Downtown St. Louis, Missouri office market rents about the same as it did in 1985
Rents at the major Class A office buildings in downtown St. Louis in 2008 are the same, or very similar, to the rents paid twenty-five years ago in 1985. As St. Louis recovers from several corporate acquisitions major cities, corporate relocations coming out of St. Louis, and a struggling revival of trendy residential urban living, commercial real estate housing corporations have surprisingly low occupancy costs … perhaps the lowest for a major city in The question is: do these low prices represent a solid market value to attract and retain renters in St. Louis? Or does it herald a more sinister fatal economic reality – that there has been plummeting negative growth in commercial real estate income – that in fact reveals that downtown St. Louis commercial real estate is dead in terms of return on investment. , stock appreciation or value? From any point of view, the lease rates that are the same or similar in 2008 to those in 1985 are beyond intelligent explanation. Any attempt to put a positive spin, other than to express what dealing with tenants is to maintain and expand their presence, would seem ridiculous.
PROBLEM OR OPPORTUNITY? It only takes a brief review of actual examples to get a barometer of St. Louis’ economic positioning. (Rates shown are per profitable square feet per year, full service leases.) The following list is presented in the following order: Building name, 2008 rate Source: Building’s current publicly quoted rates, 1985 rate Source: BOMA Leasing Guides 1983-85 and former leasing manager, and change for 25 years.
1010 Market $ 16.50 $ 18.00 loss of $ 1.50
Mercantil / USBank $ 19.50 $ 18.00 gain of $ 1.50
St. Louis Place $ 17.00 $ 18.50 loss of $ 1.50
MCI / Delloitte $ 21.00 $ 21.00 unchanged
One Financial Plaza $ 19.50 $ 19.50 unchanged
Centerre / Bank of Am $ 20.00 $ 19.00 $ 1.00 profit
701 Market $ 22.00 $ 21.00 profit of $ 1.00
Plaza Metropolitana $ 21.00 $ 20.00 profit of $ 1.00
The real estate industry market data and trends use known vacancy factors and rental rate facts to inform the media about the “state” of the market … actually, the state of buildings and from which the Reader must discern market conditions. Vacancy ranges, often sold to the media by real estate brokers and landlords, convey the impact to the real estate owner, investors and builders and developers, without leaving any real value to the engine of the economy, the tenant. . Tenants of all business types and sizes have no real insight into how market data impacts their occupancy costs, opportunities, or threats. Consequently, when information regarding the tenant and a tell-tale indicator of underlying market conditions is available, this information should be shared. In the past, all of this data was kept private between real estate brokers and data houses like CoStar and Loopnet, which report only information related to the building. It is not in the interest of any owner or broker to convey the real economics of the proposed or closed lease transactions; or how current rates compare to 25 years ago.
In these examples, you can see that instead of seeing old tracking information on non-tenant related information (e.g. vacancy factors, shadow vacancies, construction beginnings), tenants can get a crisp, on-time snapshot realities of current market realities never before provided. Indeed, with inflation over the past 25 years at roughly 118% (CPI, all urban consumers 1983 = 99.6 and 2008 = 216.63), rents in downtown St. Louis simply stopped in time. like a fly in ancient sap.
What’s worse is that during the 1980s, when several of these buildings were built, they were provided with a tax cut that effectively halved the real estate tax in effect at the time, allowing the owner to spend. less in taxes and pass it on to tenants. . That reduction has now expired and buildings have been fully taxed for some time; however, despite this, rents are still frozen in the Reagan administration.
The bigger question is: Does this data suggest that building owners and investors don’t have a good investment in downtown St. Louis, or are renters realizing the great deal in downtown St. Louis compared to downtown St. Louis? county or even 1985, or is it downtown St. Louis? It just can’t compete with other cities or St. Louis County, and or is this data an indication of the city’s income tax burden?
On this premise, over the course of the last year, there are numerous examples of additional information that is NOT part of the routinely reported real estate market data, however, it is part of the actual market realities. A tenant of a publicly traded business (whose lease is part of the public record), who moved within St. Louis County, succeeded in getting the new owner to pay for a full year of the tenant’s existing rental agreement; Another tenant in St. Charles County (a sprawling suburban market west of St. Louis) was offered one year of free rent, plus an extremely high tenant improvement allowance as an incentive to lease his building, such as Two examples.
St. Louis has long tried to respond to the changing gravity of more progressive cities. The former river town, once heavy on the railroad business, hat and shoe making, department store businesses and beer producers, now faces the added burden of trying to convince commercial real estate investors of bargains in value and the hopeful rise in rental rates will pay off in the future.
The immutable data for office rentals suggests that 1) renters in downtown St. Louis should thank their lucky stars, 2) current owners have little hope that the market will appreciate, 3) sellers do not they will have no choice but to sell low, and 4) new investors can buy low, but are likely to face flat or negative asset growth and appreciation (depending on capitalization). Choose your option. It’s good news for tenants, bad news for homeowners and investors; and perhaps very worrying for St. Louis as a downtown urban center trying to gain competitive ground within its region and with other major cities.