ST. LOUIS — Commercial asphalt paver Byrne & Jones used to pave millions of square feet of new malls each year. But now it’s paving millions of square feet in industrial parks.
The decline in demand for new retail developments has been buoyed by what has become record-high development activity around industrial warehouses, which is keeping Byrne & Jones' paving trucks busy laying asphalt for warehouse parking lots.
“They cannot build them fast enough,” Byrne & Jones Vice President Britt Taulbee said of the demand for industrial spaces.
The St. Louis region's industrial submarket was already on the upswing before the pandemic accelerated demand from the e-commerce sector, which has been a huge driver of the current industrial growth.
With a record low vacancy rate of 3.8%, the region has 5.9 million square feet of industrial space under construction, with 2.8 million square feet finished so far this year, according to research from real estate firm Colliers. Asking rents have increased 25% year over yearin a market that typically sees annual increases closer to 7% or 8%.
Those are numbers that have never been seen in St. Louis, according to veteran brokers like Ben Haas, regional investment officer for Exeter Property Group, the region’s largest industrial property owner with 13 million square feet, including 4 million acquired from the Duke Realty portfolio earlier this year.
Haas has worked in the St. Louis industrial market for 15 years. Finding tenants for larger and larger speculative developments hasn’t been a challenge.
“Where the market is right now, you’re seeing tenants seeking to gobble up the bigger blocks of space as soon as buildings are coming out of the ground,” said Haas.
And not only is it not expected to slow down, construction firms and developers believe the pace will only quicken, especially as the current global supply chain issues prompt companies to explore adding local warehouses for stockpiling supplies.
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