Without question 2015 was a “great year” for the St. Louis retail market, says Adam Glosier, senior vice president with Colliers International. “New users entered the market and few vacated. The St. Louis retail landscape benefitted from the continued expansion of organic grocers, sporting goods operators, quick service restaurants and soft goods retailers.”
At the end of the third quarter, the vacancy rate stood at 7.1 percent, unchanged from the prior quarter but down from 8.2 percent a year earlier, according to CoStar Group. Net absorption totaled 579,206 square feet during the third quarter, bringing the year-to-date total to just under 900,000 square feet.
Six new retail buildings were delivered in the third quarter, which collectively brought 612,595 square feet to the market. The gross leasable area (GLA) of the 29 buildings under construction at the end of the third quarter totaled 915,751 square feet.
“There was a lot of activity in 2015 in the freestanding and small retailer market, as well as activity from junior anchors,” says Christopher Zoellner, senior vice president of retail with Balke Brown Transwestern. “This has created strong activity and a good pipeline going into 2016.”
IKEA Makes ‘Big Splash’
A few retailers opening new stores in the St. Louis retail market dominated development and leasing activity in the third quarter.
S.M. Wilson & Co. completed the development of a new 380,000-square-foot IKEA store. The retail project, located a few miles from downtown St. Louis, was the largest to come on line in 2015. The next closest IKEA store to St. Louis is over 250 miles away in Merriam, Kan.
“The big splash in the retail market in the third quarter was from IKEA,” says Zoellner. “The success of IKEA thus far has helped to justify the entry into this submarket for many other retailers who should start to show themselves in 2016.”
Menards, a home improvement retailer, moved into a newly constructed 200,000-square-foot building in the North St. Louis County submarket during the third quarter. The project was the second largest delivery for 2015, but Menards isn’t stopping there.
Contegra Construction is developing another store for Menards — this one totaling 215,000 square feet. The Menards store, which will be delivered in Central St. Louis County in the first quarter of 2016, was the largest project under construction at the end of the third quarter.
Gander Mountain also remained a big player in the third quarter by moving into a newly built 61,000-square-foot store at 1230 Central Park Drive in O’Fallon in the Metro East Illinois submarket. Gander Mountain, an outdoor specialty retailer, also signed a new lease at 18491 Outlet Blvd. near St. Louis Premium Outlets in Chesterfield where it will occupy 60,000 square feet.
In addition, South Side Property LLC will deliver yet another new store for Gander Mountain in West St. Louis County. This store, which is expected to come on line during the first quarter of 2016, will provide another 60,000 square feet for the rapidly expanding retailer. The project was the third largest under construction in the market at the end of the third quarter of 2015. Within a period of two quarters, Gander Mountain has occupied or committed to occupying 181,000 square feet of space.
On the Horizon
With national and local retailers looking to enter the St. Louis retail market, absorption should remain positive for the foreseeable future, says Glosier.
During 2016, Academy Sports plans to open numerous locations. Meanwhile, SteinMart is set to open a new store in Town and Country in West St. Louis County. Fresh Thyme is coming to Kirkwood, and Total Wine & More will open a store in Chesterfield.
“From a retail perspective, the large anchor tenants have been pretty well built out over the metro area over the past few years, so large-scale projects have been few and far between,” says Zoellner. “I see most of the activity coming from smaller retailers, including freestanding restaurants, convenience stores and specialty grocers.”
The pace of new construction historically has not kept up with demand, but Glosier foresees the ratio of new supply to demand evening out.
Zoellner agrees with Glosier. “Assuming projects can get approved, I feel that construction should keep up with demand.”
John Shuff, senior vice president for Gershman Commercial Real Estate, says the dynamic retail landscape will continue to evolve over the next 18 months. “Smaller retailers will continue to disappear while mid-box, big-box and food-related tenants will continue to look for locations.”
— By Christina Cannon, Associate Editor of Heartland Real Estate Business. This article originally appeared in the January 2016 issue of Heartland Real Estate Business magazine.