Steady As She Goes The St. Louis office market showed little change during the second quarter of 2010. Year-to-date, vacancy rates have increased slightly with the overall vacancy rate in the CBD at 20.3 percent and the suburban market at a comfortable 13.7 percent. Companies are still being cautious about their leasing needs and are content with short-term renewals (less than 3 years).
Downtown has received the most attention of any submarket, with the Dillards sky-bridge finally coming down and the announcement of the rehab of the former One City Centre (now called 600 Washington). The new owners, SCR Investments, plan to invest $60 million to renovate the building, including the creation of a new lobby which will front Washington Avenue. New tenants to occupy the building include Lewis Rice and Larson Allen.
Metropolitan Square has been active with new leases with the law firms of Brown & Croppen, Littler Mendelson, and the engineering firm, HNTB. One of the building’s largest firms, Armstrong Teasdale, has moved from the building to the new Centene Plaza in Clayton.
Data centers continue to be an important growth industry. Construction began on June 21st to further enhance the power capabilities at the 210 North Tucker data center property with the addition of more than 16 megawatts of new electrical power. This effectively quadruples the power available to the facility. Other enhancements include new datacenter floor space, an expanded generator & cooling plant, the enhancement of the common areas of the property and the addition of new datacenter space, expanding to more than 60,000 square feet over the next few years.
This is a very challenging time for most landlords as many cannot find financing for tenant improvements and there is still downward pressure on rental rates. It is now common to see landlords giving up long periods of free rent if the tenant agrees to pay for tenant improvements. The banks are getting pressure from the Fed to reduce their real estate loans and simply will not renew property loans. This leaves landlords in a very difficult position which could result in foreclosures. Tenants are taking advantage of these issues facing the landlords by renewing early with favorable terms.
