUTH COUNTY
Greater St. Louis Region
SUBMARKET MAP
N
JEFFERSON COUNTY
ST. CHARLES COUNTY
ST. LOUIS CITY
CHESTERFIELD
WEST COUNTY
WESTPORT METRO EAST

6. MARKET CONTACT
C. Kevin Gallagher, CCIM, SIOR
Executive Vice President and Managing Director | St. Louis
REGIONAL AUTHORS
Allison Gray | Senior Director of Marketing & Research
Molly Mastin | Director of Marketing
Colliers International | St. Louis
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