Backed by solid demographics, the growing popularity of the remote work lifestyle and a diversifying economy, multifamily development across St. Louis is gathering momentum. As of March, upscale projects accounted for roughly two-thirds of the construction pipeline, according to Yardi Matrix data, with developers especially active west of the Mississippi River.
Mia Rose Holdings has several high-end developments underway in the metro, targeting both young professionals and retirees. One such project is The Prairie, an upcoming 180-unit community in Dardenne Prairie, Mo. The property is set to include outdoor gathering spaces and extensive green areas, which are some of the most sought-after amenities post-pandemic.
To understand what is fueling the metro’s development market, Multi-Housing News asked Mia Rose Holdings Founder & President Tom Kaiman to share his thoughts.
How much has St. Louis’ multifamily market changed over the past couple years?
Kaiman: Historically, the St. Louis region’s rental market has been underserved because the cost of buying a home has been so low. Driven by an increase in demand for rental housing since the pandemic and a highly competitive real estate market, St. Louis in particular and the Midwest in general, has started becoming a great investment opportunity for capital that typically has been focused in more saturated, higher growth markets.
This increasing demand for multifamily housing can be measured by the high absorption rates and the rapid pace that developments are leasing. In fact, vacancy rates last year in St. Louis hit 4.4 percent, a 10-year low.
Construction activity across the metro increased significantly in 2021. What were some factors that contributed to this, and do you expect this trend to continue?
Kaiman: Even with double digit increases in construction costs, 24 percent more units—2,057 in total—were built in 2021 compared to St. Louis’ five-year annual average. Nearly 4,000 additional units were under construction at the start of 2022 in the St. Louis region.
This increase in construction is a direct result of a market shift towards a higher flexibility, lower maintenance lifestyle. All of a sudden, rental demand is growing. As a region, we are behind the curve in being able to bring products online, so there is a strong opportunity despite regional flat population trends. As a result, an increase in multifamily construction should continue for some time.
There are a few pockets of multifamily development across the metro. What areas are developers attracted to and why? Where is Mia Rose building?
Kaiman: Our developments in the St. Louis region are focused West, in the St. Charles County market, where the population has been shifting for a long time, but rental units are in shorter supply. People equate St. Charles County with freedom and openness. The availability of land allows us to build the same quality that is in St. Louis County but more spread out with greenspaces, walking trails, resort-style heated pools, outdoor gathering spaces and more. These amenities and layout are very hard to find in St. Louis County, especially as you get closer to the city.
Would you say that demand for high-quality, upscale properties has increased recently? What is driving demand for such assets?
Kaiman: The demand for higher-end properties is a direct result of a shift in the mix of tenant demographics. New developments are being designed more intentionally to appeal to a wider variety of tenants, including higher earners, who desire a low commitment, high-amenity lifestyle.
Young professionals who want to save money, enjoy inclusive amenities and have mobility before purchasing a home, are increasingly looking to rent instead of buy at their stage of life. In addition, the spiking costs of home prices, coupled with low inventory, has led more residents aged 35 to 45 to need a high-end, short-term living situation until they buy or build.
Retirees are another demographic that is leasing at high rates within these high-end communities. They crave amenities, less maintenance and the ability to easily pick up and travel.
What multifamily projects are you currently working on in the metro?
Kaiman: Mia Rose Holdings has four large multifamily developments under construction in the region. These high-end communities in Dardenne Prairie, Lake Saint Louis, St. Peters and Valley Park will all complete by early 2023. We anticipate very quick leasing and sustained low vacancy rates.
Our $60 million, award-winning Grand Central at the Junction mixed-use development in Wentzville, which opened last year, maintains a very low two percent vacancy rate.
How do you expect the St. Louis multifamily development market to perform this year?
Kaiman: We expect the St. Louis multifamily development market to continue to perform strongly this year. Properties continue to lease up in record time despite higher-than-normal increases in rent prices. Until that slows down, the market is telling us they want more multifamily housing. At the point absorption rates slow, which doesn’t appear to be approaching anytime soon, development will continue, especially in markets like St. Charles County that has available land and low supply. However, developers will need to compete more to get projects approved.