Kansas City Office Overview
The overall vacancy rate decreased to 8.7%, down 60 basis-points from this time a year ago. Throughout the first half of 2018, the Kansas City metro has recorded 395,451 SF of positive absorption, with 143,979 SF coming during the second quarter. The Kansas City office market remains healthy as local businesses continue to expand into additional space, and a lack of new construction deliveries continue to drive down the overall vacancy rate.
As vacancy rates continue to decline, rents continue to trend upward across all submarkets in the metro. The overall asking rent from the metro has increased to $18.47/SF across all product classes. Class A rates have risen to an average of $21.35/SF, while Class B rates have increased to $17.51/SF. In well-performing submarkets, landlords have been able to successfully increase rents. Concessions remain limited and demand remains high for quality space availability.
Moves and Growth Around the Metro
The urban core submarkets, which include Downtown and the Country Club Plaza, continue to remain active with several leases completed in the second quarter. TranSystems renewed a lease within their Crown Center office space, but slightly downsized to 37,000 SF, while SafetyCulture and Sullivan Law leased spaces in the Crossroads. Near Westport and the Country Club Plaza, Gould Evans will fully occupy 4200 Pennsylvania, while DiPasquale Moore renewed and expanded to 12,500 SF within the Manor Square Offices.
HDR Engineering will move from Downtown to 10450 Holmes in South Kansas City. In South Johnson County, New Directions Behavioral Health will relocate to the Sprint Campus and occupy 78,000 SF. Black Knight, a real estate solutions company, renewed their lease of 18,400 SF at 4400 College, while Security Benefit leased 16,700 SF within Corporate Woods 27.
A trio of back office support and contact center operations also made announcements in the second quarter that will bring new jobs to the Kansas City metro. GEICO announced a new service center at 11214 Renner in Lenexa. The insurance company will lease 55,000 SF in the building and will create 500 jobs over the next five years. TrialCard announced they will lease 23,000 SF for a new contact center at the Kansas City Business Center in the Northland. The company will create 225 jobs for the area. In North Johnson County, Vituity also announced a new support center and will lease 8,500 SF at the 20/20 Building in Leawood.
Creative Planning will occupy their new HQ location at Overland One and Overland Two in South Johnson County in early Q3 2018. The financial company will fully occupy 125,000 SF within Overland One and an additional 25,000 SF in Overland Two, where HCA will occupy 25,000 SF in the near future.
Sales Activity in Kansas City
U.S. office sales volume has cooled in the first half of 2018. In Q1 2018, office investment fell almost 25% from Q4 2017 to $27.3 billion, representing a decline of 12% year over year. While suburban markets remain the principal investor focus, sales volume in the suburbs has slowed relative to previous quarters nationally.
In the Kansas City market, several office transactions occurred throughout the second quarter. Three office buildings along the College Boulevard corridor in South Johnson County traded. Tower Properties acquired Timberlands at Tomahawk Creek, a three-story, 91,000 SF building in Leawood from Investors Real Estate Trust for $12.45 million. Price Brothers acquired the Penn National building in Overland Park from CP Holmes Corporate Center. Performance Contracting Group purchased Waterside I in Lenexa for owner use. The specialty contractors group purchased the 60,000 SF building from Hines.
FOR MORE INFORMATION
Ellen Fisher Associate | Kansas City
Rollie Fors Executive Vice President| Kansas City
Jim Gates SIOR Senior Vice President | Kansas City
Phil James Senior Vice President | Kansas City
Bryan Johnson CEO | Kansas City
Reagan O'Toole Associate | Kansas City
Ross Simpson Senior Vice President | Kansas City
Matt Stover Senior Vice President | Kansas City
Sven Sykes Executive Vice President | Kansas City
Adam Tilton Executive Vice President | Kansas City
Tom Volini Executive Vice President | Kansas City
Evan Warwick Senior Vice President | Kansas City