St. Louis – On a sunny spring day here recently, more than 50,000 people packed the brand-new $365 million Busch Stadium, kicking off the baseball season and ushering in a new era for the city’s long-neglected downtown.
The ballpark has sparked a wave of real estate development, particularly residential. The $450 million Ballpark Village, now under construction, is one illustration of that trend. Developed by a partnership between the St. Louis Cardinals and Baltimore, Md.-based Cordish Co., the project will connect directly to Busch Stadium and will offer 1,200 residences, 450,000 square feet of retail space and 400,000 square feet of office space.
“Downtown was really in the doldrums, and what’s occurring now is very exciting and dramatic,” said Mike Hanrahan, an investment sales specialist for Colliers Turley Martin Tucker, a commercial real estate services firm. “There’s a big renaissance going on, and it’s primarily attracting younger people and empty nesters.”
In fact, for the first time in almost 50 years, the downtown St. Louis population is actually expanding rather than losing people to the suburbs, according to the Downtown St. Louis Partnership. Moreover, the city recently won a coveted national award from the Washington, D.C.-based organization Partners for Livable Communities for its downtown revitalization.
Residents head downtown
From 2000 to 2005, downtown St. Louis benefited from $3.3 billion worth of investment, with nearly 25% of that investment taking place in residential properties. Today, there’s another $1 billion of investment under way, according to Jim Cloar, president and CEO of the Downtown St. Louis Partnership.
In just five years, downtown St. Louis’ population nearly quadrupled to 9,700 residents, Cloar said. The number of residential condos and rentals has tripled to 5,700 units. Over the next two years, another 4,900 residential units will be built downtown, bringing 8,000 more residents into the urban core and boosting its population to 18,000 by 2009. Roughly 36% of downtown residents are in their 20s, while 37% are older than 50.
Much of the new downtown housing stock is being created through the conversion of older buildings, particularly those in the Washington Avenue district, the Central West End and the Cupples Station/ballpark area. Like most Midwestern cities, St. Louis boasts several historical and architecturally unique office and warehouse buildings that are ideally suited for reuse as condos and apartments.
“Missouri has a great historic tax credit that pairs with the federal tax credit to encourage development,” said Greg Lee, senior vice president of asset management for Gundaker Commercial Group, a locally based owner and developer.
Most of the new residential units that are available today are lofts, but more traditional units are on their way, said Wendy Wakefield, general manager of residential management for Balke Brown Associates, a locally based developer and owner. “The minute that lofts come on the market, they’re gone,” she noted.
Jacob Development Group recently started construction on one of the city’s biggest loft projects: a $63 million conversion of two historic buildings along Washington Avenue. The Ventana Luxury Lofts and The Bogen will collectively offer 222 luxury loft condos ranging from 982 square feet to 1,326 square feet and priced from $175,000 to $240,000.
On the rental front, Balke Brown Associates is in the midst of converting the 13-story concrete Pet Milk Building, which is listed on the National Register of Historic Places. The $25 million project will transform the 1960s-era building into 118 luxury apartments with floor-to-ceiling windows, nine-foot ceilings, in-building parking and a fine-dining restaurant.
Dubbed Pointe 400, the project will be the first luxury rental high-rise brought to the market in nearly 40 years and is one of the few rental projects under construction, according to Wakefield. She said several units in Pointe 400 have already been pre-leased even though the new residences will not be available for move-in until early next year. “We think the downtown is going to lease up quickly because people are starting to see that it’s urban and cool,” she said, adding that the project is leasing at between $1.70 per square foot and $2.20 per square foot with no concessions.
Condo conversions strengthen rental market
The downtown revitalization has created a ripple effect, energizing the entire St. Louis market. “St. Louis has always been a very steady market, but the last couple of years have been some of the slowest we’ve ever seen – a real anomaly,” said Sheila Webster, vice president of locally based owner, developer and operator Berkshire Co. “We’re just now stabilizing.”
Over the past 12 months, St. Louis has experienced job growth of roughly 1% as its population expanded 1.4%, according to the Federal Reserve Bank of St. Louis. Today, the population of the St. Louis metropolitan area is slightly more than 1 million people.
The job and population growth, coupled with slowing single-family home sales, has strengthened the rental market. Plus, many existing apartment communities in the St. Louis suburbs are being converted to condominiums, shrinking the rental stock.
St. Louis’ apartment market was 92% occupied at the end of 2005, an improvement over the 90% occupancy recorded at the end of 2004, according to MP/F YieldStar. Rental rates did not fall during the most recent downturn, and during 2005 they increased marginally – about 2%. Still, concessions, which have begun to decrease, had climbed to the point where landlords were offering as many as two months free on a 12-month lease.
“We are adamant about stopping concessions this year completely,” Webster said, adding that Berkshire also plans to raise rents this year on its 4,500-unit St. Louis portfolio, pushing rates 3%. Currently, the firm’s portfolio boasts an occupancy rate in the mid-90% range.
“The economy has improved somewhat, but the loss of some of these units has really contributed to the improvement,” Webster said.
Industry experts estimate that more than 2,000 rental units have been removed from St. Louis’ 118,000-unit rental base over the past 12 months and that another 3,000 will be converted this year. Locally based developer and owner Gannon Development Co. is just one of several firms that has jumped into the condo conversion game, said Carole Ballard, Gannon vice president and president of St. Louis Apartment Association.
Gannon, which owns 4,000 units in the St. Louis area, recently completed the conversion of the 90-unit Queen Anne Apartments complex and expects the units to sell for $130,000 to $160,000. In addition to its condo conversion activity, the firm also is expanding its rental portfolio; it recently closed on the 93-unit Vinings at Bordeaux, a Class A property located in the St. Charles submarket.
|Year||Downtown residential units||Downtown residents|
Source: Downtown St. Louis Partnership
St. Louis multifamily market
|Year||Vacancy rate||Rental increases||Construction||Absorption|
|2005||8%||2.1%||600 units||780 units|
|2006*||7.7%||2.5%||600 units||1,000 units|
|2007*||7.3%||3%||900 units||1,300 units|
|*Projected Source: Hendricks & Partners|