Ready for Growth—St. Louis Industrial Market Seeks to Achieve Major Distribution Hub Status

As 2007 comes to a close, the St. Louis industrial real estate practitioner community stands poised for an anticipated influx of distribution users. An abundance of newly constructed speculative warehouse space and developers with significant land positions stand ready, and eager to introduce prospects to the positive factors of the St. Louis market for their operations.

The key factors that make St. Louis attractive mirror many of the ideals recited by logistics executives and site selection consultants across the business spectrum — availability of quality labor, proximity to population centers and quality transportation infrastructure. National and local developers have sought to capitalize on these factors in recent years, building and planning on a scale unprecedented in St. Louis.

Year to date in 2007, 1.6 million square feet of space has been delivered here, with another 1 million square feet under construction. In 2006, 3.1 million square feet was brought to the market. This compares to the region's five-year market average of 1.3 million square feet. The average building size for this new supply for 2006-2007 is 76 percent larger than the five-year average. Measure these statistics against average annual net absorption (the amount of vacant or available space consumed by the market after accounting for new construction deliveries) of 950,000 square feet over the last five years, and it becomes clear that the supply stakes have been raised to compete with other major distribution hubs.

Some of the best known names in the industrial development business are betting on St. Louis in this competition — Duke Realty, Trammell Crow Co., Panattoni and First Industrial, to name a few. Duke has begun development of its 500-acre Premier 370 development in suburban St. Charles County and just completed Lindbergh Distribution Center, a 528,000-square-foot speculative building in St. Louis County. Trammell Crow completed Westway I and Westway III in 2006-2007, speculative buildings of 479,220 and 579,204 square feet, respectively, within the Gateway Commerce Center development in Madison County. They control a total of 1,200 acres for development there. Panattoni completed Lakeview Commerce Center II, a 540,000-square-foot building in Lakeview Commerce Center in Madison County, where they control a total of 600 acres. First Industrial closed in August 2006 on 122 acres at Howard Bend, a St. Louis County development.

Expanding the user base necessary to support this scale of development brings formidable challenges, as evidenced by below average net absorption for 2007 year-to-date. However, positive high-level indicators such as a steady stream of inquiries by site selection consultants conducting multi-city comparison studies and increased interest from national clients of large brokerage firms like Cushman & Wakefield and CB Richard Ellis point toward increasing demand for St. Louis locations. As we enter 2008, this practitioner is optimistic for an active and exciting year —� and expects St. Louis to stretch through the growing pains inherent to becoming a major distribution hub.

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