Retailers Feel Pinch of Job Losses, Construction

ST. LOUIS-According to a Marcus & Millichap report on the retail sector here in St. Louis, Retailers are feeling the strain of the current economic situation. Without positive news in site for 2009 retailers are maintaining extreme caution.

St. Louis slipped three places in the National Retail Index Rank to the 41 place. Unemployment is expected to climb throughout the year as a result of a softness in the manufacturing, professional and business sectors. According to the report, employment “is expected to result in a 3.1% reduction in payrolls as 41,800 positions are trimmed. In 2008, approximately 23,000 jobs were cut.

“With retail fundamentals forecast to slip in 2009, investors will exercise greater caution when pursuing properties in St. Louis,” says Stephen Maulden, regional manager of the St. Louis office of Marcus & Millichap.

During 2009 several retailers will close their doors in St. Louis, such as Sears closing its Jamestown Mall location due to underperformance. Others are likely to follow suit. Vacancy is expected to rise 250 basis points, to reach 12% by year end. While vacancy rises, asking rents are slated to drop 6.2% to average $14.14 per square foot, with effective rents at $12.09 per square foot.

Likewise building projects are expected to pick up slightly compared to last year’s pace, still not every developer is moving ahead with announced projects. In 2008, 825,000 square feet entered the market. In 2009, about one million square feet will come online.

The proposed Maryland Heights mixed-use center has been delayed indefinitely due to the inability to secure financing for the 2.7-million-square-foot project. Still, the Ballpark Village project is beginning to pick up steam again. The developer is now projecting a 2011 opening date. Also, the Manchester Highlands 520,000-square-foot project will open this year.

The 2009 fundamentals are projected to continue to trend toward the negative, leaving investors cautious about moving into the St. Louis area. “Assets in inner-ring suburbs like Clayton and Maplewood will remain attractive to buyers; these areas are near employment centers and heavily traveled arterial routes,” Maulden says.