ÃÛÑ¿´«Ã½

ST. LOUIS — Companies last year gave up more office space downtown than they occupied. More vacancies could be on the horizon.

Businesses leaving downtown put more than 300,000 square feet back on the market at the end of last year, the most of any area neighborhood in the bi-state region, according to research from real estate firm Cushman & Wakefield.

Companies that had been based downtown for decades left for Clayton. The state of Missouri announced plans to leave its longtime digs at the historic Wainwright Building at North Seventh and Chestnut streets for the suburbs. Even the federal government could dump nearly a million square feet of office space.

Yet, The Cordish Cos., the developer behind Ballpark Village entertainment district, is proposing a 250,000-square-foot office building as part of its $670 million redevelopment of the Millennium Hotel on South Fourth Street.

Real estate experts say it’s exactly what downtown needs.

“There are a significant amount of large tenants downtown that are trying to ... go to some highly amenitized building and find something that’s new, dynamic and compelling. That just doesn’t really exist downtown right now,� said Ben Albers, senior vice president of Avison Young real estate firm. “There really is an appetite for companies to spend more where they get the benefit.�

Underscoring its ability to build offices that companies want, Cordish said the PwC Pennant office building it built in 2019 at Ballpark Village is 90% occupied. Its plan to add luxury housing, commercial space and a food hall at the Millennium site, just off the riverfront on Fourth Street, could also create much-needed density downtown.

“We have proof of concept,� said Mike LaMartina, president of Ballpark Village and Cordish’s local representative. “We know there’s demand.�

Amid a tepid office climate regionwide, downtown has stood out. It has had the lowest occupancy of any neighborhood in the region for years — rates have fallen for seven consecutive quarters, according to Cushman & Wakefield research.

The cost to lease space here is among the cheapest in the region, further highlighting the lack of interest.

The Railway Exchange Building, AT&T tower and the Wainwright Building total more than two million square feet of empty office space. The federal government announced plans earlier this month that it could sell over 300 federal buildings as it seeks to reduce costs. Downtown’s Robert A. Young Building, which comprises just under a million square feet, is one of those buildings in the crosshairs. Others are in trouble: The receiver for the Bank of America Plaza on Market Street said half of the building, or over 300,000 square feet, is empty.

Neal Richardson, head of ÃÛÑ¿´«Ã½â€™ economic development agency, acknowledges his organization has its work cut out for it.

Businesses have struggled to bounce back from the pandemic, and building owners are having to rethink whether to keep their space as office as interest rates and construction costs remain high. But he says downtown has had recent wins, too, like global architecture firm HOK deciding to stay here — albeit in an updated building with more amenities than its previous office.

“Downtown ÃÛÑ¿´«Ã½ has a very diverse customer base that we’re seeking to serve,â€� Richardson said.

A bill moving through the Missouri Legislature would offer tax credits for offices that are converted to residential. The bill’s sponsor, Sen. Steven Roberts, D-ÃÛÑ¿´«Ã½, specifically targeted downtown with the legislation.

Companies have learned a lot about how they use offices in the five years since the pandemic. Many realize they need a physical space — but they want new or upgraded buildings that provide a lot of amenities and won’t settle for less.

“They are trying to lure employees back to the office, saying, ‘if we’re going to make a commitment to the office, we’re really going to go for it,’� Albers said.

City and civic leaders have said that they want to spur a downtown revitalization by squaring off against the long-vacant Millennium site, often the first sites tourists see when they arrive at the Gateway Arch grounds.

Millennium Hotel opened in 1969, originally as the Stouffer’s Riverfront Inn. It was once the region’s largest hotel with nearly 800 rooms. But its owner, City Developments Limited, closed operations in 2014. It later blamed the pandemic for not reopening. Last month, the Gateway Arch Park Foundation, a nonprofit dedicated to the preservation of the national park grounds, picked Cordish to redevelop the Millennium Hotel site. The nonprofit has the property, located two blocks east of Busch Stadium, under to contract to buy.

Cordish’s LaMartina said new office buildings show companies that a city is growing and innovating. ÃÛÑ¿´«Ã½â€™ stock doesn’t cut it.

“There are businesses that want to stay downtown, but they need better reasons. They want to see that downtown is progressing,â€� LaMartina said. “They want to plant their flag in something that says we believe in ÃÛÑ¿´«Ã½. This is a moment for that.â€�