looking to invest in St. Louis

[Bob Vollmer]

Good afternoon fellow BPers,

My wife and I have been thinking of moving back to the midwest (St. Louis region to be specific) and I was hoping to hear from some experienced St. Louis investors, brokers, lenders or any other real estate involved person on the current and projected state of the St. Louis MSA market. I’ve started doing some preliminary research and It seems like the general St. Louis area is “slow and steady” in regards to the local economy and population growth (with some exceptions; St. Charles, Chesterfield, etc). From what I’ve gathered, there does seem to be a positive outlook for multiple industries, which in turn will lead to job growth. A few of the major employers (Monsanto, Boeing, Express Scripts and a few manufacturing plants) are planning for expansion in 2017, which will also help bolster the local economy. The health care sector continues to be the largest driver accompanied by the financial services sector. I would hope that these two industries continue to pave the way and help fuel regional growth, but I don’t really like to speculate too much. I’ve also heard rumors of STL gaining momentum as a tech and startup area? thoughts on that?

Unemployment does seem to be dropping as more jobs move to the area and existing employers regain confidence. I like the fact that the unemployment rate in St. Louis has dropped to the 4.5% range while some of the suburban areas are hovering closer to 3.6%. The population looks to be increasing, but just barely. And it doesn’t look like a whole lot is from migration. The outlying suburbs seem to be having a much stronger growth trend for the time being. Nearly all of my data has been coming from the BLS, the local chambers of commerce websites and the Federal Reserve’s “beige book”. While these sources are great, I was hoping to hear some sound advice/guidance from those who have “boots on the ground”.

Growing up just across the river, I know that neighborhoods change from street to street and that it’s incredibly important to have a solid knowledge base before jumping in. And just to clarify, I’ve been looking at properties south of 44 down to the Mehlville area and following 270-64 as far west as Chesterfield (big area, I know). I’ve also been seeing a lot of comments about the difference between St. Louis and St. Louis County. Any sage advice on what to avoid in either of these areas?

My plan would be to purchase small-medium sized distressed multifamily buildings that are in the path of progress and hold on to them for some cashflow. I'd like to be in the high C, low B class neighborhoods if these properties still exist. I also wouldn't be opposed to flipping a few SFR's if the opportunity presents itself, as that's what I've been doing in CO for the past couple years. Obviously there's a big discrepancy between what a home in St. Louis goes for compared to those in some of the suburban areas, but it seems like the general consensus in that the market is more or less "healthy". Prices are on the rise and demand for a good product is definitely there. So this is an area that I was hoping other investors or brokers would chime in on. Anyone involved in real estate knows that prices can change from street to street, so I'm blind as to where the "path of progress" is and what is considered a good place to invest. To me, it seems like the STL area is a sleeper and is poised for some great things in the next 8-10 years.

So what do you think? Am I in the ballpark? Or am I way off-base? Is the market over saturated with rentals? What are your thoughts on the Saint Louis metro area? I’d love to hear from some people who are currently involved in that space! Also, I’m going to be in the area within the next two months and I’d love to buy someone some lunch or a beer if I could pick their brain about the area!

[Peter MacKercher]

You're pretty well informed about the general trends in the city, @Bob Vollmer. The tech start up area you're mentioning is called Cortex (http://cortexstl.com/), which is in the central stretch between Barnes-Jewish and the SLU campus. That's not a rumor, it's already built-out and established. 

SLU has done a lot of redevelopment, which has brought in more investment (Ikea is a big one, along with residential spaces, and there's another giant redevelopment of a former foundry near the main campus along I-40 being done by the Lawrence Group) in the surrounding areas. That has trickled down from the central corridor and brought investment to areas like the Grove, Shaw, Tower Grove, etc. That's made those markets very competitive, and in the last few years we've steadily seen prices increasing and properties bringing in offers over list. It seems like a lot of the job seekers those particular areas have brought in have settled in the city nearby, hence the growth in those neighborhoods around the botanical gardens and Tower Grove Park. SLU has also gotten a stretch along S Grand blighted, which allows them to redevelop that area and is another big upcoming improvement to the stretch of land between Choteau and I-44, where Cardinal Glennon Children's Hospital is.

The employers you mentioned (Monsanto, Boeing, etc) are engines that help the county areas a bit more as they're along more substantial inter-city travel corridors (I-70, I-170, I-270, etc). Those tend to be higher-paying career jobs, hence the suburb trend. Techy/educational jobs tend to attract folks that want to live in the city, it seems, as we've seen many students and professors looking at properties near Tower Grove.

The B-C neighborhoods you're likely going to be looking at would be North/South Hampton, Bevo, Dutchtown, Cherokee/Benton Park West, maaaybe Fox Park. Some of those areas are rougher than your floor, however. There are always exceptions and deals can pop up anywhere, but I'd suspect that's most likely areas you'd find properties that fit your criteria. 

I can't give you much advice about the Metro side of the river; I've been investing in South City myself for my entire career and haven't found a reason to look over the river yet. 

Hope this helps, and don't hesitate to reach out if you'd like to meet up and chat when you're in the area. There's also been a lot going on in the beer scene here and I can suggest a few great spots to check out while you're here.

Cheers!