Kansas City Office Overview
The Kansas City office market continues to display strong market fundamentals as the overall vacancy continues to decline to historical lows. The overall vacancy rate has declined to 8.2%, down from 8.8% this time one year ago. In Q1 2019, the office market totaled 255,614 SF of positive absorption, which remains in line with recent quarterly absorption figures. The lack of recent speculative construction deliveries continues to fuel pent-up demand within the office market, resulting in a compression of the vacancy rate downwards as tenants vie for limited opportunities.
Overall asking rents within the Kansas City metro have increased to $18.69/SF across all product classes. Rates have continued an upward trajectory as a result of current demand levels within the metro. Class A rates have risen to an average of $21.77/SF, while Class B rates have increased to $17.81/SF. Overall, the average asking rents rose by nearly $0.13/ SF across the metro from the previous quarter.
Moves and Growth Around the Metro
Solid job growth continues to generate elevated levels of demand for office space. Job growth, which was robust all throughout 2018, remained strong throughout the first quarter of 2019. Based on these strong office market fundamentals several office users within the Kansas City market continue to grow and expand their operations as the national and local business climate remains healthy. Many tenants recently executed leases to accommodate for their growth.
Home Advisers, a homeowner resource company currently located in Lenexa will occupy 60,000 SF at the I-35/119th Street Tech Park in Olathe. Touchnet will relocate from their current Lenexa building to a larger footprint of 52,000 SF within One Renner Ridge. The law firm of Spencer Fane will relocate their current Overland Park office from Corporate Woods to 6201 College Boulevard. They will lease 25,000 SF within the building.
RSM McGladrey signed a 45,000 SF lease at 46 Penn, which is currently under construction on the Country Club Plaza. The accounting firm, which currently leases space at 4801 Main on the Plaza will relocate after completion. MidCounty Bank, another tenant within the Country Club Plaza submarket, will relocate to their local office to Crown Center. The Minnesota-based bank will lease nearly 29,000 SF of office space.
Transaction Activity in Kansas City
Office Investment activity within the Kansas City remains solid as investors continue to chase yields in fundamentally sound secondary markets. During the first quarter 2019, two significant office transactions closed. City Ventures purchased the Southlake Office Portfolio from Hines for $88 Million. The Southlake portfolio contains 11 office buildings and encompasses a total of 784,557 SF. The Southlake portfolio was approximately 80% occupied at the time of sale. This was the first acquisition in the Kansas City market for City Ventures, an Omaha-based real estate investment company. The company also has plans to acquire a 2-building portfolio located on the Country Club Plaza. Park Central Plaza & II, totaling 158,108 SF, which is expected to close in Q2 2019.
In Downtown Kansas City, Somera Road acquired City Center Square from Nightingale Properties for $37.4 Million. Somera Road plans to rebrand and significantly renovate the 30-story, 663,000 SF building. Renovations on the building could exceed $60 Million. The New York-based firm who also owns the 3Y office building in the River Market, recently stabilized that asset after they acquired, rebranded and renovated the building in 2016.
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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