Rental rates in the industrial market have declined steadily throughout the year, settling at $4.06 per square foot at the end of Q3 2011 compared to an average of $4.20 per square foot at the end of Q3 2010.

Click here to read our full St. Louis metro industrial report, featuring detailed submarket information and major transactions from the quarter.

The metro St. Louis retail commercial real estate market is still undergoing a transition period at the end of Q3 2011 as the overall economy remains shaky.  On the bright side, vacancy rates continue to decrease and are down to 7.9% across all retail sectors.  However, restricted lending and a troubled economy continue to create a slight downward pressure on average asking rates across all sectors, which have dropped from $12.36 per square foot at the end of Q3 2011 from $12.51 per square foot at the end of 2010.

No new square footage was delivered to the market in in Q3 2011, however 323,292 square feet are currently under construction, It will remain to be seen how this additional space will affect the retail market moving into 2012.

Click here to read our full St. Louis metro retail report, featuring detailed submarket information and major transactions from the quarter.

NAI DESCO is pleased to announce that our 3rd Quarter 2011 Office Report is now available.

The overall office vacancy rate at the end of Q3 2011 was 12.4%, showing a 1% downturn over the vacancy rate as of a year ago. The Fenton and Manchester/270 submarkets maintain some of the lowest office vacancy rates in the metro St. Louis area, while the Earth City submarket reflects some of the highest vacancy rates.

Over the entire metro St. Louis market, asking rates at the end of Q3 2011 were $17.95 compared to $18.65 at the end of Q3 2010, suggesting the market may not improve for landlords for some time to come.

Click here to read our full St. Louis metro office report, featuring detailed submarket information and major transactions from the quarter.

As inflation takes hold, generations that have never witnessed inflation will experience its destructive power, says NAI chief economist Dr. Peter Linneman. In his new white paper, Dr. Linneman discusses the potential effects inflation will have on the commercial real estate industry.  The following is an excerpt:

No one deserves less forecasting credibility than the Fed. Over the last two decades, their macroeconomic forecasts have been among the poorest of any forecasters, despite the fact that they are the only forecasters who know macro policy decisions before they are announced. The Fed’s abysmal forecasting record makes our record look extraordinary, as at least we forecasted a 2009 recession in early 2006. Even as the recession was well under way, the Fed was saying there was no recession. Yet the Fed’s forecasts continue to gain respect.

Most notable in this regard is the Fed’s assurance that there is no danger of inflation. Bear in mind that this is the same Fed that worried about deflation a decade ago, subsequently flooding the market with liquidity that ultimately led to disastrous asset pricing bubbles (which they assured us did not exist), particularly for housing. Simply stated, the Fed’s assurances about inflation ring hollow.

Let’s look at some facts. We recently received notification from our healthcare insurer that healthcare costs for our company are rising by 24%. We were shocked, and discussed this increase with many other owners of small and mid-sized firms, only to find that their increases were even higher than ours.

This raises a very simple question: How is it possible to have 25% increases in healthcare costs, which account for roughly 17% of GDP, and not have serious inflation? Even if all other prices in the economy remain unchanged, this healthcare increase alone would generate an aggregate inflation rate of 3.75%. Also in the past year, education has risen by 4.4%, food prices have risen by 0.44%, and anyone in the business knows that apartment rents (supposedly 40% of CPI) have risen by at least 3% (and in some markets by as much as 8%). These basic truths suggest that there is already serious inflation in the U.S.

Read the entire article here.

And if you like what you read, stay tuned to the NAI DESCO website for information on Dr. Linneman’s next webinar.

I saw an article recently that stated “If we are always looking in the rear view mirror it is hard to keep our eyes on the road ahead.”  The lesson is obvious, we can not ignore the past but rather we should learn from it and have the ability to quickly look forward and responsively meet the challenges of our daily tasks.

In the early 90’s we saw the commercial real estate market in a state of upheaval, with the savings and loan debacle causing values to plummet.  The eventual result was a turn around starting in the mid 90’s with values of properties reaching market level heights not seen before. 

In 2000 we saw the Dot.com over expansion and another sharp decline in rents, values, and owner profitability only to be followed a few years later by the most robust increase in commercial real estate values that we have ever seen.

Taking a look at our current situation finds the commercial real estate market once again bouncing along at the bottom of a down cycle that has been present for the last couple of years.  Market activity would indicate that the markets are rebounding ever so slowly but with better days ahead.  So what is our future course?

The message is simple:  Buy it today or lease it now for the values you will find today won’t be there tomorrow.  But that sounds risky doesn’t it?

We need to think outside the box and recognize that only by trying some difficult ways of working….some “risky business” will we be able to move forward.  The answer to this recession, as it relates to our respective industries, whether it is commercial real estate, banking, accounting, or the practice of law lies within the individual that seeks to change and do things a little better than before.  We will not find long term solutions from federal or state programs, success will come from individual efforts whereby; each of us push a little further to complete a real estate transaction; advise a client armed with more research and analysis and the results will be better for our clients.  Clients will be ready to assess risk properly and thus benefit long term from the property they buy or lease.   

Everyday we take risks.  We assess risk, and then enact a plan based on the priorities in our lives and based on the successes or failures of our past.  But it is not enough to rely on prior experience; we need to think of better ways to learn from our past in order to shape our future.  Based on that, I am suggesting that we take advantage of this down market to conclude commercial real estate transactions.  Those buyers or tenants that do their homework will be rewarded over the long haul.  I am not promoting that gains will be quick but when we pause in a couple of years and look back, I think we will realize what a window of opportunity was present in 2011.

Vacancy rates in both flex space and warehouses have trended downwards, and overall vacancy in St. Louis is approximately two percentage points lower than in the United States as whole.

Rental rates in the industrial market have hovered steadily around $4.20 per square foot for the past year, with little upwards or downwards movement.

Click here to read our full St. Louis metro industrial report, featuring detailed submarket information and major transactions from the quarter.

Net absorption in the fourth quarter was positive 340,000 square feet, continuing a trend of positive net absorption through the entirety of 2010. Very little square footage was delivered to the market in 2010 compared to 2009, so the combination of ongoing positive absorption and minimal new deliveries to the market should promote a continued downward trend in the vacancy rate moving into 2011.

Click here to read our full St. Louis metro retail report, featuring detailed submarket information and major transactions from the quarter.

The office vacancy rate at the end of 2010 was 11.4%, showing a slight improvement over the 11.8% vacancy rate at the end of 2009. A bright note in the St. Louis market was Clayton’s ability to absorb most of the 485,000 SF Centene building with little change in the Clayton vacancy rate, indicating better market conditions for Class A space than in the overall office market.

Over the entire metro St. Louis market, asking rates at the end of 2010 were $18.65 compared to $18.35 at the end of 2009, suggesting the market may be starting to look brighter for landlords moving into 2011.

Click here to read our full St. Louis metro office report, featuring detailed submarket information and major transactions from the quarter.