I was told that number is because of the tons of LIHTC units that are sitting vacant along with the aging, sometimes low on parking and amenity, loft buildings around downtown. The newer products are doing well, it's the older stuff that's having issues. For some condos, it comes down to high condo association fees and aging units. This issue will slowly correct itself and vacancy will decline again in favor of occupancy. For now, I don't think it's anything to be too worried about.
That same report has Midtown at 10.3% vacancy and the Central West End at 11.9% for an overall Central Corridor vacancy rate of 15.6%.
If we go back and look at Q4 2021, vacancy was 12.1% Downtown, 21.3% in Midtown, and 7.7% in the Central West End for an average vacancy rate of 13.7%. So vacancy ticked up in the Central Corridor despite Midtown's vacancy rate plummeting. It's not a massive increase, but it's still not very nice to look at.
Now let's take a look at Kansas City's River-Crown Center-Plaza corridor (comparable to our Central Corridor). That had a combined vacancy rate of 9% in Q4 2020 (no link to Q4 2021) and in the Q3 report from Cushman, the area now has a 4.8% vacancy rate despite few new products coming online since the end of 2020.
The reason I bring Kansas City's data up is to verify my feeling that the higher vacancy rate isn't a bad thing. St. Louis has continued to build new housing within our Central Corridor during this timeframe and opened in a pretty good pattern with seemingly decent lease-ups. Kansas City, on the other hand, has not been doing the same. They might be building things now, but they weren't. Once their under construction projects open within that River-Crown Center-Plaza corridor, vacancy will increase. It's better to have more available units than fewer in order to meet demand and keep rent from rising too fast.
St. Louis's higher vacancy means that rent increased within the Central Corridor from an average of 6.13% YOY in Q4 2021 to 5% YOY in Q3 2022. On the other hand, Kansas City had an average of -2% YOY in Q4 2020 where they now have an 8.3% YOY rent increase in Q3 2022 (net +6.3% over two years). In short, St. Louis is more steady, Kansas City is more of a roller coaster.
In the end, investors and banks will continue being bullish on these corridors within these two cities because new products do fill up and these areas remain desirable.
That same report has Midtown at 10.3% vacancy and the Central West End at 11.9% for an overall Central Corridor vacancy rate of 15.6%.
If we go back and look at Q4 2021, vacancy was 12.1% Downtown, 21.3% in Midtown, and 7.7% in the Central West End for an average vacancy rate of 13.7%. So vacancy ticked up in the Central Corridor despite Midtown's vacancy rate plummeting. It's not a massive increase, but it's still not very nice to look at.
Now let's take a look at Kansas City's River-Crown Center-Plaza corridor (comparable to our Central Corridor). That had a combined vacancy rate of 9% in Q4 2020 (no link to Q4 2021) and in the Q3 report from Cushman, the area now has a 4.8% vacancy rate despite few new products coming online since the end of 2020.
The reason I bring Kansas City's data up is to verify my feeling that the higher vacancy rate isn't a bad thing. St. Louis has continued to build new housing within our Central Corridor during this timeframe and opened in a pretty good pattern with seemingly decent lease-ups. Kansas City, on the other hand, has not been doing the same. They might be building things now, but they weren't. Once their under construction projects open within that River-Crown Center-Plaza corridor, vacancy will increase. It's better to have more available units than fewer in order to meet demand and keep rent from rising too fast.
St. Louis's higher vacancy means that rent increased within the Central Corridor from an average of 6.13% YOY in Q4 2021 to 5% YOY in Q3 2022. On the other hand, Kansas City had an average of -2% YOY in Q4 2020 where they now have an 8.3% YOY rent increase in Q3 2022 (net +6.3% over two years). In short, St. Louis is more steady, Kansas City is more of a roller coaster.
In the end, investors and banks will continue being bullish on these corridors within these two cities because new products do fill up and these areas remain desirable.
