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2020 North America Industrial Big Box Review & Outlook

St. Louis
March 22, 2021

“St. Louis’s central location provides quick access to a large portion of the U.S., making the region a desirable distribution hub. Despite few available land sites, construction continues at a rapid pace. Demand is being driven by e-commerce companies and automobile and aerospace industry suppliers. Rents are expected to increase in 2021 as a shortage of available supply further lowers the vacancy rate.”
Jeff Kaiser – Managing Director, CBRE St. Louis

Demographics

Nearly 3 million people live within 50 miles of St Louis, with a 1.2% expected growth rate over the next five years. Expanded to 250 miles, occupiers can reach nearly 23 million people and nearly 9 million households.

Figure 1: St. Louis Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of 39,717 is expected to grow by 6.8% over the next decade. The average wage for a non-supervisory warehouse worker is $14.17 per hour, on par with the national average.

Figure 2: St. Louis Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 173 economic incentives deals totaling more than $523 million at an average of $22,405 per new job in the St. Louis metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, the top incentive programs offered in metro St. Louis is the Missouri Works Program, which provides payroll rebates and discretionary income tax credits for new jobs. To qualify, at least two full-time jobs must be created with wages exceeding 80% to 140% of the average county wage.

Among the top incentive programs offered in neighboring Illinois is the Economic Development for a Growing Economy Program (EDGE), which provides nonrefundable, discretionary tax credits for corporate income taxes for up to 10 years. These credits equal up to 50% of new income tax withholdings generated by a project’s new job creation. To qualify, companies with more than 100 employees worldwide must invest a minimum of $2.5 million and create new jobs equal to 10% of the company’s total employment.

Figure 3: St. Louis Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

The port of Metropolitan St. Louis (PMSL) encompasses 70 miles on both sides of the Mississippi River. It is the northernmost ice- and lock-free port on the Mississippi and is served by six Class 1 railroads, seven interstate highways and two international airports. Nearly one-third of the U.S. population is located within 500 miles of the port.

St. Louis Lambert International Airport is a growing cargo hub with total cargo volume increasing by more than 5% the past two years.

Capital Markets


"St. Louis is a major distribution hub for a variety of users and industries. After a slow year in 2019, investor activity surged in 2020 with core cap rates compressing by more than 50 bps from previous record lows. The core cap rate spread between St. Louis and similarly smaller strategic markets in the Midwest and Southeast is disproportionately wide, so cap rate compression is expected to continue in 2021 and beyond."
Zachary Graham – Executive Vice President

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

The St. Louis big-box market posted a solid year of activity in 2020, although transaction volume totaling 5.4 million sq. ft. was much lower than the 9.4 million sq. ft. in 2019. The drop in volume was due to a lack of available supply in the 750,000-sq.-ft. and above size range. Some 6.3 million sq. ft. in this size range transacted in 2019, which dropped the vacancy rate to 2.9%. In 2020, the volume of similarly sized transactions fell to 2 million sq. ft. Other size range volume was on par with 2019.

The market absorbed 3.5 million sq. ft. in 2020, up by 52% from 2019 and lowering the direct vacancy rate to 5.5%. The average taking rent was $3.37 per sq. ft., the lowest of any market in this report. Construction completions declined to 2.7 million sq. ft. and will decline further in 2021 with only 1.8 million sq. ft. under construction, 65.3% of which is preleased. The lack of first-generation space will continue to drop the vacancy rate in 2021 and will increase taking rents in the coming quarters.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction vs. Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics and Retail Leader
Advisory & Transaction Services
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist & Head of Americas Research
+1 617 912 5215
Spencer Levy
Chairman, Americas Research & Senior Economic Advisor
+1 617 912 5236