New Headquarters Construction Drives Office Growth Along Highway 40
The office market in Chesterfield, a suburb of St. Louis, has undergone tremendous growth in the past two years. In particular, the I-64/Highway 40 corridor within the West St. Louis County submarket has experienced a flurry of activity highlighted by the construction of several corporate headquarters as well as expansions.
The corridor, which stretches from Clayton to Chesterfield, boasts a highly visible central location, proximity to high-end housing that appeals to corporate executives, newer buildings that bode well for future resale or leasing, and convenient interstate access.
With a Class A vacancy rate of only 7.6 percent, the West St. Louis County submarket is experiencing a shortage of available blocks of office space of 50,000 square feet or more. Corporations desiring to locate along the prestigious corridor are relocating from older Class B space to existing or build-to-suit Class A properties.
In fact, new construction during the last two years added 774,000 square feet of office space to this submarket, of which all but 50,000 square feet was already committed upon delivery. Less than 50,000 square feet was considered speculative.
Magnet for headquarters
RaboAgrifinance will relocate its corporate headquarters from Creve Coeur Pointe to the new Delmar Gardens III at 14767 N. Outer 40 Road in Chesterfield.
Construction has begun on the 125,000-square-foot office building, which is slated for completion in the summer of 2017. RaboAgrifinance will lease 75,000 square feet of the new building, relocating and expanding its footprint by almost 20,000 square feet.
Additionally, MiTek recently completed a new 99,000-square-foot headquarters building in Chesterfield.
A new 405,000-square-foot global headquarters for Reinsurance Group of America (RGA) was the largest office project in St. Louis since Centene Plaza was completed in 2010. RGA’s build-to-suit is located at 16600 Swingley Ridge in Chesterfield.
The 17-acre complex includes two five-story towers connected by a two-story atrium lobby and nearly 600,000 square feet of parking. The complex has been designed with an expanding workforce in mind, including a third building in the future.
At Timberlake Corporate Center III in Chesterfield, Edgewell Personal Care leased 44,000 square feet for its
headquarters at 1350 Timberlake Manor Parkway.
In May 2015, Centene Corp. expanded its corporate staff and leased a total of 180,000 square feet at Timberlake Corporate Center II and III. Six months earlier, Centene had leased approximately 123,000 square feet at Woodmill Commons I and II, resulting in a total 300,000 square feet of new absorption within a 12-month period.
Suburban submarkets shine
As a whole, suburban office space is in higher demand than office space in the city. Tenants absorbed 1.61 million square feet of suburban space from the start of 2012 through the first quarter of 2016. In that same period, the entire St. Louis office market absorbed 1.59 million square feet.
During 2015 and the first quarter of 2016, 74 leases of more than 10,000 square feet were completed. Of those, 35 were located in West St. Louis County, and 13 were in Clayton.
In contrast to the West St. Louis County submarket, the North County submarket has become a hotbed for cost-conscious corporations looking for high-density office space to house either back-office or call center operations.
The vacancy rate for Class A space in North County fell from 14 percent at the end of 2014 to 6 percent at the end of 2015 as major tenants absorbed large blocks of space and took advantage of large, efficient floor plates, high parking ratios and lower rents.
Expect growth to spread
With Chesterfield’s lack of suitable sites zoned for office construction — other than infill sites off the highway — and limited availability of large blocks of office space, corporations will need to consider alternative areas to accommodate larger space requirements.
One example is the Spirit of St. Louis Corporate Center in Chesterfield Valley, a 14-acre site that can accommodate up to 260,000 square feet of office space, has surface parking at a ratio of 5.5 spaces per 1,000 square feet and direct access to Interstate 64/Highway 40.
Future growth will be forced to migrate west along the Interstate 64/Highway 40 corridor to Chesterfield Valley and St. Charles where less expensive, quality space and land are available.
— By Jim Mosby and Scott Bazoian, Executive Managing Directors at Cushman & Wakefield. This article originally appeared in the June 2016 issue of Heartland Real Estate Business.