MARKET SNAPSHOT: Vacancy in St. Louis Declines for Sixth Consecutive Quarter

St. Louis—Vacancy in St. Louis is expected to decrease 110 bps, to 6.5 percent, this year, according to Marcus & Millichap’s third quarter report on the market.

This rate is actually 30 bps lower than it had been at the start of the recession, as vacancy dropped 160 bps last year.

Metrowide vacancy decreased 40 bps in the second quarter alone, the sixth consecutive quarterly decline.

Class A vacancy, meanwhile, increased 10 bps in the second quarter, to 6.4 percent. However, the vacancy rate for this asset class dipped 40 bps this year and 150 basis points over the past 12 months, according to the Marcus & Millichap report.  Class B and C apartments, meanwhile, saw a drop in vacancy of 50 bps, to 7.2 percent. So far this year, vacancy is down 80 bps.

Of the various submarkets in the metro, the South submarket had the lowest vacancy rate in the third quarter—4.6 percent—compared to the high of 9.5 percent in Florissant. The South submarket also saw the greatest year-over-year effective rental growth—3.4 percent—while Manchester/West County saw the lowest: 1 percent.

Class A properties saw an increase of 0.6 percent in asking rents during the second quarter, while Class B and C asking rents increased 0.5 percent during the same period.

Overall asking and effective rents will rise 2.1 percent and 2.7 percent, respectively, this year, according to Marcus & Millichap’s projections.

Only 307 new rentals were brought online in the 12-month period ending in the second quarter, while only 500 units are slated for delivery for the entire year, though 1,500 permits will be issued.

Marcus & Millichap reports that transaction velocity in St. Louis has increased 39 percent over the past year, with the median price of properties sold at $44,900 per
unit. (In the previous 12-month period, the median price was $56,500 per unit.)

Cap rates ranged from the low-to mid-7-percent range, about 60 bps lower than the year prior. Properties in lower-tier locations may trade at caps of 9 percent or more.