Development Decline
Date Posted: February 6, 2025
Posted In: Discussion, Regionalism,
From St. Louis Business Journal: St. Louis developer Michael Hamburg moved quickly to redevelop the former Reliance Automotive facility in the Central West End after acquiring the site in 2022.
Design work advanced on a $46 million project to turn the property into the 144-apartment Flats at Forest Park. City approvals, including tax abatement, were given. But nearly three years later, construction hasn’t started.
Hamburg said he’s run into one issue after another: Interest rates climbed, construction costs soared 30% and insurance costs also increased.
“You re-underwrite and figure out how to project with increased rates and then you get punched with increased costs and then you figure that out and then you get punched with increased insurance costs,” Hamburg said. “It’s been a lot of stop and start. Just when you think things have gotten better, you kind of get knocked down to the mat again unfortunately.”
That’s had a crushing impact on city development, which has fallen considerably in the past two years. Building permits from 2020 to 2022 topped more than $1 billion annually, peaking at $1.4 billion in 2022. That fell to $713 million and $721 million in 2023 and 2024, respectively, though there is evidence an area prioritized by Mayor Tishaura Jones, North City, has seen more building activity under her term. There has also, in the past two years, been a considerable drop in the number of projects approved by the city for development incentives.
The drop-off comes not only as rates have increased, but also as Jones’ administration in 2023overhauled tax incentive policies, reducing the amount of subsidies available for development in some areas of the city. It also comes amid a new travel-heavy strategy from the city’s development agency, St. Louis Development Corp., to find more developers from outside the region to come to St. Louis.