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Centene Corp. is terminating leases for two of its office buildings in St. Louis, but one has already leased most of that space to a new tenant.
The move to shed more office space locally is part of the the Clayton-based health care giant’s (NYSE: CNC) ongoing effort to shed half its office space, promised to shareholders in an April earnings call.
Some of Centene’s local offices are leased long term, but in some cases, where the company has an early termination clause, it is opting to terminate its lease early.
That was the case for the Clayton Executive Center I, located at 7930 Clayton Road in Richmond Heights, where Centene terminated its seven-year lease to occupy most of the building after five years, the building owner and broker confirmed. Centene occupied 80,000 of the building’s 95,000 square feet.
Since Centene notified the landlord last summer that it would terminate its lease as of July 31 of this year, the building’s leasing agent, Tom Bajardi of Sansone Group, was able to find a replacement tenant before the lease expired. ARCO National Construction, part of the ARCO Construction family of companies, signed a 10-year lease to take most of that space to serve as its newer, more modern office and expand its operations.
Centene also appears to be vacating the Creve Coeur Pointe office building at 12443 Olive Blvd., where the company has been the sole tenant since 2017. That entire 112,806-square-foot building is now available for lease starting in March 2023, according to marketing materials. A leasing agent for the building did not immediately respond to a request for comment Friday.
Centene declined to discuss individual buildings or identify how many other buildings locally where it has terminated leases or plans to do so. Instead, the company issued a statement:
“Centene recently announced a fresh perspective on flexibility based on feedback from employees and designed to attract and retain top talent. This approach includes full remote working options and flexible working arrangements for all employees. Like many other large employers, we continue to evaluate our workplace and facility requirements as we activate new hybrid working arrangements.”
With those changes, and the opening of its new office tower in Clayton in 2019, the company has less need for space than it did when it went on a leasing spree in 2017, when it signed to occupy both Clayton Executive Center I and Creve Coeur Pointe along with other buildings.
Centene “just gobbled (office space) up. As soon as something like that came available, they were on it, which is great,” Bajardi said. “You love that, but then you go, ‘well, now we’ve got all our eggs in one basket.'”
Owner Tim Ronan of Los Angeles-based Stanton Road Capital, which owns Clayton Executive Center I, said that when he received the termination letter from Centene he immediately reached out to the ARCO family of construction companies, which works closely with Stanton on its national projects.
Ronan describes the Richmond Heights building, which was built in 1982, as “Class A-” office space, below newer Class A space but a higher quality than Class B. It has large, flexible floor plates, which allows companies to customize their own space. It is listed as leasing at $26 a square foot, a benefit for those who want space near Clayton but at lower prices and easier parking, Bajardi said.“The visibility and the access of the buildings, the floor plates, and the available parking are all interesting aspects of the property that I think really attracted (ARCO National),” Ronan said.
The neighboring building, Clayton Executive Center II, is fully leased to SSM Health, Ronan said.
Although the building has its perks to market to tenants, Bajardi took full advantage of the year’s notice given by Centene to find a replacement tenant.
“You need a lot of runway in order to protect the downside of potentially being a vacant space,” Bajardi said. “So the fact that we had a year’s notice helped soften the blow.”
With ARCO National signed on for 60,000 square feet of the building, Bajardi is still searching for a tenant to take up the remaining 35,000 square feet.
“As Centene continues to shed space, we’d love to see other companies like ARCO grow as well to pick up the slack,” Bajardi said.
