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Consumer spending in St. Louis is up, according to the latest Federal Reserve Beige Book. Likewise, the Fed reports that residential real estate activity is increasing at a moderate to strong pace with escalating home sales and prices. All around, there is a sense of optimism that has jump-started retail activity.
The vital signs are just starting to reflect this surge in activity and are expected to continue improving for the foreseeable future. Asking rates, averaged across all retail sectors, have remained near $12 per square foot triple net over the last three quarters, while vacancy rates have fallen from 9 percent to 8.5 percent during that same period.
Net absorption has seen positive gains over the last three quarters with the delivery of a few new fully occupied projects. These positive changes in absorption and vacancy rates should result in higher asking rates going forward.
Competitive Landscape
An example of a successful project is in Chesterfield Valley, where two outlet mall developers have created more than 660,000 square feet of new retail space within a two-mile radius. The two projects, headed by Taubman Prestige Outlets and Simon Property Group, will open this month in time for back-to-school shopping. The projects are touting occupancy rates of 90 percent and 100 percent, respectively, at the time of opening.
In Maplewood, Deer Creek Shopping Center has undergone a redevelopment, raising occupancy from 30 percent to 97 percent. The 216,000-square-foot center was originally built in 1980 and anchored by Venture. Buy Buy Baby, Ross Dress for Less, Gordon Foods, Marshalls and other national retailers anchor the center.
Several projects currently in the pipeline could have an effect on net absorption. The largest of these projects is in the north trade area. The
redevelopment of the former Northwest Plaza shopping mall, which has been renamed the Crossings at Northwest, calls for a large portion of the mall to be torn down and replaced with a multi-anchor power center.
Plans for the new 400,000-square-foot center include a freestanding Menards, other potential anchors and numerous outlot users. In addition, there is a 250,000-square-foot office component to be completed in the fourth quarter of 2014. Occupancy rates are unknown at this time.
Another project currently in the works is Ballpark Village, a mixed-use development at the site of the former Busch Stadium. After stalling during the recession, construction finally began on Phase I in February with 100,000 square feet of retail and entertainment space scheduled for completion in spring 2014.
Current committed tenants at Ballpark Village include Anheuser-Busch Brewhouse, a restaurant and beer garden, and the Cardinals Nation
museum, bar and restaurant. In addition, Professional Bull Riders Inc. will open PBR St. Louis: A Cowboy Bar in April 2014.
Vibrant Restaurant Scene
The most active segment of St. Louis retail seems to be the restaurant niche. Restaurants are slowly helping absorption by backfilling vacant space. Both existing restaurants and new concepts are expanding in the market. Existing restaurants include Chick-fil-A, Chipotle, Crushed Red, Dunkin’ Donuts, Jimmy John’s Gourmet Sandwiches, Panda Express, Potbelly Sandwich Shop and The Original Pancake House. New concepts to the market consist of 801 Chophouse, the Egg & I, Cheddar’s, Jet’s Pizza, Moe’s Southwest Grill, Subliminal Grilled Subs and More, Raising Cane’s, Which Wich Superior Sandwiches and Z Pizza.
The junior-box segment has also been active, and spaces have been backfilled with discount and thrift stores. New to the market are Ross Dress for Less, Five Below, h.h. gregg, Gordon Foods, Fresh Market, Anna’s Linens, Savers thrift store and Red Racks Thrift Store. These retailers, along with Aldi and Goodwill, are expanding into space vacated by Linens ‘n Things, Ultimate Electronics, Borders, Barnes & Noble and Circuit City.
Big-box retailers are showing signs of activity as well with Walmart in the due diligence stage in Ellisville (in the west trade area), Shrewsbury (in the south trade area) and Florissant (in the north trade area). Sam’s Club has one project under construction in Glen Carbon (the Illinois north trade area). Menards, a newcomer to the St. Louis market, has opened two stores with plans for a third store in the west trade area. In addition, Menards continues to pursue the Hadley Township redevelopment and the Crossings at Northwest.
Asking rates in St. Louis will hinge on the anticipated changes to absorption. While average rates for in-line, second-generation space remains slightly above recession levels, the highly desirable centers, particularly those in the central trade area, still command high rents with minimal tenant improvement allowances. However, the average rent should increase across the board if absorption continues its positive upward swing.
— Josh Hibbits, vice president, NAI DESCO