KANSAS CITY—According to DTZ, Kansas City's 49.5-million-square-foot office market produced 269,000-square-feet of net absorption in the fourth quarter, the strongest period of a year when the market showed signs of life. Total growth of occupancy for 2014 was 372,000-square-feet.
Significantly, even though historically it's the suburban submarkets like South Johnson County that have performed the best, this quarter much of the growth occurred in the city's submarkets, the researchers found. The Crown Center submarket, for example, saw the General Services Administration move into 140,000-square-feet at 2300 Main St. in December.
In addition, as reported in GlobeSt.com, the submarket has seen even more growth in the New Year. Littler, an employment and labor law practice, just decided to relocate its services center and corporate departments to 2301 McGee Center at Crown Center.
“We are seeing significant growth in the private sector, which is a boon for the overall office market,” says Michael Mayer, managing principal in Cassidy Turley's Kansas City office. Cassidy Turley recently sold its equity interests to an affiliate of DTZ Investment Holdings as part of a larger deal. “Companies, such as Burns & McDonnell and Cerner Corp. are expanding their facilities, and both are expected to complete the first phases of construction in 2016.”
Vacancy for the office sector peaked at 21.5% early in 2011. Since then, however, it has fallen, and hit 18.1% at the end of 2014. South Johnson County continued to lead the region. Class A vacancy there, for example,was just 5.7% by the end of the year. And although the submarket around the Country Club Plaza has a class A vacancy rate of 18.1%, it will plummet to single digits when CBIZ moves into more than 100,000-square-feet next summer, the researchers say.
Developers have certainly begun to show more interest in the Plaza district. 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.
During 2014, the average asking rate in the Kansas City region increased by 3% for both class A and class B. Class A ended the year at $20.66, up from $20.14 one year earlier. The year-end Class B rate was $17.72, compared to $17.20 at the end of 2013.
The researchers expect that vacancy rates will continue to fall in 2015 and should lead to higher leasing rates. Furthermore, they anticipate that some speculative construction will begin in 2015.
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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.
