Panel says St. Louis needs to ready itself once economy starts recovery

By Tim Logan

ST. LOUIS POST-DISPATCH

Thursday, Dec. 04 2008

Yes, the economy's lousy right now.

And it's expected to get worse next year, especially for commercial real estate.

So, what now? And how does St. Louis gain when things eventually turn around?

That was the question for five local real estate experts Wednesday at the
annual luncheon of the St. Louis chapter of the Urban Land Institute. And the
answer?

Hold on. Stick to the fundamentals. And plan for the future.

Things will get worse for those who build and buy office and retail space, said
Michael Horst, senior vice president of ULI, which recently published its
annual survey of market trends nationwide. It found St. Louis to be generally
in the bottom third of regions nationwide for investment and development, but
better off than some Midwestern peer cities.

But, he said, there will be a "flight to quality" by investors — to the
strongest, most competitive regions, to the best spots within regions, and to
urban cores rather than outer suburbs.

"Infill development is going to be big," Horst said. "I think this is a good
opportunity for St. Louis."

The panel also predicted continued growth in low-income and workforce housing
properties, apartment projects and other developments with strong tax credit
programs and federal backing.

"There are available funds where (the U.S. Department of Housing and Urban
Development) is involved," said Jack Sheredano, senior vice president of
Gershman Investment Corp. in Clayton.

But in the long run, this is a good time for St. Louis to think about where it
goes from here, and to reposition itself for the rebound.

"There's a rebalancing of our economy going on," said Bill Emmons, an economist
with the Federal Reserve Bank of St. Louis. "The driver of the economy can no
longer be households and construction and home building."

The next driver may be, at least in part, exports, Emmons said, and that could
benefit St. Louis, with its strong agriculture and advanced manufacturing
sectors. Business services and life sciences are areas on which to focus, too.

Several panelists pointed to the change in administrations, both in Washington
and Jefferson City, as an opportunity for St. Louis to come out ahead.

"There is going to be a slowdown, but we should be using our regional resources
to jump all over this thing," said Mary Campbell, a senior vice president with
Bank of America in St. Louis. "There's going to be more federal money and we
need to be first in line at the table."

Basically, the region needs to think about what it wants to be next, said Amos
Harris, president of Brady Capital. St. Louis missed out on the tech boom of
the 1990s because it hadn't thought ahead, he said. That's a mistake it
shouldn't repeat this time.

"Chance favors the well-prepared," Harris said. "We need to be prepared."