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Winds of Change

Economic climate in the Midwest has enjoyed stability, but the barometer appears to be dropping.

Despite signs that the economy is cooling, real estate professionals throughout the Midwest remain upbeat on real estate activity in 2001.

"The reason we're optimistic the economy will have a soft landing or moderate decline in growth is that capital has slowed," says John Breitinger, a vice president and general manager of retail investment at Bloomington, Minn.-based United Properties.

The region's trademark stability is another factor that instills confidence. The Midwest is characterized by steady growth patterns rather than the boom and bust cycles experienced in other parts of the country.

Chicago, for example, does not experience extreme peaks and valleys, but rather a more even ebb and flow of economic activity, notes Greg Van Schaack, a vice president with Hines Interests LP in Chicago. "It really reflects the Midwest culture on business. Nobody overreacts," says Van Schaack.

Federal Reserve Chairman Alan Greenspan gave the economy a much-needed boost when he announced in early January that the Fed would drop interest rates by 50 basis points. Nevertheless, Midwestern real estate markets are bracing for more moderate growth in 2001.

"Overall, if Greenspan continues to drop rates later this year, like he did in January, that will likely be enough to carry us through a soft period," says David Farbman, president and CEO of Detroit-based The Farbman Group.

Chicago Metro Chicago continues to grow its inventory of space in all real estate sectors. The downtown and suburban office markets are both on an expansion track, albeit at a different pace. Downtown Chicago is still in its recovery mode. "This has been a gradual recovery," says Jeffrey Barrett, managing director of the Schaumburg, Ill., office of Los Angeles-based CB Richard Ellis. Year-end vacancy was at 8.2%, and has steadily declined since downtown vacancies peaked near 20% in 1993, according to CB Richard Ellis.

The opening of two new buildings in 2000 marked the return of multi-tenant development in the CBD. The downtown office market grew by 754,000 sq. ft. with the completion of 550 West Washington and Dearborn Plaza. The two projects came online nearly 100% preleased. "These buildings were the type that are normally seen in suburban properties," says Barrett. "But the smaller projects made sense in a market where rents were just beginning to recover."

The strong absorption has helped push rents up and has paved the way for additional development. At year-end, new downtown office construction totaled 4.7 million sq. ft. with two openings scheduled for 2001. The 280,000 sq. ft. 550 W. Jackson building is scheduled for a summer opening. Chicago's The John Buck Co. is developing One North Wacker, a 1.3 million sq. ft. project that is expected to open by year-end.

Also, Houston-based Hines broke ground in the third quarter of 2000 on the 191 North Wacker office tower. The 700,000 sq. ft. building is 30% preleased by the law firm of Gardner, Carton & Douglas, who will vacate its existing space in the Quaker Tower. Completion is scheduled for October 2002. "The renewal market has been very strong for landlords," says Van Schaack. "Large tenants don't have a lot of alternatives."

Demand remains high for suburban office space. Leasing activity in 2000 was 70% above the 10-year average with the net amount of space leased totaling 3.7 million sq. ft., according to CB Richard Ellis. The west suburban/I-88 submarket represented the most active region with 1.7 million sq. ft. of net absorption in 2000.

"The suburban office market recovered earlier than downtown, and a significant amount of new construction has taken place the last four to five years," says Barrett. Almost 2.4 million sq. ft. of suburban multi-tenant space was built in 1998, 3.5 million sq. ft. was constructed in 1999, and 3.8 million was delivered in 2000, according to CB Richard Ellis.

New space continues to lease at respectable levels. The suburban office vacancy rate at year-end was 10.1%, which is down slightly from the 10.5% at the end of 1999, according to CB Richard Ellis. "I think we are beginning to push the envelope in terms of new construction," says Barrett. "Our sentiment for suburban Chicago is that there won't be a total retreat of new construction starts, but we will definitely see a slowing in 2001."

Chicago industrial Overall vacancies in Chicagoland's 921 million sq. ft. industrial market have increased slightly to 7.8% as of third quarter 2000, according to a market report by the Chicago office of New York-based Cushman & Wakefield. "The market is very stable," says Mitchell Rothstein, a vice president at Chicago-based Transwestern Commercial Services. "There is continued activity, and the absorption rates have been good for new construction."

Construction has continued at a more moderate pace compared with the record level of activity in 1999. Year-to-date construction completions through third quarter 2000 totaled 9 million sq. ft., which was slightly lower than the 10.6 million sq. ft. completed during the same period in 1999, according to C&W. "We think activity in the industrial sector for 2001 is going to be the same as 2000," says Rothstein.

Industrial developers are moving farther out in search of land availability, and build-to-suit activity is heavy in Will County and the Fox Valley submarkets. Des Plaines, Ill.-based DSC Logistics announced its intention to build a distribution center in Elwood. The third-party logistics company plans to construct a 1.1 million sq. ft. facility in CenterPoint Properties' redevelopment of the former Joliet Arsenal, now known as the Deer Run Industrial Park, according to Cushman & Wakefield. Brake Parts Inc. plans to add 370,000 sq. ft. of distribution space to its existing 200,000 sq. ft. office complex.

Asking rents are on the rise for all three industrial property types. Warehouse/distribution space rates increased 10.5% during the past year, manufacturing rental rates rose 19% and office/service space rates grew 7.8%, according to C&W. In addition, land prices are at a premium of $6 per sq. ft.

Chicago retail Downtown Chicago's retail market is thriving. The Downtown Chicago market is split into three retail markets - Streeterville, Michigan Avenue and State Street. The Streeterville market includes new developments such as MCL Cos.' River East Center. The project features an 18-story Embassy Suites, 620 condominium residences and a high-end retail and entertainment complex, anchored by a 21-screen AMC movie theater and a health club. The project is expected to open in phases beginning in fall 2001.

New projects on North Michigan Avenue include John Buck Co's. North Bridge project at the south end. The 5 million sq. ft. mixed-use development features 900,000 sq. ft. of retail space, 800,000 sq. ft. of office space, 450 luxury apartment units and 2,400 hotel rooms. Retail tenants include Nordstrom, Hugo Boss, ESPN Zone, DisneyQuest and Harley Davidson.

Retailers are vying for coveted space on Michigan Avenue's north end with net rents reaching $225 to $300 per sq. ft., notes Steve Monroe, a vice president in the retail services group in the Chicago office of Northbrook, Ill.-based Grubb & Ellis. Demand remains high for space on State Street where the vacancy rate is almost 2%. State Street rents are averaging $50 to $70 per sq. ft. net, but are running as high as $100 per sq. ft. net, adds Monroe.

Drug stores, discount stores and grocers have all been active in suburban Chicago. "This past year, one of the biggest changes has occurred on the drugstore front with CVS coming into Chicago to compete with Walgreens," says Rick Scardino, a vice president in the retail division for Grubb & Ellis' Rosemont, Ill., office. Both CVS and Walgreens continue to aggressively roll out new stores. The grocery sector also has been driving new development, as brands such as Meijer, Jewel, Dominick's and Cub Foods add new locations. "As housing grows and the suburbs push farther out, retail is there chasing it," says Scardino.

Chicago multifamily & hospitality Downtown Chicago has experienced a resurgence in urban living, led predominately by condo conversions. "The downtown market has generally been very strong," says Bruce Webster, an executive vice president at Chicago-based Equity Residential Properties Trust. "Occupancies and rental growth are both on the rise due to the increased demand and high barriers to entry for new apartment construction," says Webster. "What we've seen in the last two years is a lot of new condo and townhouse product delivery, as well as conversions of old buildings."

The overall suburban apartment market is very healthy. Although construction activity is occurring throughout the metro area, the bulk of activity is in Naperville and Aurora, both of which have a growing residential base. Suburban occupancies are running 95% to 96% overall, with Naperville and Aurora coming in a couple of points lower due to new construction, says Webster. "The market has been strong despite the new construction," he adds. In 2000, 4,100 new rental units came online, with 3,200 units planned for 2001 and 6,400 units on the drawing board for 2002.

Chicago's hotel industry remains active with occupancies averaging 76.6% for the first nine months of 2000, which is up from the 75.5% reported during the same period in 1999, according to Atlanta-based Hospitality Research Group, an affiliate of PKF Consulting. Average daily rates (ADR) increased 5.9% in September 2000 to $142.05, compared with 1999 rates. New projects include the 311-room Le Meridien Chicago at the new North Bridge project, which is scheduled to open this spring.

Detroit Concerns about an economic slowdown are more prevalent in Detroit due in large part to an auto industry plagued by slowing sales and bloated inventories. Some plants may be idled, and the talk of layoffs is widespread. The metro area is home to General Motors Corp., Ford Motor Co. and Daimler- Chrysler Corp. "Clearly our economic base has become more diverse over the past decade, but automotive is and always will be the main catalyst of this market," says Farbman of The Farbman Group.

Higher vacancies are likely to emerge particularly in and around a number of technical parks and industrial areas in the Detroit metro area, notes Farbman. "Obviously, with the economy and auto sales slowing, we have been seeing a slowdown that - at least in certain markets - has started to affect occupancy," he says.

Detroit's downtown office market has struggled in recent years due in part to corporate consolidation and relocation activity. Major downtown firms such as Michigan Consolidated Gas Co. have vacated large blocks of space in the CBD. Total net absorption for 2000 through the third quarter was only 66,617 sq. ft., and third-quarter vacancies reached 20.2%, according to a market report by the Southfield, Mich., office of Grubb & Ellis.

On a more positive note, a new 1.7 million sq. ft. corporate headquarters for Compuware is under construction and slated for a summer 2002 completion. The project is the cornerstone of the city's Campus Martius development, a planned 2 million sq. ft. mixed-use development in the heart of the CBD.

The multi-phase development is expected to have a significant impact on the Detroit CBD. "The $64,000 question is whether Campus Martius will re-energize downtown Detroit," says Michael Moran, a partner with the Bingham Farms, Mich., office of Boston-based Colliers International USA.

"The suburban office market remains strong, although I think we're seeing a little bit of softening farther west and north of the central metro," says Farbman. "Occupancies remain strong, but rent increases and new construction activities are both slowing," he adds.

Suburban vacancies averaged 7.63% as of third-quarter 2000. The 2.6 million sq. ft. Dearborn submarket is reporting the lowest vacancies at 1.42%, while the 1.3 million sq. ft. East Side submarket reported the highest vacancies at 14.09%, according to a market report by Colliers International.

"I don't think we'll see much new construction for multi-tenant spec office building in 2001," agrees Moran. "When the automotive sector hiccups, all of the suppliers get cautious and business gets tentative. So we're waiting to see what happens."

Detroit industrial "The Detroit industrial real estate market had a very good year in 2000," says Jon Savoy, a senior vice president and director of industrial services in the Southfield, Mich., office of Grubb & Ellis. "Users continue to absorb new construction." Grubb & Ellis, which tracks approximately 500 million sq. ft. in Detroit's industrial market, reported a vacancy rate of 5.88% as of September 2000. "Overall, the market is still very healthy," adds Savoy.

Detroit has been riding a strong industrial market since 1994. "It has been one record setting year after another," says Savoy. However, concerns are emerging that the record-breaking performance may be in the past. "These days every time you pick up the paper it's not good news," notes Savoy. The big three automakers are struggling with issues ranging from downsizing to revenue losses. "We expect that to have an impact on the demand for industrial space," he says.

Opus North LLC and Ashley Capital both remain active in spec industrial development. Opus recently broke ground on a 200,000 sq. ft. bulk warehouse project in the Van Buren Township, while Ashley Capital has built more than 1 million sq. ft. in its Livonia Corporate Center.

A slower construction pace in 2001 is anticipated in order to bring the Detroit industrial market to a soft landing rather than a severe decline in market vacancies and rental rates, notes Savoy. "The last time Detroit experienced a recession was in the early 1990s, when the metro area was saddled with overbuilding," he says. "Now banks are very conservative in loaning money, so we don't have the same potential oversupply."

Detroit multifamily & hospitality Demand is exploding for upper-end rental properties, lofts and for-sale units in Detroit's CBD. "The residential market is really hot in the city," says Farbman. "The momentum from Compuware and two new athletic stadiums is creating a lot of activity in both entertainment and residential growth."

Approximately 2,200 new rental units were built in metro Detroit in 2000, and 1,600 units are planned for 2001. "For the most part, the new development is well spread out around the city," says Webster. Equity Residential Properties Trust owns 10 properties and 3,056 units in the Detroit market, largely in outer ring suburbs. Occupancy in Equity's Detroit portfolio has been averaging almost 95%.

The Michigan division of Philadelphia-based Toll Brothers Inc. has been an active developer in metro Detroit. The firm's most recent project is the 184-unit phase two development at its Lake Village of Auburn Hills property.

In the hotel sector, rates rose while occupancies declined. Occupancies for November 2000 averaged 59.6%, which was a 4.6% decrease compared with the 62.5% reported in the same period the previous year. Meanwhile, ADRs increased 7.9% to $84.17 in November 2000, compared with the $77.98 average in November 1999, according to Hendersonville, Tenn.-based Smith Travel Research.

Detroit retail The Detroit retail market is experiencing a building boom driven by new retailers entering the market, as well as the expansion of existing brands. Approximately 2.5 million sq. ft. of retail space was completed in 2000, and another 3.5 million sq. ft. of space is expected to break ground in 2001, according to a retail report by the Southfield, Mich., office of Palo Alto, Calif.-based Marcus & Millichap. Strong demand pushed vacancy rates from 5.3% in 1999 to 4% at year-end 2000.

Aggressive expansion of drug stores such as CVS, Walgreens and Rite-Aid appear to be slowing. Meanwhile, activity is heating up among major grocers that are pursuing new stores in metro Detroit.

Kroger and Farmer Jack have added new stores to areas such as Novi, Macomb and Brownstown Townships. Meijer also is rolling out new locations with stores at the Millennium project in Livonia and the Auburn Mile in Auburn Hills, according to Rick Shlom, a retail sales associate in the Detroit office of Southfield, Mich.-based Signature Associates.

Discount department stores such as Target, Wal-Mart and Super Kmart have stores planned or under construction in several trade areas. Wal-Mart is planning new locations in Canton, Shelby Township and Grand Blanc. Target has opened a store in Auburn Hills and has selected Shelby for an additional new store. Costco added new stores in the Shelby Township, as well as a new store in the Auburn Mile across from Great Lakes Crossing, according to Shlom.

Home Depot opened in Novi and also has targeted locations in Canton, Orion and Dearborn. Home Depot's Expo concept recently opened in Troy and West Bloomfield, and the home improvement-retailer has proposed additional stores in Utica and Canton. Lowe's Home Improvement added stores in Clinton Township and Bloomfield Hills and is planning a new store for Chesterfield Township, Shlom notes.

Omaha Omaha continues to enjoy a robust economy. "Every year for the last seven years we have seen either an increase in activity or a sustained level of activity," says Trenton Magid, president of Omaha-based World Group LLC. Downtown Omaha is experiencing unprecedented construction activity with more than $2 billion in development and redevelopment projects proposed or under way.

The most significant project is a new $281 million convention center and arena. The project is located on 104 acres of a 422-acre redevelopment site near the Union Pacific rail yards. The facility will feature 194,000 sq. ft. of total exhibition space, an arena that can accommodate 14,600 to 17,000 spectators, a 30,000 sq. ft. ballroom, 40,000 sq. ft. of meeting room space and 5,300 parking spaces.

Several major office projects also have been proposed in a downtown market that is reporting minimal vacancies for large users. Downtown vacancies averaged 5.2% as of third quarter 2000, according to Omaha's Grubb & Ellis Pacific Realty.

Major projects include the 40-story Tower at First National Center. First National Bank will move its employees to the new 999,100 sq. ft. building in April 2002. Union Pacific is planning to build a new 25-story headquarters just south of the firm's current downtown location.

The Omaha World-Herald is constructing a new $100 million newspaper production facility downtown. "All of these projects, combined with the convention center, will make the spotlight shine on downtown Omaha," says Magid.

The West Omaha office market has experienced climbing office vacancies in recent years due in part to new construction. Vacancies rose to 10.06% as of third-quarter 2000 - up from 7.89% in 1999, according to Grubb & Ellis Pacific Realty.

Omaha industrial Space remains tight in the industrial sector. "We have what appears to be a little bit of pent-up demand," says Duke Matz, a vice president at NAI Progress West in Omaha. "Our demand is usually pretty thin," adds Matz. "So even a little bit of additional demand is noticeable. The demand is due in part to logistics companies searching for space in Omaha."

The Omaha industrial market typically maintains a stable 4.5% to 5% vacancy rate. Vacancies currently average 4.4% within the city and 5.5% in suburban markets, according to Matz. Approximately 110,000 sq. ft. of new space is under construction in the city, and 750,000 sq. ft. is under construction in suburban Omaha. Construction activity is split evenly between warehouse/distribution, manufacturing and high-tech and R&D space.

The industrial leasing market got off to a slow start in 2000. However, demand increased during the third and fourth quarter, and demand is expected to continue into 2001, says Matz. Bulk warehouse development increased in the second half of 2000 with several developers building 50,000 sq. ft. warehouses. The development of flex buildings continues to increase in the areas around industrial and even commercial parks.

The bulk of the construction activity is occurring in southwest Omaha along the I-80 corridor due to interstate access, zoning and land availability. Shopko is nearing completion of its 435,000 sq. ft. distribution facility in Sarpi County.

Caterpillar has begun construction on its anticipated 500,000 sq. ft. manufacturing facility in Sarpi County. Airlite Plastics recently completed a 300,000 sq. ft. manufacturing and warehouse facility near the airport.

Ongoing construction The Omaha retail market remains healthy, particularly among anchored strip shopping centers. Overall, the anchored strip shopping center vacancy rate was 5% as of November 2000, according to a survey by the Omaha-based Lund Co. Vacancies increased slightly from 4% in May 2000, due in large part to the addition of two new shopping centers. The 111,000 sq. ft. Walnut Grove Shopping Center opened in southwest Omaha, while the 116,000 sq. ft. Pepperwood Village was built in the west central metro.

Developers remain active in the southwest. A Super Target is under construction at the northeast corner of 180th and West Center Road, while a Super Wal-Mart also is under construction at the southwest corner of the same intersection. In the west central submarket, preleasing also is under way for Briar Square Shopping Center, a 450,000 sq. ft. shopping center proposed for the southwest corner of 168th and West Dodge Road Corridor.

Omaha's strong job growth and low unemployment translates into a strong housing market. "Omaha has a very stable apartment market," says Dean Hokanson, a vice president at CB Richard Ellis/Mega in Omaha. "We might see some vacancy, but it typically doesn't last very long."

New apartment construction has been strong the past decade. The total number of multifamily housing units in Douglas, Sarpi and Pottawattamie counties totaled 75,339 in 1999. As of September 2000, 1,230 units had been issued permits for the three-county area compared with the 961 total permits issued in 1999. However, construction activity may start to slow.

The new convention center has sparked new hotel construction. Downtown development activity includes the renovation of the former Red Lion, which has been reflagged as a Doubletree property. Three new properties under construction downtown include a 240-room Embassy Suites, a 180-room Marriott Courtyard and a 180-room Hilton Garden Inn. In addition, a 66-unit Super 8 and a 68-unit Hampton Inn are under construction near the airport.

St. Louis A strong economy helped St. Louis maintain a steady development pace in 2000. The number of jobs increased by 1.3% in the 12-month period ending in October 2000. In addition, St. Louis was successful in attracting prominent businesses that are either new to the area or significantly increasing their local presence such as IBM, Unigraphics Solutions, Johnson Controls, MasterCard and McLeod USA.

The St. Louis office market maintained a similar level of activity in 2000 compared with the previous year. Absorption again was 1.9 million sq. ft., while construction was just less than 2 million sq. ft. St. Charles County was the focal point of activity with 500,000 sq. ft. of absorption, according to a year-end market report by St. Louis-based Colliers Turley Martin Tucker.

New office construction returned to the city of St. Louis in 2000 with the completion of the 145,000 sq. ft. Highlands Plaza I. The building opened fully leased, and construction of Highlands Plaza II is expected to commence this spring.

Construction also is scheduled to begin this spring on Cupples Station Building I, which is part of a major development and rehab project on the south side of downtown.

Vacancy rates at year's end remained steady at 8.4%, according to Colliers. "The office market is still very strong but we have seen a slight slowdown in the last six months," says Ramsey Maune, a senior vice president in the St. Louis office of Indianapolis-based Duke-Weeks Realty Corp.

The tremendous activity experienced from 1997-1999 has slowed to more normal levels, says Maune. The dip in activity is due in part to the six interest rate hikes in 2000. "Companies are starting to scrutinize capital expenditures more closely," he says.

Maryville Center is Duke-Weeks largest development in the St. Louis market. The company opened 533 Maryville Center Drive in December. The 125,000 sq. ft., 6-story office building is 100% leased to Energizer. Duke-Weeks also broke ground on the 125,000 sq. ft. 555 Maryville Center Drive.

Energizer has preleased almost 35% of the building, which is slated for completion this May. Duke-Weeks also expects to start construction this spring on the speculative 85,000 sq. ft. 825 Maryville Center Drive.

The build-to-suit market remains healthy. "There are a number of very large companies in the market now looking for office space," says Maune. Duke-Weeks recently broke ground on a new headquarters for Unigraphics Solutions in the Riverport Business Center. The 140,000 sq. ft. building is located near the I-270 and I-70 interchange in Earth City.

St. Louis industrial Industrial demand also remained consistent in 2000. "We have a good balance of larger deals in the market," says Thomas Martin, a vice president and principal at Colliers Turley Martin Tucker. Several large deals emerged at year-end, including Rawlings Sporting Goods' decision to lease 450,000 sq. ft. in Washington County.

The overall industrial space vacancy rate increased from 2.9% to 4.0%, according to Colliers. In addition, St. Louis has moved away from a robust spec cycle toward a balance between spec and build-to-suit activity. "Essentially, activity is being driven more by user demand," notes Martin.

Another shift in the industrial market has been an increased balance in the type of projects that are under construction.

Prior to 1999, development was focused largely on bulk warehouse properties. But now developers are splitting efforts between all three property types - bulk, office/warehouse and service centers.

More than half of the almost 3 million sq. ft. added in 2000 was office/warehouse space. That is a shift from the bulk space that has dominated development. Bulk construction declined to less than 400,000 sq. ft. in 2000. However, five bulk buildings under construction will deliver nearly 1.7 million sq. ft. of additional space to the market during the first half of 2001, according to Colliers.

St. Charles County has been the most active submarket due to land and labor availability, as well as favorable tax rates, says Martin. Of the almost 3 million sq. ft. of industrial space completed in the metro area in 2000, 1.2 million sq. ft. was in St. Charles. In addition, absorption for St. Charles County reached 1.5 million sq. ft.

This year is expected to get off to a slow start, but activity is likely to pick up by year-end. "You're going to see a quarter or two of very cautious people waiting to see what is going to happen with the economy," says Martin.

St. Louis retail "The retail market is stable, but we believe it will start to experience a slowdown," says Jim Sansone, a principal at St. Louis-based Sansone Group. The overall vacancy rate for 86 neighborhood centers increased from 7.8% in 1999 to 10.2% in 2000, according to Colliers.

Meanwhile, vacancies decline among St. Louis' 73 community centers from 10.9% in 1999 to 9.2% in 2000. Anchor space in community centers decreased from 9.1% to 6.3% in 2000, and shop space vacancies increased from 14.7% to 15.4%.

Retail expansion in St. Louis is driven largely by power centers and grocery-anchored retail centers. Kohl's is one retailer that has entered the St. Louis market within the last two years, while Costco was a new entrant in 2000 with its first store.

St. Charles County continues to lead the metro area's growth. The county added 75,000 people and 30,000 housing units during the 1990s, according to Colliers. Shopping center developers are following that residential growth in St. Charles. Retail construction also has picked up in Jefferson County, which reported a population increase of 30,000 in the last decade and 12,000 new housing units. Both counties are attracting big-box retailers such as The Home Depot, Lowe's and Best Buy.

Developers also are focusing their attention on redevelopment opportunities in mature trade areas. "Opportunities will lie more in redevelopment or focusing on the northwest corridor as retailers begin to expand and housing begins to boom in those areas," says Doug Sansone, a principal at the St. Louis-based Sansone Group.

Dierbergs Market will anchor the 180,000 sq. ft. Dierbergs Brentwood Pointe project, which broke ground last fall. In addition, the city of Brentwood recently issued a request for proposals for a redevelopment site east of Brentwood Pointe.

In the central corridor, demolition began on Brentwood Square in preparation for an expanded center to be known as Brentwood Town Center. The West County regional center will be rebuilt over the next two years in a $200 million project that will add a Nordstrom and Lord & Taylor. In Chesterfield Valley, Chesterfield Commons opened with Wal-Mart, Lowe's, Sam's Club, Linens `n Things and OfficeMax.

St. Louis multifamily & hospitality The year 2000 was an active year for the St. Louis apartment market. The number of multifamily permits issued through September 2000 was 1,926 - up 96% compared with the same period in 1999, according to H. Edward Hall, a vice president in the investment properties group at CB Richard Ellis in St. Louis.

New complexes include the 276-unit Ashwood Apartments in St. Charles. The property, which was completed in October of 2000, achieved occupancy of 98% at year-end. Several new projects are under construction and slated for completion in 2001, notes Hall. Two major projects in O'Fallon include the 400-unit Enclave at WingHaven and the 376-unit Pheasant Point. Construction continues on the Plaza in Clayton, which includes a 12-story office tower and a 21-story luxury condominium building.

Notable properties sold in 2000 include the 252-unit Ridgetop Manor Apartments in St. Louis County, which sold for $4.5 million or $17,800 per unit. Hanley Crossings, a 208-unit complex in north St. Louis County reportedly sold for $3.6 million or $17,300 per unit, according to Hall.

In the hotel sector, St. Louis saw occupancies hold steady in 2000 at a rate of 68.7% during the first nine months of the year, which is comparable to the 68.5% reported in 1999. ADRs increased 2.7% to $87.53 as of September 2000, according to The Hospitality Research Group.

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