The Railway Exchange building, for a decade, has been considered the heart of downtown St. Louis. Every day, locals flock here to shop or dine at upscale restaurants.
But now the 21-story building sits empty, its windows boarded up. A fire broke out last year, and city officials suspect copper thieves were behind it. “It’s a very dangerous place,” said Dennis Jenkerson, chief of the St. Louis Fire Department, who noted that a nearby 44-story building recently sold for about $3.5 million.
Cities like San Francisco and Chicago are scrambling to salvage many of their trapped office parks. Buildings are abandoned, while streets are sparse and dreary.
According to the University of Toronto, downtown St. Louis saw the largest drop in pedestrian traffic of 66 major North American cities from the start of the pandemic through last summer. Traffic has improved slightly, but at a slow pace.
Railway Exchange could be the future of downtown America if officials don't quickly renovate it, experts say. The St. Louis office district is now sparsely populated with clothing stores. Residents can't even find a McDonald's.
The value of the 44-story AT&T Tower has plummeted. In 2022, it sold for just $4 million, down from more than $200 million several years ago. Last year, the city demolished the bridge that connected the building to the parking lot across the street because people kept using it to break into the building.
“I saw six teenagers with skateboards and GoPros in there one time. A police officer showed up and yelled at the kids,” said Jack O’Connor, manager of a downtown bar.
According to the University of Toronto, six of the 10 U.S. office parks that will see the steepest declines in foot traffic between 2019 and mid-2023 are in the Midwest. St. Louis has suffered similar losses for decades. Declining population, competition from newer suburban offices, and failed urban planning projects have left the area in a bleak state. Tourists aren’t making up for the lack of office workers.
Cities like San Francisco and Chicago are trying to salvage many of their stranded office parks.
“People don’t go there because there’s nothing to do. There’s nothing to do in that area because people don’t go there,” said Glenn MacDonald, an economics professor at the University of Washington.
The devastation spread south. Across the street from the garage, the St. Louis Bread sandwich shop was shuttered. The lawyers at the law firm Brown & Crouppen now had no place to eat lunch.
Standing behind the counter at Chili Mac’s Diner, next to the shuttered Panera, owner Charlotte Herling rattled off the names of five restaurants that had left within a two-block radius. “A lot of them didn’t make it. We’re just lucky we don’t have any more competition.”
The deserted streets make the office district dangerous. In early 2023, a 17-year-old volleyball player from Tennessee lost both legs after being hit by a speeding car. Aziz-Morris, a part-time employee, said the windows at Pharaoh’s Donuts had been broken twice. The delivery truck outside was also covered in graffiti.
To improve the situation, the city is implementing a number of campaigns, adding landscaping and dedicated bike lanes. The goal, said Kurt Weigle, the group’s downtown director, “is to get more people out on the streets doing positive things.”
Retailers moving downtown will receive up to $50,000 to help pay for construction work. Sidewalk cafes and pop-up stores will also be eligible for incentives.
The campaign is not easy. To boost local business, the city wants to encourage developers to build hundreds of new apartments by converting empty office buildings. But these projects are extremely expensive.
In addition to St. Louis, Atlanta is in a similar boat. Once considered one of the Sunbelt’s biggest boomtowns, you’ll never see that again when the office market collapses. Vacancies are high, while companies are racing to free up space on the sublease market. Many new office projects are on hold.
The turmoil shows that even economically prosperous Sunbelt cities can’t escape the office sector crisis. Strong job growth can’t offset the city’s weak return to the office.
Soaring interest rates have pushed many property owners to the brink.
“Everything is completely disconnected,” said Madelyn Shields, vice president of real estate data company CoStar Group.
Soaring interest rates have pushed many property owners to the brink. Miami-based Banyan Street Capital has had to abandon six office towers and a shopping mall, while Starwood Capital Group defaulted on its debt after failing to refinance.
Atlanta’s office vacancy rate is expected to rise to 14.7% in 2023 from 11.5% at the end of 2019, according to CoStar. That’s well below San Francisco’s 20% vacancy rate, but CoStar predicts the impact of corporate downsizing will push Atlanta’s office vacancy rate above a record 16%.
Atlanta’s poor return-to-work rate is adding to the stress on commercial properties. Rob Sadow, CEO of Scoop, said poor traffic is a major reason why employees are less likely to be in the office. Commute times have a big impact on work engagement.
According to: WSJ
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