Framer wrote: Even with the loss of Centenne, I predict that we'll see a big interest in office space in BV. Remember, they've already got a major law firm interested in moving their headquarters there (a fact that seems to have been lost in all of the Centenne hubbub).
David Nicklaus disagrees...
Downtown office glut could get even bigger
With Centene's decision last week to pull out of the Ballpark Village development, the counting is certain to run past the two-decade mark. Even as city officials and developers talk bravely about the likelihood that Ballpark Village eventually will contain a major office component, the downtown real-estate market faces three big challenges.
The first is a glut of office space. According to Colliers Turley Martin Tucker, 16.9 percent of Class A space downtown is vacant, versus 9.1 percent for the whole St. Louis area and 6.5 percent in red-hot Clayton. That's more than 1 million square feet of empty space — the equivalent of all of Metropolitan Square — and 1 million square feet of competition for anyone contemplating a new building.
The slowing economy, and a credit crunch that has made lenders stingier about financing real-estate projects of any sort, is the second challenge. When employers aren't hiring, they don't need new space.
The third challenge is a remarkable coincidence: Six downtown law firms, which occupy a total of 875,000 square feet, face decisions about expiring leases within the next two years. The largest firms, such as Armstrong Teasdale and Thompson Coburn, are so big that they have only two practical choices, according to leasing agent Jay Holland: Stay put or sign up for space in a new building.
"I've been doing this for 28 years, and I've never seen anything like this before," said Holland, a senior vice president at Colliers Turley Martin Tucker. "The implications of their decisions are huge. They will affect landlords and other tenants, vacancy rates and rental rates for all of downtown."
The law firms do have a third option: Clayton, where developers are promoting new high-rises and where Holland says the market is ripe for more construction. Clayton has lured big firms from downtown before, including accountants Ernst & Young in 2001 and lawyers Husch & Eppenberger in 2002.
Partly because of such losses, the downtown office market has been weak for more than a decade. The best recent year was 2006, when Holland's firm calculated net absorption at nearly 200,000 square feet. (That's the total of firms leasing new space less those moving out.)
In 2007, however, absorption was a negative 91,000 square feet. This year's numbers look soft, too, with Bank of America having recently vacated 120,000 square feet at 100 North Broadway.
Downtown does have a lot of things going for it, Holland said. A flurry of residential, retail and entertainment development should make the area more attractive to office employers, too.
So far, though, they're not flocking to downtown. Centene, by moving from suburbs to city instead of the other way around, was supposed to reverse a decades-long trend. With Centene out of the picture, things look bleak.
Ballpark Village remains the highest-profile spot for new offices, but it's not the only one. Richard Ward, a consultant with Zimmer Real Estate Services, says he's recently been looking at potential office-building sites downtown. "There are quite a few of them actually, more than I had thought," he said.
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