Strong private-public partnerships, fewer pandemic issues and more immigration are among the factors that should drive a productive and profitable new year for St. Louis-area commercial real estate, according to “AEC Update & Economic Forecast 2023,” a panel discussion hosted recently by the St. Louis Council of Construction Consumers (SL3C) at Greenbriar Hills Country Club in Kirkwood, Mo.
Moderator Rhonda Hamm-Niebrugge, director of St. Louis International Airport, introduced panelists Subash Alias, CEO of the Missouri Partnership, which is funded by the Missouri Department of Economic Development and the Hawthorn Foundation; David Kehm, AIA, design principal at FGM Architects; and Michael B. Kennedy, Jr., CEO of KAI Interprises.
“The public-private partnership role is to bring companies to Missouri. We don’t do it alone — we work with partners all over Missouri. We use our megaphone to get the word out about how great Missouri is,” Alias said.
Alias expects to see a lot of activity with distribution and large e-commerce entities such as Chewy and Chick-Fil-A -- projects that represent $16 million in investments and more than 60 jobs. He is also seeing a lot of activity in data storage centers although new large fulfillment centers are down for now.
“Missouri is very attractive in terms of taxes, although we compete with Kansas City for labor with their airport project,” he said.
The Partnership isn’t seeing a lot of headquarters relocation projects for the St. Louis area at the moment, but “we’re myth-busting: St. Louis is not losing corporate headquarters — those have been at the same level for about the past 20 years.”
Alias noted that when companies leave the area, it’s mostly through mergers and acquisitions.
Back-office projects “came to a screeching halt (during the pandemic) but are slowly coming back,” Alias said, with manufacturing picking up the slack. “For every office project, we get about 15 in manufacturing.”
Along those lines, “Accenture Federal Services was the biggest news for St. Louis in years, with 1,400 high-paying jobs and (an investment of) $28.5 million.”
“The challenge is that we’re constrained by the need for large sites,” Alias allowed.
Food-related projects should be among the centers of activity in 2023 because “food never stops,” Alias said. Examples include Swift Prepared Foods, with 190 jobs and a $68,000 investment, and the American Food Group, with 1,363 jobs and an $800 million investment.
Construction materials should also see a lively new year, driven by housing projects. Carlisle Construction Materials is bringing in 100 jobs and $61.9 million; James Hardie, 238 jobs, $400 million, among others.
Kehm reported on his recent research with 16 engineering, architecture and miscellaneous St. Louis firms (updates available monthly on LinkedIn) for the Architecture Billing Index via the American Institute of Architects (AIA), which found that many respondents had as much as 19 months of increased billings, with a slight dip in October.
For architecture, the higher education market is strong, as are industrial, science and technology, solar, manufacturing and cannabis; and healthcare remains steady.
Employment in architecture firms “has returned to pre-Covid levels,” he said. “Most architecture firms have been hiring, which is a good sign.”
In engineering, the aviation, transportation, federal and education sectors are strong, while commercial appeared weak; salaries are up by 20 - 40 percent compared to before the pandemic, according to Kehm.
Citing the “national macro view” of the Associated General Contractors (AGC), Kenney said project delays have been an issue. Residential construction activity is still high, but interest rates will create a slowdown. “Commercial is slowing down; construction wages are up and paying premium levels. Missouri is in the top five of the country in construction employment changes going up,” he said.
Kennedy warned colleagues to watch out for increased costs on the fuel side of projects: “We are about to enter a super-cycle in oil — it should go from $70 to $110 a barrel.” Luckily, Kennedy expects lumber costs to continue going down.
Federal funding support will be helpful, but “it will take a year or so for infrastructure funds to reach states and local areas,” Kennedy said.
The economic recovery should continue, although “the likelihood of a recession remains high. However, it should be gradual. It isn’t clear whether offices will decentralize or remain in less demand,” Kennedy said.
“Finding workers will be a challenge for longer than (the costs of) materials and supplies, but increasing immigration could help with labor shortages.”
Other good news from Kennedy is that Missouri’s population continues to increase: “Missouri is up 2% as usual,” he said.
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Feature photo from L to R: SLC3 panelists Subash Alias, Michael Kennedy, Jr. and David Kehm. PHOTO CREDIT: MWM STL.