World and domestic markets are constantly recalibrating as the global supply chain continues to see a disruption from the COVID-19 pandemic. It has never been more clear though just how important freight logistics and a healthy supply chain are to keep the economy moving. Demand for distribution space continues to grow, and the latest data available reveals the bi-state St. Louis market is rebounding well from the uncertainty of 2020 and 2021, and is positioned to assist distributors and developers to meet the growing demand.
Mary Lamie, Bi-State Development
The St. Louis region has more than 51 million square feet of modern bulk inventory supported by a strong labor force and an exceptional freight network that provides tremendous optionality to move goods into and out of the region via river, rail, truck and runway.
Those advantages are contributing to historic lows in vacancy rates, with only 4.5 percent of modern bulk space (more than 250,000 square feet) available at this time. This follows on the heels of the overall vacancy rate for the entire St. Louis industrial market dropping below 6 percent in 2020, the first time it fell so low in more than 15 years.
Fortunately, construction in the bi-state region has rebounded from the uncertainty of 2020, with more than 1.4 million square feet delivered already in 2021, and nearly 1.9 million square feet under construction, which rivals pre-pandemic levels.
Speculative construction activity levels are at 2.2 million square feet for 2021, mirroring both 2018 and 2019, a clear indication that developers believe the St. Louis market remains a strong place for industrial growth. The direct average asking rent for bulk distribution space in the entire St. Louis-area market is at $3.76 per square foot as of the second quarter of 2021.
Madison County in Illinois and northern St. Louis County in Missouri represent the largest inventory of bulk buildings within the region with 68.8 percent of the building stock. When one factors in that an additional 6.9 percent of the bulk buildings are in neighboring St. Charles County, Missouri, to the west, it reinforces that the locational advantages of being along the I-70 corridor are a key driver of that concentration.
Recent activity along that corridor includes Panattoni’s acquisition of the remainder of Duke Realty’s ground in the Premier 370 Business Park in St. Peters in St. Charles County, where Panattoni is constructing an 811,000-square-foot spec building.
“It will be a welcome addition in St. Charles County, where both residential and mixed-use development is booming. Demand for new industrial construction remains high with few large modern bulk buildings available,” says Allison Gray, vice president of Steadfast City Economic & Community Partners, which develops an annual report on the bi-state St. Louis region’s industrial market for the St. Louis Regional Freightway.
At Tradeport Industrial Park in the Hazelwood community of North St. Louis County, NorthPoint Development is constructing two additional buildings that will add almost 1 million more square feet of inventory to the market. And, in nearby west St. Louis County, the first Class A industrial park to be developed in Maryland Heights in three decades is now under construction. TriStar Properties has broken ground on the first two of six buildings planned within the 1.3 million-square-foot industrial park that will be known as Westport Commerce Center.
These latest developments reinforce the findings in the St. Louis Regional Real Estate Market Indicators & Workforce report released in May by the St. Louis Regional Freightway, which reveals that bulk distribution buildings remain the fastest-growing sector in the St. Louis inventory.
The report also includes examples of how the St. Louis region continues to support successful industrial developments through a spotlight on the major redevelopment and investment in former and current auto manufacturing sites in the area.
Following a $1.5 billion investment by General Motors (GM) into growing its Wentzville Assembly Center in St. Charles in 2019, the plant now employs 4,300 workers. The transportation and warehousing industry grew 11 percent faster in the five-mile radius around the GM plant than the national average. Meanwhile, an estimated $550 million has been invested in developing both the Fenton Logistics Park in South St. Louis County and Aviator Business Park in North St. Louis County (at the sites of the former Chrysler and Ford auto plants respectively). To date, these redevelopments have collectively generated more than 3,150 jobs.
“Aside from the region’s locational advantages and exceptional freight network, the developers of both projects cited the available workforce as a contributor to the success of the redevelopments,” says Gray.
A second spotlight on the Illinois Route 3 Corridor in southwestern Illinois showcases its strength as the backbone of a 60-mile-long logistics and manufacturing corridor that spans from north of Alton in Madison County to south of Waterloo in Monroe County and has access points to six Class 1 railroads, five airports with capacity, four interstates with national access and America’s third-largest inland port.
“We’ve enjoyed the fruits of the corridor and been part of it for nearly 150 years,” says Mike Patton, general manager of U.S. Steel, an integrated, flat rolled steel manufacturing operation in the heart of the Illinois Route 3 Corridor.
“But one thing that’s been fairly constant is that we rely heavily on getting product to us, as well as shipping our product. Being geographically located in the Midwest, as well as having all of those transportation ways, if you will, there’s been a huge advantage for this facility and one of the reasons we’re still here.”
Mary Lamie is vice president of multimodal enterprises for Bi-State Development, an economic development organization in the St. Louis region of both Missouri and Illinois. She is also head of the St. Louis Regional Freightway. This article originally appeared in the September 2021 issue of Heartland Real Estate Business magazine.