MARKET INSIGHT ST. LOUIS MULTIFAMILY REPORT THIRD QUARTER 2018

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1 CUSHMAN & WAKEFIELD MULTIFAMILY RESEARCH MULTIFAMILY REPORT THIRD QUARTER 2018 Cushmn & Wkefield Reserch provides in-depth coverge of the St. Louis Metropolitn Sttisticl Are. In ddition to nlyzing multifmily rent nd sle trends, these reports exmine employment dt, key economic nnouncements, nd development pipeline news. IN THIS EDITION Downtown Clyton Downtown CBD St. Louis City Mid County West County St. Chrles County North County South County Metro Est RESEARCH TEAM DAVID HOEBBEL ASSOCIATE DIRECTOR RESEARCH GREG NELSON ANALYST RESEARCH

2 2, MO EMPLOYMENT & UNEMPLOYMENT TRENDS St. Louis s lbor mrket continued to show signs of growth during the third qurter of 2018 s the unemployment rte fell to 3.5%, decresing by 130 bsis points (bps) over the pst two yers. Employment in the re hs incresed by 25,800 jobs over the sme period. The Federl Open Mrket Committee rised interest rtes for the third time this yer, signling n incresed confidence in the United Sttes economy. The rte will be incresed by qurter percentge point to rnge of 2.00% nd 2.25%, with the possibility tht it could be rised for fourth time in December. Money policymkers expect for t lest three more rte hikes in JOB GROWTH TRENDS EMPLOYMENT IN THOUSANDS & JOB GROWTH (%) ECONOMIC EXPANSION The following re select job nnouncements from the third qurter 2018: The Boeing Compny ws wrded $9.2-billion contrct to produce new T-X Air Force triner jets in St. Louis. This project is expected to support 1,800 locl jobs. Top Golf opened its 44th loction worldwide nd its first Missouri loction in Chesterfield Vlley. The $12.5-million fcility is expected to bring 500 locl jobs. Microsoft opened its new $50-million regionl hedqurter nd technology center in the Cortex Innovtion Community. Microsoft will bring pproximtely 100 jobs to the re. Ameren Missouri hs lunched new project to updte grids s prt of the Smrt Energy Pln. This project hs been clled the lrgest in the history of the stte nd is expected to generte 3,000 direct nd indirect jobs over five-yer period FORECAST U.S EMPLOYMENT (% Chnge) 1.8% 1.6% 1.1% MSA EMPLOYMENT (% Chnge) 1.4% 1.0% 0.9% MSA UNEMPLOYMENT RATE (%) 4.6% 3.7% 3.5% Forecst is 12-month outlook Source: Moody s Anlytics JOB GROWTH & UNEMPLOYMENT RATE % YOY BPS YOY Office-using employment increse since Jnury Decrese in unemployment rte during the third qurter. OUTLOOK Stedy income growth is projected s wges increse, boosted by employment gins in professionl, scientific nd technicl services. Roughly $8-billion in development from the Arch to Wshington University re recently completed or underwy, which is projected to spur dditionl economic development nd job growth in the metro. St. Louis continues to be one of the fstest growing cities for strtups thnks to the ntionlly recognized Cortex district, which is currently home to over 250 compnies.

3 3 MULTIFAMILY TRENDS The verge vcncy rte fell 70 bps since the first qurter of 2018, s vcncy rtes reched 5.3% % Growth BPS YOY Effective rte growth since the beginning of Decrese in verge vcncy in the third qurter of HISTORICAL & FORECASTED METRO RENT GROWTH RATES Rent growth hs rebounded over the pst six months with effective rtes incresing by 1.8% since the first qurter of RENT GROWTH RATES DEVELOPMENT / INVENTORY St. Louis currently hs over 5,000 units either under construction or under renovtion, of which more thn 65% fll within the St. Louis City submrket, ccording to Costr. Severl developers hve broken ground on new projects including: The Cordish Compnies 297-unit mixed-use expnsion of Bllprk Villge Phse II t 8th nd Clrk Street, Wtermrk Residentils $66 million development t Lydi Hill Drive, nd Mc Properties $130 million project t 100 N. Kingshighwy. DEMOGRAPHIC FUNDAMENTALS The St. Louis re continues to be n ttrctive mrket for residents s it rnked the 6th most ffordble city to live in the United Sttes by CNBC in In ddition, St. Louis ws nmed the 2nd best rising city for strtups in Americ by Forbes in : 2,675, : 2,787,704 POPULATION 2017: 2,835, : 2,918,426 PERCENT RENTER HOUSEHOLDS 2010: 29.4% 2017: 30.5% 2022: 30.3% MEDIAN HOUSEHOLD INCOME 2000: $44, : $52, : $59, : $69,851 MULTIFAMILY FORECAST The following re Cushmn & Wkefield s projections over the ner term: Source: AXIOMetrics RENTS VACANCY PIPELINE % GROWTH Forecst is 12-month outlook

4 4 INVESTMENT ACTIVITY Ech of the top five buyers in the St. Louis mrket over the lst two yers re from out-of-stte. These investors hve been locted in Colordo, New Jersey, Pennsylvni, Sn Frncisco nd Cnd, respectively. This trend is result of the St. Louis mrket offering higher yields thn mny other mrkets in the country. Cumultive sle volumes through the third qurter of 2018 in the St. Louis re totled $680 million ccording to Rel Cpitl Anlytics, which is 15.7% increse yer-to-dte. HISTORICAL SALES VOLUME MOST ACTIVE MARKET PLAYERS TOP FIVE BUYERS - PAST 24 MONTHS RANK BUYER TOTAL VOLUME NO. PROPERTIES 1 Monrch $240,000, Strtegic Props. of NA $133,000, Somerset Prtners $132,450, FPA Multifmily $89,300, Brss Enterprises $79,700,000 1 TOP FIVE SELLERS - PAST 24 MONTHS (in ) RANK SELLER TOTAL VOLUME NO. PROPERTIES 1 GEM Properties $178,000, L3C Cpitl/Hrbor Group Int l $132,450, Mills Properties $124,850, Mxus Properties $72,300, Priderock Cpitl Prtners $64,150,000 1 Source: Rel Cpitl Anlytics PRICING & CAP RATES Source: Rel Cpitl Anlytics (excluding trnsctions below $5m), Cushmn & Wkefield Reserch In 2018, the verge cp rte for Clss A ws 5.6%, 28 bps below the verge cp rte in The Clss B verge cp rte in 2018 ws 6.5%, 27 bps below the verge cp rte in Strong demnd for multifmily product in St. Louis is expected to further drive cp rte compression. NOTABLE SALES - THIRD QUARTER PROPERTY YEAR UNITS SELLER BUYER PPU CLASS A PW Shoe Lofts* Privte Developer CLASS B Highgrove t Big Bend CLASS C Nico Terrce Aprtments Ok Relty Group Cypress Mngement *Sold by Cushmn & Wkefield s St. Louis Cpitl Mrkets Tem Ridgehouse Cpitl $247,059 Brir Cpitl $104,229 Odin Properties $27,099 Source: Cushmn & Wkefield Reserch

5 5 SUBMARKET OVERVIEW RENTS & VACANCY BY SUBMARKET SELECT SUBMARKET NEWS Chesterfield Construction is underwy on the Wtermrk of Chesterfield Vlley. The $66-million development is expected to deliver 345 units in the second qurter of This is the first multifmily development in Chesterfield in nerly three decdes. Metro Est Greenmount Retil Center LLC hs begun construction on the first phse of $26-million multifmily development. Phse one is expected to deliver 216 units in the fourth qurter of The entire development is expected to be completed by July St. Chrles County Mi Rose Holdings hs begun construction on mixed-use development tht will include Sugrfire Smoke House, 174 units, nd retil component. The $45-million project is expected to deliver second qurter of UNITS UNDER CONSTRUCTION BY SUBMARKET Centrl West End Wshington University hs completed $28-million renovtion of two historic Centrl West End buildings clled The Core Aprtment Residences. Tennt will begin moving into the 160-units during the fourth qurter of Downtown The Cordish Compnies nd the St. Louis Crdinls hve begun construction on $260-million expnsion on Bll Prk Villge Phse II. The mixed-use development is expected to deliver 297 rentl units, 220-room hotel, 900 prking spces, nd 117,000 squre feet of office spce. Source: Costr, Cushmn & Wkefield Reserch Note: Submrkets re defined by Cushmn & Wkefield

6 About Cushmn & Wkefield Cushmn & Wkefield (NYSE: CWK) is leding globl rel estte services firm tht delivers exceptionl vlue by putting ides into ction for rel estte occupiers nd owners. Cushmn & Wkefield is mong the lrgest rel estte services firms with 48,000 employees in pproximtely 400 offices nd 70 countries. In 2017, the firm hd revenue of $6.9 billion cross core services of property, fcilities nd project mngement, lesing, cpitl mrkets, vlution nd other services. To lern more, visit or on Twitter. Dvid Hoebbel Associte Director St. Louis Reserch 7700 Forsyth Blvd, Suite 1210 St. Louis, Mo Office Greg Nelson Anlyst 7700 Forsyth Blvd, Suite 1210 St. Louis, Mo Office 2018 Cushmn & Wkefield. All rights reserved. The informtion contined within this report is gthered from multiple sources believed to be relible. The informtion my contin errors or omissions nd is presented without ny wrrnty or representtions s to its c curcy. cushmnwkefield.com