Third-Party Logistics Providers Lead the Way in St. Louis’ Big-Box Warehouse Leasing Activity

Third-party logistics (3PL) providers leased more big-box (200,000 sq. ft. or larger) warehouse space in St. Louis and across North America than any other occupier category, according to a new report from CBRE.

In 2022, 3PLs accounted for 39.4% of local and 41% of North American big-box lease transactions, claiming the largest share for the first time since CBRE began tracking the activity in 2012. The previous leader in big-box leasing activity – retailers and wholesalers – fell to second place, taking 32.8% of the leasing share in St. Louis and 35.8% in North America. Food and beverage occupiers came in third, accounting for 11.7% of local and 8.7% of North American activity.

As a result of enduring pandemic-era shifts, companies have expanded their reliance on 3PL partners to create resilient supply chains and economically address customer needs. These providers will remain active lessees in St. Louis, due to the metro’s central location and lower-cost rents, despite economic uncertainty and competition from other markets. This 3PL demand and low new first-generation inventory will lower vacancy rates and keep rent growth over double digits in 2023.

“St. Louis’ location provides quick access to a large portion of the U.S., making it a desirable distribution hub,” said Jeff Kaiser, a Senior Managing Director at CBRE. “While tenant demand has slowed, CBRE projects construction will not keep up with demand in upcoming quarters, leading to higher rents and lower vacancies.”

St. Louis big-box leasing and net absorption returned to 2020 levels, as leasing space to protect inventories slowed. Net absorption declined to 3.8 million sq. ft. Construction completions outpaced net absorption, raising the vacancy 120 bps to 4.2%, 130 bps lower than in 2020. St. Louis remains more economical than other markets: first-year base rents finished 2022 at $4.03 PSF per year, a 15.7% year-over-year increase.

“Like the broader market, St. Louis sales activity decreased towards the end of 2022. Rapidly rising interest rates led to an approximately 100 bps increase in core cap rates from the mid-4% range to the mid-5% range,” said Bently Smith, Senior Vice President of CBRE. “User demand and rent growth should remain near 2022 levels as new construction begins to slow. St. Louis is ideally positioned for investment, offering investors attractive pricing to acquire real estate, significant rent growth and a going-in yield allowing for positive leverage.”

CBRE analyzed warehouses of 200,000 sq. ft. and larger since they are used for large-scale national and international product distribution. Encompassing the United States, Mexico and Canada, the big-box report found that industrial facilities had record-low vacancy rates and unprecedented rent growth in 2022, despite record new construction deliveries. Demand was driven primarily by a desire to serve markets with growing populations, modernize space for automation and improve supply chain resilience.

To read the full report, click here.