KANSAS CITY—According to Cassidy Turley, Kansas City's 49.9-million-square-foot office market produced 54,000-square-feet of net absorption in the second quarter, an improvement that, although modest, indicates that the market may have turned a corner. Like many secondary markets across the Midwest, “we don't have big swings back and forth, but it seems like the C-suite guys in Kansas City have become more comfortable expanding their labor forces as we come out of our deep freeze,” Michael Mayer, managing principal at the Cassidy Turley offices in Kansas City, tells GlobeSt.com.
The gains are modest because most companies have also decided to emphasize efficiency and limit expansions of their footprints. “Mid-year vacancy for the Kansas City office market was 19.4%,” Cassidy Turley researchers found. “The vacancy rate has drifted between 19% and 20% since the end of 2012.”
And although the downtown has attracted a host of new residents, many of them millennials, “its office market still struggles and the rents are flats,” Mayer says. Still, some submarkets, especially those in the suburbs, put up solid numbers. “You go to South Johnson County and it's the shining star.” South Johnson County had 144,000-square-feet of net absorption and South Kansas City recorded 112,000-square-feet.
“And the presence of Cerner Corp. has been a real bright spot for Kansas City,” Mayer adds. The North Kansas City-based health care information technology company has announced plans to hire 16,000 new employees over the next decade to staff its future campus south of the city.
There is even talk of starting speculative development, he says, and “that's been completely off the table since the downturn.” Ken Block of Block Real Estate Services LLC, for example, recently announced plans to build a $78 million, 12-story office tower in the Country Club Plaza area a few miles south of the downtown.
However, in the short-term, there is nothing in the construction pipeline which will greatly expand the amount of available space, Mayer says, and he expects the gradually improving economy will steadily push down the vacancy rate and simultaneously push up rents, especially for class A offices. “It's been a tenants' market for a long time, but that's changing.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
