Missouri is located in the center of the country and has long been thought of as a gateway, no matter which direction the traveler is going. In Kansas City, which serves as a major distribution hub for products moving from the south to the north, industrial companies are jumping on the property ownership bandwagon. This is particularly true of smaller industrial companies with extra cash that are eager to diversify their portfolios. Even though there are fewer tenants in the industrial submarket, vacancies are still dropping. In the last quarter, tenants absorbed more than 1.9 million square feet of industrial space. Industrial vacancies are the lowest they've been since 2001, and space is tightest in Executive Park and Northland Park.

The commercial office market is strong in the Kansas City area, particularly its suburbs. Recently, out of state investors have been making pricey acquisitions of Kansas City real estate. In the last quarter, the office submarket has generated over $45 million, and top suburban office space is selling for anywhere between $125 and $150 per square foot. Additionally, forecasters are predicting an increase in the development of light industrial and flex use office space in the near future.


St. Louis, by no means a slouch of a city, is trying to rehab its image so it matches the vibrancy of Kansas City. City officials have created two enhanced enterprise zones, using tax breaks and other incentives to lure tenants of light industrial and flex-use office space to downtown St. Louis. The city isn't so much trying to cultivate retail developers, believing that retail and housing will follow the light industrial users. Additionally, state and local officials are working to shore up the flood protection system that separates St. Louis from the Mississippi River. The chief properties that would be affected by a devastating flood are commercial and industrial.

Another reason St. Louis officials aren't in a hurry to court retail development is that retail real estate is strong in St. Louis. Some of the most desirable restaurant spaces are going for $35 per square foot. These attractive areas also feature high-end condo development and other mixed use improvements. One interesting feature of this market is that it is starting to be filled in by local retailers, trailing business that larger, national retailers have generated. As a result, the market is heavy on restaurant pads and small-scale service space. This market shows signs of heating up rather than slowing down over the next several quarters.