Post on 29-May-2015
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St. Louis Office MarketSt. Louis Office Market
Michael J. Wolken, SIORMichael J. Wolken, SIOR
PrincipalPrincipal
Office CommitteeOffice Committee
Dennis DeSantis, SIORDennis DeSantis, SIORGateway Commercial, Gateway Commercial,
a Cushman & Wakefield a Cushman & Wakefield AllianceAllianceDave Morris, SIORDave Morris, SIOR
Gundaker CommercialGundaker CommercialScott Bazoian, SIOR Scott Bazoian, SIOR
Colliers Turley Colliers Turley Martin TuckerMartin Tucker
Lynn Schenck, SIOR Lynn Schenck, SIOR CB Richard EllisCB Richard Ellis
Office PresentationOffice Presentation
Review 2007 PredictionsReview 2007 Predictions Significant TransactionsSignificant Transactions Tenants in the MarketTenants in the Market Taxes, Tenant Improvements & TrendsTaxes, Tenant Improvements & Trends 2008 Predictions2008 Predictions
2007 Predictions2007 Predictions
Area Absorption 1.35 Million SFArea Absorption 1.35 Million SF Area Vacancy Rate DroppingArea Vacancy Rate Dropping Build-to-Suits and Health CareBuild-to-Suits and Health Care
Good to Great in 2008?Good to Great in 2008?
Large Tenants Moved in 2007Large Tenants Moved in 2007
CityPlace Six140,500 SF
40 West II Building114,000 SF
Large Tenants Moved in 2007Large Tenants Moved in 2007
1881 Pine Street110,00 SF
NorthPark90,000 SF
Large Tenants Considering Options Large Tenants Considering Options in 2008in 2008
Total potential impact – 1,000,000 SF
Tenant by Size RangeTenant by Size Range
48.9%
19.8%
11.3%
3.1%
1.1%
1.8%
14.0%
0% 20% 40% 60%
Up to 2,499 SF
2,500-4,999 SF
5,000-9,999 SF
10,000-24,999 SF
25,000-49,999 SF
50,000-74,999 SF
75,000 SF & Up
Percentage of Tenants
Tenants by Lease ExpirationTenants by Lease Expiration
16.9%
18.1%
9.3%
10.5%
3.2%
6.4%
0% 5% 10% 15% 20%
2009
2010
2011
2012
2013
2014
Percentage of Tenants
Office Employment GrowthOffice Employment Growth
Market Employment Growth Inventory Growth Difference
AtlantaAtlanta 8.9%8.9% 6.3%6.3% 2.6%2.6%
BostonBoston 7.7%7.7% 2.5%2.5% 5.2%5.2%
ChicagoChicago 7.6%7.6% 3.8%3.8% 3.8%3.8%
Dallas/Ft. WorthDallas/Ft. Worth 16.6%16.6% 6.4%6.4% 10.2%10.2%
DenverDenver 8%8% 4.3%4.3% 3.7%3.7%
Los AngelesLos Angeles 8.1%8.1% 2.2%2.2% 5.9%5.9%
New York CityNew York City 8.8%8.8% 1.5%1.5% 7.3%7.3%
Seattle/Puget SoundSeattle/Puget Sound 15%15% 4.4%4.4% 10.6%10.6%
Tampa/St. Tampa/St. PetersburgPetersburg
18.2%18.2% 8.3%8.3% 9.9%9.9%
WashingtonWashington 11.2%11.2% 9%9% 2.2%2.2%
St. Louis 7% 3.8% 3.2%
Vacancy ReportVacancy Report
SubmarketSubmarket All ClassesAll Classes Class AClass A
DowntownDowntown 18.5%18.5% 16.5%16.5%
ClaytonClayton 10%10% 6.5%6.5%
West CountyWest County 8.7%8.7% 6.2%6.2%
North CountyNorth County 17.9%17.9% 9.5%9.5%
South CountySouth County 7.5%7.5% 3.9%3.9%
St. Charles CountySt. Charles County 12%12% 7.2%7.2%
St. Louis MetroSt. Louis Metro 12%12% 9.9%9.9%
Vacancy ReportVacancy Report
2007 Absorption 1.4 Million SF2007 Absorption 1.4 Million SF 5.4 Million SF Still Vacant5.4 Million SF Still Vacant
2008 New Construction2008 New Construction
The Meridian at Brentwood180,000 SF
Lakeside Crossing Office One127,000 SF
2008 New Construction2008 New Construction
Central Park Square I100,000 SF
825 Maryville Office75,000 SF
580,000 square feet
Potential Major Office Potential Major Office Developments 2008 and BeyondDevelopments 2008 and Beyond
Ballpark VillageBallpark VillageLakeside Crossing 2Lakeside Crossing 2
Highlands IIHighlands II
Potential Clayton DevelopmentsPotential Clayton Developments
Centene SiteCentene Site Apex Oil SiteApex Oil Site Koman PropertiesKoman Properties Montgomery BankMontgomery Bank
Conrad PropertiesConrad Properties Orchard DevelopmentOrchard Development MehlmanMehlman Brown ShoeBrown Shoe
Potential new office – 1.5 – 2 million square feet
Taxes – T.I. and TrendsTaxes – T.I. and Trends
A major component of office building operating expenses is real estate A major component of office building operating expenses is real estate taxes. As a percent of the total, tenants are now paying 30% plus, including taxes. As a percent of the total, tenants are now paying 30% plus, including the surcharge. It is one of the items that erodes the value.the surcharge. It is one of the items that erodes the value.
Building Year Built 2007 Tax PSF
Bemiston TowerBemiston Tower 19821982 $640,532$640,532 $3.68$3.68
Pierre Laclede I & IIPierre Laclede I & II 1965-701965-70 $1,908,877$1,908,877 $3.30$3.30
Old Town Exec CtrOld Town Exec Ctr 1983-891983-89 $682,223$682,223 $3.69$3.69
The Plaza in ClaytonThe Plaza in Clayton 20012001 $1,900,000$1,900,000 $5.84$5.84
Five years ago, the typical tenant finish was $15 to $20 per square Five years ago, the typical tenant finish was $15 to $20 per square foot. We are now heading to $25 to $35 per square foot for new foot. We are now heading to $25 to $35 per square foot for new Class A buildings.Class A buildings.
2008 Predictions2008 Predictions
The four new projects currently under The four new projects currently under construction will be significantly leased at the construction will be significantly leased at the end of 2008.end of 2008.
The financing market will have a profound The financing market will have a profound negative effect on new office construction.negative effect on new office construction.
Speculative office is a distant memory.Speculative office is a distant memory. Barring a recession, all Classes of office Barring a recession, all Classes of office
buildings should show a decrease in their buildings should show a decrease in their vacancy.vacancy.
GoodGood
GreatGreat
Thank YouThank You