76
Downtown St. Louis has always marched to the beat of a different drummer. Despite a sluggish economy and a history of major corporations leaving for a variety of reasons, the downtown office market has experienced steady, incremental growth that has been reflected by the positive absorption since 2009.
Much of this growth is due to tenants looking to expand or relocate in order to take advantage of the many options downtown, which generally are less expensive than suburban locations. Since 2012, downtown St. Louis has gained 425,000 square feet of positive absorption in the office sector.
New Life for Older Buildings
Recent building renovations also play a part in the growth. Creative companies are looking for open, contemporary facilities, which can be found in old buildings that have been redeveloped.
These revitalized buildings now offer new infrastructure and modern space that exude a cool look and vibe. Indeed, that trend can be found in historic structures like the 450,000-square-foot Park Pacific, once the headquarters of the Missouri Pacific Railroad and now 80 percent luxury apartments and 20 percent office (tenants are CBS Radio and Creative Producers Group) and retail space.
Cupples 9, a 144,000-square-foot building that was once part of a large-scale group of factories and warehouses, is now an office building with tenants such as marketing and branding firm Osborn Barr, information technology consultant Asynchrony and earphone manufacturer Yurbuds.
During the last several years, St. Louis has had success converting architecturally historic buildings that were vacant and in disrepair and turning them into modern office facilities. These buildings feature high ceilings, wood beams and exposed duct work, which gives the office environment an open, creative feel that appeals to office workers.
Configuring office space for more collaborative, small-group settings rather than traditional offices fosters teamwork — a trend found across the country. Many companies find this to be a solution in reducing occupancy costs and increasing productivity.
In addition, corporate and regional headquarters located in downtown St. Louis such as US Bank, Wells Fargo, Stifel, Conagra, Gateway EDI and Nestle are contributing to the growth of the office market by expanding operations and absorbing Class A office space. As these companies grow and make acquisitions, they continue to add employees, hence the need for additional office space.
The combination of a low cost of living, inexpensive real estate and a talented labor pool has helped draw companies to St. Louis. As states and cities compete to attract new businesses, companies often are offered additional incentives for either relocation purposes or to expand their workforce. St. Louis was able to persuade The Hudson’s Bay Co. to move its information technology operations from Toronto to the 500 Broadway building downtown. Hudson’s Bay is creating an additional 225 jobs thanks to tax incentives for new job creation.
Millennials Act As Catalyst
Another contributing factor to the steady growth downtown is the improved amenities — shops, restaurants, hotels and parking. This leads to a trend that’s occurring across the nation: Millennials who are in their mid-20s are interested in an urban lifestyle and a vibrant downtown in which to work and live.
Downtown St. Louis already is seeing an influx of millennials looking to move out on their own and into apartments. Young adults fresh out of college often have a high amount of student loan debt, and they find home ownership more challenging.
Rather than spending weekends mowing the lawn and maintaining a home, millennials are interested in outdoor activities and events. They fit the perfect renter profile, and they tend to rent for a longer period of time as they pay off student loans.
Millennials, along with working professionals and empty nesters, are living downtown in modern apartments and condos that are often in renovated buildings. They are keenly interested in luxury apartment living and all of the excitement and activities of an urban lifestyle.
The numbers are revealing. In 2000, there were 7,200 residents in the central business district. Today, more than 14,000 people reside in the CBD. This trend has created demand for even more mixed-use retail and entertainment facilities that are being built within vacant buildings or on vacant parking lots.
The latest examples, Mercantile Exchange (MX) and Ballpark Village, are immediate answers to demand and will spur further development. The 145,000-square-foot MX is a shopping, dining, entertainment, arts and culture, commercial and residential destination downtown. The district is comprised of the area surrounding the MX and Laurel Buildings at 7th Street and Washington Avenue.
Ballpark Village is a mixed-use retail, entertainment, office and residential district covering seven city blocks on 10 acres north of Busch Stadium. Downtown is evolving into a place where people can live, work and play.
Big Challenge Ahead
An interesting opportunity will present itself when AT&T vacates one of the largest buildings downtown in 2017. Built and occupied by AT&T, the 1.1 million-square-foot building represents almost 10 percent of the office space downtown.
For St. Louis to make the next major step toward an urban environment, city and state officials, along with business leaders, will need to combine efforts to attract a new local company headquarters or expand an existing operation. It’s a big hill to climb, but with the proper planning it could put St. Louis in the spotlight and provide even more opportunities for growth downtown.
— Rick Messey, senior managing director and principal, Cassidy Turley