The old adage that every cloud has a silver lining holds true for the St. Louis industrial market. After posting positive absorption during every quarter of the current recession, the industrial market got cloudier when Chrysler shuttered its St. Louis plants during the early part of the third quarter. That placed more than 5.1 million square feet of space on the market and boosted the vacancy rate a couple points. The auto industry’s woes trickled down to a number of Chrysler’s suppliers as well. Another 2.1 million square feet of auto supplier buildings also became available.
So where’s the silver lining? Actually, there are several. For starters, Chrysler’s plants and its suppliers are primarily located in the South County submarket. Historically, South County has been one of the area’s strongholds for industrial, with a vacancy rate of only 4.2 percent at the end of the second quarter. The availability of space now opens up opportunities for large and small users. A number of companies have already taken advantage of these opportunities. Colt Industries, the area’s distributor for Corian countertops, purchased a nearly 100,000-square-foot building formerly occupied by Dakkota Integrated Systems, which supplied vehicle interiors. An aerosol can supplier has signed a letter of intent for nearly 247,000 square feet formerly occupied by a seat supplier. A printer is negotiating to lease nearly 118,000 square feet in a building used by Oakley Industries, another Chrysler supplier. In all, deals have been completed or are in the works for more than 40 percent of the space formerly used by Chrysler suppliers.
Secondly, the Chrysler plants will more than likely face the wrecking ball. This will open a wealth of opportunities for industrial users in a key distribution corridor. By and large, the infrastructure is already in place.
A similar situation has already occurred with the former Ford plant in the North County submarket. It was demolished and now offers 155 acres for development. Panattoni Development is actively pricing several potential projects in the mixed-use park, with plans for 11 buildings totaling more than 2.6 million square feet.
Nearly all new developments are either build-to-suit or preleased. Villa Lighting moved into its new 239,000-square-foot headquarters during the second quarter. Late last year, World Wide Technology moved into its 700,000-square-foot, build-to-suit distribution center in Panattoni’s Lakeview Commerce Center across the river.
Green Street Development has been one of the area’s most active developers. Launched last year by Phil Hulse and Mike Clark, long-time area commercial development powerhouses, Green Street has purchased a number of former manufacturing and distribution sites in the city. The company is redeveloping the sites with LEED-certified, multi-tenant industrial and mixed-use business parks. Clayco and McEagle Properties also remain poised to develop NorthPark Business Park, a 550-acre development located near Lambert-St. Louis International Airport.
The St. Louis industrial market has more than 1,000 acres of development approved and ready to go. A couple of large projects should be announced soon in these developments, which could trigger more demand. The skies may be cloudy today, but that silver lining should bring sunshine once the economy returns to better days.
— Terry Stieve is senior vice president and principal in Colliers Turley Martin Tucker’s regional office in St. Louis.