We are excited to see Intelica's insights featured in REjournals! Our Q2 Office Market Report highlights positive signs of stability in St. Louis, with demand for office space reaching 860,000 square feet over the past year and improvements in the sublease market. Thank you, ReJournals, for showcasing our findings and helping us spread the word!

Signs of stability, yes. But headwinds, too, in St. Louis office sector

Dan Rafter | Januray 28, 2025

The St. Louis office market showed signs of stabilization over the past year but continues to face headwinds, according to the latest research from commercial real estate firm Intelica.

Intelica’s fourth-quarter office market report, released in late January, highlighted both progress and lingering challenges in the office market in the St. Louis region.

Demand for office space in St. Louis totaled 400,000 square feet over the past 12 months, marking one of the highest levels since 2017. This growth, largely driven by owner-occupied properties, underscores the resilience of some sectors despite broader shifts in how companies utilize office space. However, the market still faced negative absorption during the first nine months of 2024, reflecting ongoing adjustments to post-pandemic work trends.

Vacancy rates in the St. Louis market improved slightly, buoyed by increased leasing activity and acquisitions of vacant buildings by companies for their own use. The sublease market also saw some recovery, with availability declining from its peak. However, sublease space remains higher than historical norms, and overall demand for office properties has yet to return to pre-2020 levels.

Rising construction costs and tighter financing have further slowed new development. As of the end of 2024, only 766,500 square feet of office space was under construction in the St. Louis market, reflecting a sharp decline in building activity.

Rental rates in St. Louis averaged $24.00 per square foot in the fourth quarter, remaining significantly lower than national averages. Clayton, Missouri, emerged as a bright spot, with strong leasing activity pushing asking rents above $40 per square foot in some properties. Meanwhile, landlords in the Central Business District (CBD) continue to struggle with weak tenant demand, leading to reduced rental rates and several properties falling into receivership.

Investment activity in the St. Louis office market has dropped to its lowest level in over a decade. Nonetheless, some opportunistic buyers have taken advantage of reduced prices to purchase and renovate vacant office buildings for owner-occupied use, providing a modest boost to market activity.

Intelica reported a 10.9% direct vacancy rate in the St. Louis office market during the fourth quarter, while the average market rental rate increased slightly to $24.90 per square foot.

The report underscores a market in transition, with pockets of opportunity amid broader uncertainty. While some submarkets like Clayton are thriving, challenges persist in other areas, particularly the CBD. As businesses continue to adapt to hybrid and remote work models, the path to sustained recovery in the St. Louis office market remains uncertain.