The St. Louis commercial real estate market looks healthy for the new year, according to panelists at MetroWire Media’s first-ever St. Louis Market Forecast Summit, held at Green Street Real Estate Ventures’ new office HQ on March 2, 2022.
Moderated by Teri M. Samples, CPA, TPR, real estate partner, WIPFLI | Mueller Prost, panelists included Paul Giacoletto, president, Green Street Building Group; Mary Lamie, executive vice president, multi-modal enterprises, Bi-State Development; Jarrett R. Cooper, VP/St. Louis studio director, Rosemann & Associates, P.C.; and Danielle Grubbs, director, Cushman & Wakefield.
“We’ve heard a lot about pivot and change,” Samples said in opening the session and asking for panelists’ perspectives on the past year and upcoming one.
Infrastructure expansion
In the wake of the pandemic, “there is much greater awareness of the importance of infrastructure,” said Lamie. “Redundancy and a robust infrastructure here have benefited the St. Louis area. We were well-positioned. The rail area should continue to do well.”
St. Louis is the third-largest rail hub and inland port in the nation, with the most-strategic location on the Mississippi River. Redundancy with bridges and highways makes it easy for businesses to switch between truck, rail and river to get supplies and equipment transported and delivered. Availability may currently be a weakness, Lamie said, but the transportation sector is already looking toward flexibility.
Bi-State aims to launch new options for containerized cargo on new river vessels that will be able to transport 1,000 containers, in part by triple-stacking. The hub-and-spoke concept and plans to fabricate such vessels are in the works for a site in Herculaneum, Mo.
Lamie also noted that COVID-19 has enhanced the focus on replacing bridges to double capacity and adding lanes to highways. “Our capacity will continue to increase and we will be more competitive,” she said.
Office and Retail aspects
According to Giacoletto, being able to work from home and communicate via online meetings has kept business going, but there has been a drop in mental health and the quality of customer service.
“Nobody really knows what will happen with mask mandates and other safety precautions, and we haven’t settled on what office life will look like yet, but there is a huge psychological advantage if we can go back to the office,” he said. “It’s healthier mentally if we can be back in the office.”
Indoor fast-food restaurant service is a thing of the past, Giacoletto said, because so many locations have found that they make as much from drive-through service as from indoor service at less cost.
The real estate collapse of the past related more to financial markets where today, the issue is likely to be “inflation, inflation, inflation,” Giacoletto said, “but the market won’t slow down.”
He expects both the office and residential markets to experience a need for less personal space and a greater demand for shared or amenity space.
“A constant we will see in retail is that malls will be gone in twenty years,” he predicted. “Retail will become much more walkable with an urban feel.”
Multifamily growth
The multifamily market is going strong now and has discovered flexibility, Cooper said.
“We sent everybody home when the pandemic began, but it was awesome that we could still get together (virtually). We figured out what we had to do and worked beyond the office on construction sites. We learned that it takes a team — being a collaborative team member is more important than ever.”
A lot of multifamily projects are going up now because the housing sector had been underactive, Cooper said, and there is a growing demand for luxury amenities.
“The single-family market is starting to catch up, but the cost of entry is higher. We are seeing more people opting for rental units — empty nesters, as well as people coming out of college with high expectations for their apartments. There will be a lot more upgrading of existing apartments to meet those demands.”
Retail and industrial evolution
Grubbs has seen a key lesson of the past two years as “we need the flexibility to function at our highest capability. St. Louis is unique because we have both downtown and areas like Clayton [that create] a great market with lots of opportunities.” Industrial space is becoming retail in response to the e-commerce trend, she noted.
“The industrial sector has been a bright spot in the economy,” Samples said. “I’ve heard that St. Louis stands out very favorably compared to the rest of the nation.”
Continuing challenges
While the overall market forecast for St. Louis looks positive, the cost of materials remains a challenge.
“The market ebbs and flows. It is hitting the point where something has to give. Prices go up and money is available, but it has to slow down,” Giacoletto said.
One approach for mitigating or coping with the current high cost of materials is to look at alternatives.
“I’ve seen flexibility — we have had to change materials because of what’s available,” Cooper said. “It affects when you can finish a project.”
Lease times have also been affected by the pandemic and are starting to return to advantageous terms.
“No one wanted to commit to long-term leases, but now we’re doing 10-year deals to cover costs,” said Grubbs. On the other hand, buildout times have doubled.
Optimism rules
Predictions for the new year included that “things will be OK — we will see some sort of adjustment,” according to Giacoletto. “Industrial will continue to be very strong.”
“The multifamily housing market will continue to be strong, with development focusing on [continued] work from home and more innovation in infrastructure,” Cooper said. “It will be important to have WiFi wherever you are.”
Grubbs said accessibility and investing in space will be important trends.
Lamie expects transportation times to improve and Bi-State’s projects to contribute to the economy by bringing increased manufacturing and more jobs to the region.
In essence, Samples is seeing “good things happening now that we can build on” and MWM summit panelists agreed that 2022 should be a profitable and positive year for commercial real estate in the St. Louis region.
In addition to venue host Green Street Real Estate Ventures, sponsors included Cushman & Wakefield, Brinkmann Constructors, Contegra Construction and Rosemann & Associates.
The event was the first for MWM in St. Louis and attracted over seventy attendees. Make sure you are signed up for the STL MWM Newsletter, so you don’t miss future events and STL CRE news! SUBSCRIBE HERE.
Check out the Event Photo Album HERE.