Plans for a new, sprawling Centene Corp. campus on the eastern edge of downtown Clayton could soon solve one of Clayton’s longest-tenured real estate quagmires: The Clayton Hole, a 16-acre property that has seen multiple failed development attempts over the last three decades.
The campus expansion is the latest in what appears to be turning Clayton into a giant construction site. Two high-rise towers already in the works would add 700,000 square feet of Class A office space to the market, and bookend $168 million worth of multifamily housing development in progress. In all, more than a half billion dollars worth of development — office, residential and mixed-use — is either under way or in the planning stages. Those projects are expected to bring hundreds of workers and more than 1,000 residents to Clayton.
Centene’s mixed-use development — to be built on at least 19 parcels on Hanley Road, Forsyth Boulevard, South Lyle Avenue and Carondelet Plaza — would complement the company’s existing Clayton headquarters with another 20-story officer tower and a soon-to-be revealed retail and residential space. It would give Centene CEO Michael Neidorff one of the largest real estate footprints in the region. Further details of the project, including design and renderings, are expected to be revealed June 6 when Centene officials go before Clayton’s Architectural Review Board. Clayco is serving as the construction manager on the project with HOK as the designer.
Across town, at 8125 Forsyth Blvd., an office tower is being proposed by Jared Novelly of Crest Management. The $68.5 million development would remove an existing unoccupied two-story retail building and replace it with a 233,226-square-foot, 14-story tower with Class A office space.
Centene officials and Novelly declined to comment on their respective developments.
The extra foot traffic created by new developments should lead to higher sales at local restaurants and shops, while adding to the city of Clayton’s sales and property tax revenues, which have grown about 25 percent over the past five years to $15.13 million in fiscal 2015.
“The official bird of Clayton is once again the construction crane,” said Clayton Mayor Harold Sanger, whose office overlooks construction of Opus Group’s $41 million, six-story apartment development, at 25 N. Central Ave., that is set to be completed next March.
So far, multifamily has led the way. And why not?
“When multifamily developers look at markets, the biggest drivers are household income, job growth and population growth,” said Matt Bukhshtaber, senior vice president of investment property sales for CBRE. “If you look at those, Clayton is the premier district. And that’s why you’re seeing a lot of these multifamily developments coming to that area.”
Bukhshtaber said Clayton is on the front end of the supply curve, meaning more multifamily developments are likely before the market cools. He projects the city could easily handle another 1,500 units on top of the in-progress projects (roughly 500 units) before the supply curve starts its downturn.
Start at Clayton on the Park
The recent wave of development can be traced back to a single building: the 24-story Clayton on the Park, at 8025 Bonhomme Ave.
The building originally opened in 2000, developed by Conrad Properties as a boutique hotel and apartments. By 2008 — and just before the recession took hold — Conrad and Sunrise Senior Living converted it into a senior living facility that ultimately failed during the downturn and closed in 2009.
The Koman Group wound up buying the foreclosed property from Sovereign Bank for $34.3 million in 2012, which allowed Koman to invest millions of dollars into the property and transform it into apartments overlooking Shaw Park.
“The big impetus to all of the development happening now was Clayton on the Park and the success that Koman found with it,” said Jared Novelly, who is planning the 14-story office building at 8125 Forsyth Blvd. called Apogee Office Tower. “The rents they are getting (around $3.25 per square foot) are unheard of in the entire history of St. Louis. Now the expectation is that there is room in the market for those kinds of rents.”
‘First olive out of the bottle’
Just a few months after Centene opened its new $186 million headquarters at 7700 Forsyth Blvd. in 2010, the Clayton Board of Aldermen mocked up a new master plan for the city’s future.
“Back then, there was a lot of time to plan,” said Sanger, the city’s mayor.
The main theme of the plan was to create a walkable, high-density, mixed-use district with new office and multifamily buildings.
The city has been selective in which projects it offers incentives to, but in 2014 gave a 50 percent tax abatement — a figure that has since been lowered to 20 percent following a lawsuit from upset residents and Clayton School District officials — to Chicago-based CA Ventures and Rosemont, Illinois-based White Oak Realty Partners for their $75 million apartment tower project at 212 S. Meramec Ave.
“They were trying to figure out what to do with the property when they originally came to us and we guided them into fulfilling the goal of the master plan, and it’s what we like to call the first olive out of the bottle,” Sanger said. “You open up a bottle of olives and it’s hard to get the first one out. That’s what we used the incentive for. Then it was like the other olives started flowing out of the bottle. We started getting proposals from lots of other people.”
Since crews broke ground on 212 S. Meramec Ave., plans have surfaced for five new developments, including:
- Covington Realty Partners’ $55 million Vanguard apartment complex project at 8500 Maryland Ave.;
- Opus’ $41 million development at 25 N. Central Ave.;
- Bob Saur’s $10 million, 26,500-square-foot apartment complex called Solire Apartments at 15 Lee Ave.;
- The Lawrence Group’s $3.5 million townhomes development at 121 N. Brentwood Blvd;
- And a massive 537,000-square-foot, mixed-use development being planned by Tennessee-based GBT Realty that would include nearly 300 residential units at the corner of Clayton and Hanley roads — former site of a Schnuck’s grocery store — that Sanger says could ultimately turn into an “entry way into Clayton.”
Combined, these projects, once completed, will add more than 600 rental units to the market.
“Clayton has always had a strong office and restaurant component,” said Tim Sansone, principal at Clayton-based real estate firm Sansone Group. “But it lacked a bit on the rental housing and high-rise apartments. And the demand we’re seeing now is set to be met, which is great for the city and its future.”
Pricing will be key for future success.
“The chunk pricing is beginning to be a concern to us,” said Jason Braidwood, president of Koman. “You can probably rent 30 to 50 units at over $2,500 per month. But 300 to 500? I’m not so sure. That’s why unit sizes need to shrink so absolute pricing stays low. Clayton on the Park averages a high price point, but that doesn’t mean that everyone in our building lines up to pay $2,500 a month. We feature a very wide range (from $1,200 per month for a 450 square foot studio to $4,960 per month for a 1,680 square foot two-bedroom, two-and-a-half bath apartment). For the central corridor to feature and lease up another 1,000 units, we need affordability.”
Sansone said the market will be watching to see how the properties absorb over the next two or three years, specifically at the top of the market. “I think the demand is there, but we’ll all have our eyes on it,” he said.
Because of Clayton’s status as a premier office and residential market, few parcels are available for development. Still, pockets exist.
The city owns three properties and is seeking development proposals for them. There are no imminent plans for two: 227 S. Central Ave., the Clayton Police Department’s former headquarters; and 602 S. Hanley Road, a parking lot across the street from Starbucks at the intersection of Hanley Road and Wydown Boulevard.
The third, a 0.86-acre parking lot across the street from Ruth’s Chris Steak House at the intersection of Forsyth and Brentwood boulevards, appears to be attracting growing interest. The city received four proposals for the property, and a project is expected to be announced before the end of the year, Sanger said.
One proposal, a mixed-use project that would have likely featured residential, office and retail from Koman, was already turned down.
Sanger said a proposal for a hotel represents “an interesting situation,” though he did not elaborate further.
A hotel that can compete with The Ritz-Carlton, industry experts said, should be among the city’s top priorities. The idea of a hotel also has been floated for the Novelly office building site.
St. Louis County, meanwhile, owns two sites — the old Seven-Up building, at 121 S. Meramec Ave., and the surface parking lot across from the county’s Administration Building, at 41 S. Central Ave. — where the city would like to see cranes in the near future.
“The county put out a request for proposal for that parking lot under the (former County Executive Charlie) Dooley administration, but the current administration has not made any move on it,” Sanger said.
A St. Louis County spokesman said it was “premature to comment” on those properties.
The Gershman family, which in 2014 sold at least eight properties to Centene for $14 million for its new tower, still owns property on the north side of Forsyth Boulevard, across the street from the proposed Centene tower. Chris Fox, Gershman Commercial Real Estate’s executive vice president, said the real estate firm is trying to figure out what’s next for that property, which is currently the site of U.S. Bank, at 11 N. Hanley Road.
“Originally, we thought it was a very good site for multifamily, although with Centene looking to expand its footprint significantly, we’re now looking to wait and see how their strategic plans play out,” Fox said.
Redevelopment of existing buildings could also come into play.
Already, several downtown Clayton buildings that traded owners last year have received face-lifts, including Hanley Corporate Tower at 101 S. Hanley Road (bought by KBS Realty Partners for $62 million from Duke Realty) and The Sevens Building at 7777 Bonhomme Ave. (bought by Lincoln Property Company Midwest from Blackstone for an undisclosed amount).
Both owners have invested millions in the properties.
KBS committed to investing $6.5 million into Hanley Corporate Tower, which has already lured new tenants such as NAI DESCO, one of St. Louis’ largest commercial real estate firms, and Varsity Tutors, a fast-growing tutoring startup.
KBS is currently shopping the Pierre Laclede Center, a two-building office complex in the heart of Clayton, though prospective buyers have been hard to come by thanks to a firm asking price.
Other sites could pop up for sale or get assembled for potential sale, too.
“If you looked at Clayton 10 years ago and pointed to the sites where apartments are going now, you’d say, ‘Where could they possibly go?’” Sansone said. “If the demand is there, locations will be found. And certainly Clayton doesn’t have many vacant parcels of ground just waiting to be developed. These projects will take creativity and vision. But the future is bright.”