Strong renter demand in the metro St. Louis apartment market helped boost annual effective rent growth by 3.6 percent in 2015, 200 basis points above the market’s long-term average, according to Axiometrics.
An estimated 1,012 apartment units were delivered to the St. Louis market for all of 2015 compared with 2,378 units of absorption during the same period, reports Axiometrics.
But with numerous projects in the pipeline, that ratio is likely to change over the next few years, say real estate experts.
“We expect supply levels to increase in 2017 and for absorption to begin to struggle to keep up due to slowing job growth,” says Sophie Zatterstrom Gore, analyst with Axiometrics. But 2016 is a different story, she points out. Robust job growth will help absorption outpace new supply by about 600 units in 2016: 1,587 units of absorption versus 990 units of new supply.
Such strong demand is giving a strong lift to real estate fundamentals in the local apartment sector. The average effective rent in the third quarter of 2015 was $914, which Axiometrics projects will rise to $948 by the end of 2016. The average vacancy rate is projected to fall from 6.3 percent at the end of 2015 to 5.8 percent at the end of 2016. If that were to occur, it would be the lowest vacancy since rate 2001.
Developers Get Creative
The Arcade Apartments was one of the largest projects to come on line in 2015. The 500,000-square-foot renovation project is now complete, and official move-ins started in December. The building was originally constructed in 1919 and sat vacant for years before being renovated into apartments.
The $118 million project developed by Dominium provides 80 luxury units but also has 202 units reserved for artists.
These units are awarded based on income qualification and commitment to an art specialty, which includes anything from sculpting to writing to makeup artistry.
Rents range from $563 a month for working artist apartments to $3,000 or more for luxury units, and residents have 50 different floor plans from which to choose.
Paric Corp. began construction on the 100-year-old building in August 2014. Ebersoldt + Associates Architecture was the primary designer in charge of revamping the Arcade Building, which was listed on the National Register of Historic Places in 2003.
Arcade Apartments isn’t the only new residential community trying to woo renters. The Orion, which is the second largest project to come on line after Arcade, welcomed new renters in December. The Orion consists of 177 luxury one-, two- and three-bedroom units that are available in 34 different floor plans.
In the Pipeline
Two new large apartment complexes are scheduled to come on line in Creve Coeur, located in west St. Louis County. The multifamily sector will see the delivery of the 174-unit Vanguard Heights and 182-unit Terra West by the end of 2016.
Vanguard Heights, which is in the leasing stage, will feature one-, two- and three-bedroom units that range from 651 square feet to 1,509 square feet. The rents at Vanguard Heights range from $1,350 to $3,025 per month, but residents will get to enjoy amenities such as a Starbucks café, heated pool, wine room and pet spa.
The St. Louis multifamily market will also see the first new high-rise in 10 years, which will also be delivered by the end of the year.
Construction on the 26-story tower, known as 212 South Meramec Avenue, began in July 2015. The project will cost $75 million and is expected to take 18 months to complete. Plans for the new tower include 250 units, ground-floor retail and a parking structure for residents.
The tower, which will be located in Clayton, Mo., will total 382,636 square feet and is sure to become a St. Louis landmark.
— 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.