The Great Downsizing
Date Posted: March 3, 2022
Posted In: Discussion, Workforce,
From St. Louis Business Journal: Major St. Louis employers are starting to drop excess office space, a response to pandemic-driven work changes that has long been expected but has long-term implications for the local office market.
Germany-based Bayer, which acquired a Creve Coeur campus in a $65 billion acquisition of St. Louis-based Monsanto in 2018, became the latest to make such a move, announcing last week that it has put a 95-acre, four-building western section on the market as it envisions “a future that will require less physical office space than before.”
But it’s far from the only one. Footwear retailer Caleres last April put its 275,000-square-foot headquarters on the market and has yet to find a buyer as it recognizes its “office space needs have changed.” Clayton-based health care giant Centene Corp., the region’s largest publicly traded company, told investors last month that it’s actively reevaluating its real estate footprint as work-from-home has become more prevalent. U.S. Bank leased less space after selling its downtown tower, and marketing firm Ansira and Bank of America are marketing big subleases.
“The shift to work at home and enhanced flexibility will have a meaningful impact on our ability to recruit and retain talent, but it also means we need to reevaluate our real estate footprint,” Sarah London, Centene’s vice chairman, told analysts in a Feb. 8 conference call.
As companies vacate millions of square feet of office space, each new announcement raises questions about who or what will fill that space, and how long that will take. But compared with corporate cutbacks and drops in office values seen in other cities, so far St. Louis has fared better than previously expected, although vacancy rates will continue to climb for the foreseeable future, analysts told the Business Journal. Research issued by firms analyzing the St. Louis market have shown steady increases in office vacancy rates over the past year, with the latest vacancy rates ranging from 13.2% to 17.8%, depending how data is calculated.
“To some extent we’ve been better insulated than other markets, but our time is here and it’s coming,” said Brandon Svec, a commercial real estate analyst for CoStar in St. Louis.