Downtown St. Louis could soon see its first new commercial office building in decades if a plan from Koman Group moves forward.
Not since Metropolitan Square went up in 1989 has the region’s busiest employment hub added a new office building to its stock. The one proposed at the southeast corner of Spruce and Ninth streets isn’t nearly as large, but it’s still something for a business district that has mostly watched while new offices went up elsewhere.
“This is being billed as the first Class A office building to be built downtown in just shy of 30 years,” said Dale Ruthsatz, director of commercial development for the St. Louis Development Corporation, the city’s economic development arm.
St. Louis-based Koman Group says it has a tenant lined up for a 100,000-square-foot office building it plans to construct on a parking lot just west of Busch Stadium.
A current downtown business is interested in moving its 310 jobs to the new $43.5 million, five-story office building planned for the parking lot just south of the Westin St. Louis hotel. And the business could add up to 280 jobs in ensuing years, Koman representatives told the St. Louis Tax Increment Financing Commission Tuesday.
Garrick Hamilton, Koman’s executive vice president and general counsel, said the developer couldn’t reveal the name of the tenant while the business seeks approvals to finalize the deal. But he said more details would be forthcoming in a public hearing set for Dec. 14 in front of the TIF Commission.
Koman is asking for $8.7 million in TIF assistance for the project, named Cupples X. Construction could start by late spring 2017 and the building is slated to open in late 2018.
“That is an extremely aggressive schedule for a building of this type,” Hamilton said.
The planned building’s proximity to the Stadium MetroLink station and the connections that provides to technology centers such as Cortex was an important consideration for the tenant, Hamilton said. Koman’s TIF application to the city describes the building as “millennial-focused” with collaborative working space.
The new building will join the Cupples warehouse district, where 20 red brick warehouses surrounding rail lines and factories once contributed to St. Louis’ reputation as one of the nation’s busier commercial centers. When they were built between 1894 and 1917, it was thought to be one of the largest clusters of warehouses, rail lines and manufacturing in the country.
Today, only eight of the warehouses remain, including Cupples 9, a Koman Group rehab that now contains its headquarters and other offices, as well as the Flying Saucer Draught Emporium on the first floor. The new building would be just down the street from the site of Cupples 7, the toppled historic warehouse that riled preservationists three years ago and spurred talk of better preserving St. Louis’ iconic old buildings.
Hamilton said the new office building, which renderings show would include a fair amount of glass rather than the red brick making up the historic warehouses, “is intended to be complementary” to the area, not identical.
Still, the new building will add more space to a downtown office market that has the highest vacancy rates in the region, according to a recent report from commercial real estate firm CBRE. Vacancy is falling downtown but still approaches 25 percent compared with about 11 percent in the suburbs. CBRE includes Cortex and the Highlands in its “downtown” sub market.
But the project’s location near Busch Stadium, Highway 40 (Interstate 64) and other full buildings makes sense, especially with a primary tenant, said Rick Messey, a CBRE senior vice president who focuses on downtown office space. Plus, it’s not so huge a project that it will hurt many other owners too much, he said.
“All the other Cupples buildings are pretty much fully leased,” Messey said. “There’s a lot of dense traffic foot traffic and you’re right next to the ballpark.”
When word of the new Cupples project first went public in May, Koman was seeking tax abatement from the St. Louis Board of Aldermen. It has since pivoted to seek TIF, which allows increases in property taxes and a portion of new earnings and sales taxes on the site to be used to finance development.
The incentives are necessary because the rent that the market can bear for office space downtown is lower than elsewhere in the region, Hamilton said. Without TIF, the project isn’t feasible, he said.
According to CBRE’s report, Class A space in Downtown averages $19.91 per square foot compared with average Class A rental rates of $22.97 per square foot in the suburbs.
David Newburger, chairman of the TIF Commission, said he hoped the St. Louis Development Corporation would come back with a detailed analysis of the requested incentives.
“The TIF you’re proposing is basically 20 percent of the project” costs, Newburger said, adding that SLDC generally allowed TIFs to cover up to 15 percent of project costs.
SLDC Director Otis Williams said that his agency “will be having a discussion” with the developers about the amount of TIF requested. Koman’s Hamilton noted that part of the reason for the TIF request was because the new construction wasn’t eligible for historic tax credits.
The proposed building will also include a small, 3,000-square-foot retail component.
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