Kansas City Industrial Market – 1Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. February’s 3.2% unemployment rate was significantly lower than the 4.0% 10-year historical average.
Year over year, job gains have been most pronounced in the Education & Health and Government industries, while job losses have been most pronounced in the Information and Business & Professional sectors.
Industrial firms are continuing to adjust labor needs. Locally, two out of the three industrial sectors, experienced growth during the past year. Manufacturing registered 1.5%, Trade/Transportation/Utilities registered 0.1% and Construction registered negative 0.5%.
Absorption in the first quarter of 2024 recalibrated totaling negative 295,788 SF. The slowdown is more acute in large bulk buildings, while leasing velocity and rent growth in midsized and small bay industrial spaces was strong and is expected to remain active. Other factors contributing to the slowdown include lower international trade volume, an uncertain economic climate, the upcoming election and a tapering demand for short-term space needs, recently solved exiting the pandemic.
The construction pipeline increased to 9.7 million SF as 222,090 SF delivered to the market during the quarter, while 854,310 SF of new product started construction. As this recently-completed inventory leases, the next construction cycle will offer very few alternatives, leading to a tightening of vacancy. Vacancy increased 10 basis points to 5.5% during the quarter.
- Average Asking Rent: $6.05/SF
- Vacancy Rate: 5.5%
- Net Absorption: -295,788 SF
Kansas City Office Market – 1Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. February’s 3.2% unemployment rate was significantly lower than the 4.0% 10-year historical average.
Year over year, job gains have been most pronounced in the Education & Health and Government industries, while job losses have been most pronounced in the Information and Business & Professional sectors.
Professional business and technology firms are continuing to adjust labor needs. Locally, two out of three office-occupying sectors experienced employment retraction compared with the prior 12 months. The Financial Activities sector led all office-occupying sectors, displaying an increase of 0.8%.
Absorption in the first quarter of 2024 totaled negative 594,182 SF. Total net absorption has averaged negative 287,131 SF per quarter during the past three years, demonstrating a contractionary environment. The 347,320-SF construction pipeline has fluctuated between 300,000 SF and 700,000 SF during the past four years, with a limited number of major projects.
Vacancy increased from 16.2% to 17.9% during the past year as negative net absorption continued across multiple submarkets. Landlords are motivated to provide lease concessions in the form of free rent or tenant improvements rather than reducing quoted rates. In addition, expansive landlord investment in property upgrades, driven by solid demand for highly-amenitized Class A space, drove slow but positive 12-month rent growth of 2.9%.
- Average Asking Rent: $22.33/SF
- Vacancy Rate: 17.9%
- Net Absorption: -594,182 SF
Kansas City Retail Market – 4Q23
In the fourth quarter of 2023, Kansas City continued to see average asking rents climb as total vacancy rate remained low with small shop space averaging 2.5% and big box averaging 4.4% vacancy. Small shop space continues to see a wide variety of interest from service-based retailers (salon, nail, massage, etc.), boutique fitness, and fast casual food type users. Fitness, entertainment, and grocery have been the most active players in backfilling big box space. Drive-thru space, whether freestanding or end-cap, continues to be highly sought after by brands. In addition, QSR concepts are continuing to look for opportunities to convert or relocate spaces to a drive-thru concept.
- Average Asking Rent: $15.09/SF
- Vacancy Rate: 4.1%
- Net Absorption: 285,900 SF
Kansas City Capital Markets – 4Q23
The pace of investment activity in the Kansas City market slowed during the past four quarters, with sales volume totaling $1.8 billion, a decrease of 51.6% compared to the prior five-year average. As a leading second-tier market, the Kansas City Metropolitan area ranked seventh out of the largest 13 Midwest markets in total sales volume during the past 12 months, with multifamily and office assets combining for 68.0% of the Metro’s activity.
- Class A Capitalization Rates: 6.3%
- 12-Month Total Sales Volume: $1.8 Billion
- 12-Month Total Transactions Volume: 147 Transactions
State of Space Report – Kansas City Office Market
The State of Space Report is a snapshot of the current Kansas City office market and provides detailed information that is useful for both owners and occupiers of office space throughout the Kansas City metropolitan area.
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Big Box Report – Kansas City Industrial Market
The Big Box Report is a summary of all existing, under construction and announced Class-A vacancy in the Kansas City Metropolitan market. Inquire with the Industrial & Logistics Heartland Team to receive the report.
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