Market of the Month -
St. Louis, MO
By Heidi Nielsen, VP of Business Development
St. Louis remains one
of the Midwest's most durable and diversified hospitality markets, anchored by
a broad-based economy that spans healthcare, financial services, advanced
manufacturing, and logistics. Rather than leaning on a single demand driver, the
market draws steady, year-round support from a mix that has helped St. Louis
avoid the sharp swings seen in more leisure- or group-dependent markets:
· Corporate travel
· Regional healthcare
and higher education activity
· A deep roster of
sports and cultural attractions
Key submarkets,
including the CBD, East (Metro East, IL), Airport, Northwest, and Southwest,
each carry a distinct demand profile, from downtown convention and corporate
business to suburban drive-to and airport-driven transient demand.
The region's economic
base includes global and national employers such as Boeing, Anheuser-Busch,
Centene, Edward Jones, and World Wide Technology, as well as a growing base of
bioscience and technology firms anchored by the Cortex Innovation District.
Washington University
in St. Louis and Saint Louis University support a steady pipeline of research,
medical, and corporate-visitor demand, while America's Center Convention
Complex, the Gateway Arch, and professional sports teams such as the Cardinals,
Blues, and City SC continue to drive citywide compression around major events.
Key Demand Drivers
• Healthcare &
Life Sciences - BJC HealthCare, Ascension, and SSM Health anchor a major
regional medical hub, complemented by a growing bioscience cluster at Cortex
that continues to attract private investment and research-driven visitation.
• Corporate &
Financial Services - Edward Jones, Centene, and a deep bench of insurance,
logistics, and professional services firms sustain consistent weekday and
transient corporate demand across the CBD and West County submarkets.
• Sports, Tourism
& Conventions - America's Center, the Gateway Arch, and a full slate of
professional sports across three major leagues generate recurring citywide
compression and weekend leisure demand.
• Transportation
& Logistics - St. Louis's position along major interstate and rail
corridors, combined with a significant airport capital investment program,
reinforces the market's role as a regional distribution and connectivity hub.
Airport Expansion
Underway
St. Louis Lambert
International Airport's FAA-approved masterplan calls for a consolidated
terminal with a net eight-gate increase capable of accommodating larger
aircraft. Groundbreaking is expected around year-end 2026, and a first phase is
opening in 2028. Full completion is projected for 2031/2032.
Momentum is also
building in the office market. After a soft 2025, Q1 2026 brought roughly
526,000 square feet of new office leasing, the strongest first quarter in over
five years, with Class A space capturing about 70% of activity and net
absorption turning positive for the first time in several quarters. No new
office space is currently under construction, which should support continued
vacancy improvement as the leasing rebound plays out.
Lodging Performance
& Outlook
St. Louis occupancy
climbed to 61.7% in 2025, up from 57.9% in 2024, aided by a supply base that
contracted (-0.9%) following the closures of the Le Méridien Downtown and the
142-room Last Hotel, along with temporary closures tied to a May 2025 tornado. Performance normalized into the seasonally
slower first quarter of 2026, with occupancy at 54.5%, ADR of $122.89, and
RevPAR of $66.94.
New Supply: A
Disciplined Pipeline
Development activity
remains measured, with just 2.2% of existing rooms under construction and
another 12.6% in planning. Construction is concentrated in the CBD, East, and
Northwest submarkets, led by projects such as the 225-key AC Hotel St. Louis
Downtown (opening October 2026) and the 142-room Hyatt Centric St. Louis, with
additional CBD activity in the planning stage, including a 176-room Kimpton
dual-brand hotel and a 300-room Downtown Chesterfield project. Home sharing
remains a limited competitive factor, accounting for just 1.9% of
accommodations revenue versus a 4.6% national average, and the City's
short-term rental permitting process remains paused pending litigation over its
licensing fee structure.
Transactions &
Investment Outlook
Transaction volume
has been limited but is showing signs of life. St. Louis cap rates reached
10.0% in 2025, above the market's 9.1% long-term average and 90 bps wide of the
U.S. average, itself above the market's 25-bp historical spread.
Conclusion
St. Louis continues
to offer investors a compelling combination of economic diversification,
disciplined new supply, and improving office fundamentals, a rare setup in
today's environment of elevated construction costs. While RevPAR growth is
likely to remain measured given only modest regional job growth, the market's
below-average five-year supply pipeline, a major airport capital program moving
toward construction, and cap rates already near cyclical highs point to an
attractive entry window for investors seeking stable, long-term value creation
in a well-located Midwest gateway market.
