CRE X Missouri

Piers Pritchard: Expect more commercial activity in St. Louis in 2012

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Like most Midwest cities, St. Louis suffered through its share of pain during the Great Recession and its painfully slow recovery. Today, though, the city appears to be on the rebound. And that includes its commercial real estate market. Midwest Real Estate News recently spoke with Piers Pritchard, a vice president and principal at the St. Louis office of Cassidy Turley. Pritchard had plenty of positive news to share regarding this Midwest city’s commercial real estate market.

Like most Midwest cities, St. Louis suffered through its share of pain during the Great Recession and its painfully slow recovery. Today, though, the city appears to be on the rebound. And that includes its commercial real estate market. Midwest Real Estate News recently spoke with Piers Pritchard, a vice president and principal at the St. Louis office of Cassidy Turley. Pritchard had plenty of positive news to share regarding this Midwest city’s commercial real estate market.

Midwest Real Estate News: This is a pretty broad question, but are you seeing things getting better in the commercial real estate market these days in St. Louis? Piers Pritchard: Yes. We saw some good momentum at the end of 2011. In the second half of this year, that momentum has continued. Some of the good news comes from our local companies. We have several local companies, from recent start-ups to our Fortune 500 companies, who are adding jobs and committing to additional space. These companies are furthering their commitment to the St. Louis metro area.

MWREN: It’s good to see that commitment from local companies. Pritchard: It is. We won’t see that absorption until 2012. That’s when we’ll see the space actually being occupied. But we are seeing good momentum in St. Louis right now. The total square footage that those tenants are looking for is 11 percent more space than they currently occupy. That’s a good formula. We are feeling good and optimistic about 2012.

MWREN: Why do you think you’re seeing these improvements now. Pritchard: I think St. Louis is a pretty fundamentally sound city. We do not have the boom/bust of the bigger cities on the coasts. We don’t’ see the highest of highs or the lowest of lows. When we are seeing a recovery, as we are now across the country, St. Louis is almost always positioned well to recover because we don’t have the big swings like some of the bigger cities. We also have a good foundation of corporate citizens. Some of our largest employers are adding jobs and more space.

MWREN: What commercial sectors are performing better than others? Pritchard: The big thing everyone is talking about is healthcare. St Louis is actually pretty heavy on healthcare. That’s a good thing from our perspective. It’s one of those segments that hasn’t slowed during the recession. We’ve seen growth. We think that will accelerate.

MWREN: What other property types are doing well right now? Pritchard: Some property types seem to be in the last stages of the downfall. Others seem to be in the first stages of recovery. Industrial has seen the most significant recovery so far. The St. Louis area has seen a couple of large deals. Walgreen’s occupied 500,000 square feet last year. Procter & Gamble expanded in the area. There has also been a strong demand for rental units. It’s hard to purchase a home because of stricter lending standards. The multi-family market coast to coast is doing well. That is the case here in St. Louis as well.

MWREN: Multi-family seems to be doing well in all the Midwest markets that we cover. Pritchard: From an investment perspective, there are two product types doing well now. One is core, well-leased, good-credit-tenant big retail projects that are grocery anchored. Big retail centers of that kind are doing well. And the multi-family segment is also doing well.

MWREN: What about retail? How is that segment performing today? Pritchard: Retail is slow and steady. We have optimism going forward. What we’ve seen in the last couple of years has been a flight to quality from lesser B- and C-class properties to Class-A properties on the retail side. Those B and C type properties have been vacated or have been converted to different types of uses. An old retail center could become a church or a school or very inexpensive office space. The owners of lesser-quality retail space have had to be creative in attracting tenants, in recouping that income from tenants that have vacated.

MWREN: Since the start of the recession, we’ve seen plenty of these creative re-uses across the Midwest. Pritchard: It is a trend that we have seen. And it’s not just on retail. You’ll also see light industrial, flex spaces and office/warehouse spaces that may have had more of a typical type of use that are now being converted into something different. From a landlord’s perspective, they just want their space leased.

MWREN: Looking ahead, what do you see occurring in the world that might actually derail the recoveries we are seeing in most Midwest markets? Pritchard: Everyone is still on edge. We are still optimistic and we do believe that the momentum we’ve seen can carry us in the right direction. But recent history has everyone a little nervous. Everyone is very cautious in their optimism. We have political issues and the presidential election in November to worry about. There are a lot of things that are teetering in Washington. Who will be president is one of them. This could all have an impact on what happens nationally.

MWREN: Do you think the recovery in St. Louis will continue in 2012 and beyond? Pritchard: Our economy here is pretty diverse. We are not completely dependent on any one industry. Healthcare is a growing trend in St. Louis, but we are not completely dependent on healthcare. We have manufacturing. We have IT companies here. We have a strong market with lawyers and accountants and other professionals. We are not dependent on one segment of the market. That will help our recovery. We are all about slow and steady. St. Louis is about not hitting the high highs or low lows.