Consumers are loosening their wallets in St. Louis, and the thaw in spending has given the local retail market a much-needed shot of adrenaline. The discount retailer is still king, but new concepts and developments are gaining ground. With positive absorption of space on the rise, investment sales are increasing.
St. Louis is poised to see a major development in the central trade area at the former Hadley Township site. After several failed attempts at development in the past 10 years, Hadley seems destined for redevelopment at last. The 40-acre site is located on I-64 in the central suburb of Richmond Heights and will consist of an assemblage of 150-plus commercial and residential parcels.
In the southern half of the development, Menards was selected by the city over Costco and will open one of its first St. Louis locations in early 2014. The site plan includes a 240,000-square-foot store with additional out parcels for retail and restaurant users.
In the northern half, Pace Properties has received approval to develop a two-story, 400,000-square-foot, big-box store for an as yet unnamed retailer. This development will further enhance the desirability of the Richmond Heights/Brentwood area as a retail destination and will boost asking rents in the vicinity.
In Chesterfield Valley, located in the west trade area, competition is brewing between two outlet mall developers. T-O Ventures LLC and Simon Properties Group/Woodmont Outlets are vying to build competing 400,000-square-foot outlet centers.
The centers would be approximately 3.5 miles apart. Simon Properties has already announced the signing of its anchor tenant, Saks Fifth Avenue’s OFF Fifth, which would be the first Missouri location for the retailer. T-O Ventures has declined to name tenants, but has moved forward with the groundbreaking. While both sides concede that only one center will be built, neither side is backing down.
Other developments in the planning stage include proposed Walmart stores in Ellisville, Shrewsbury and Florissant; a Sam’s Club in Glen Carbon; the Lindenwood Town Center in St. Charles anchored by a Schnucks supermarket; and a mixed-use redevelopment of the 122-acre Northwest Plaza site in St. Ann.
National Retailers Expand
The St. Louis market suffered through high vacancies and lower rents during the recession years of 2008-2010, a time when many retailers such as Ultimate Electronics, Borders and Linens ‘N Things vacated mid-box spaces.
However, we are starting to see a light at the end of the tunnel. In a promising indicator of recovery, several national retailers are entering the market including hhgregg, Nordstrom Rack, Ross Dress for Less, Five Below, buybuyBABY, Savers and Menards.
The fast casual hamburger restaurant trend has hit St. Louis with chains like Five Guys Burgers and Fries and Smashburger opening multiple restaurants, and many local start-ups joining in as well.
Other restaurant concepts new to the area include Cheddar’s, BrickTop’s, BlackFinn American Grille, Firehouse Subs, Pita Pit, Potbelly Sandwich Shop and Panda Express.
These new concepts are capitalizing on the increase in consumer spending while benefiting from aggressive landlords willing to grant concessions in order to fill vacancies.
Positive absorption during the last three quarters combined with optimistic projections for 2012-2014 has resulted in higher leasing rates that will continue to rise in light of the current outlook.
The positive absorption will continue, driven in part by the expansion of discounters such as Ross Dress for Less, Stein Mart, Big Lots, ALDI, Savers and others.
Investments Take Off
The economic recovery has not only spurred leasing and development in St. Louis, it has also positively affected investment sales.
The largest sale in the area was Plaza Frontenac, a 500,000-square-foot upscale mall that features Saks Fifth Avenue and Neiman
Marcus. General GrowthProperties paid $135.5 million for a majority ownership stake in the mall.
Several grocery-anchored centers have also sold including:
• Heritage Place, a 270,000-square-foot center anchored by Dierbergs, Petco, Marshalls, T.J. Maxx and Office Depot, which sold to Ramco-Gershenson for $39.4 million;
• Town & Country Crossing, a 282,000-square-foot center anchored by Whole Foods and Target, which also sold to Ramco-Gershenson for $37.8 million;
• Hilltown Village, a 149,000-square-foot center anchored by Schnucks, which sold to the Montgomery Family Trust for $17.2 million.
— Peter Sheahan is a principal at NAI DESCO, a St. Louis-based commercial real estate brokerage firm.