Hopeful outlook for Kansas City office market in 2014
01/28/2014 6:14 PM
01/28/2014 6:14 PM
Ken Block knows southern Johnson County, Jon Copaken knows downtown, and Dave Harrison knows a bit about both. So when you get them together to talk about the office world, it’s an entertaining, fast-break romp.
The three real estate professionals were on a panel discussion recently held by Integra Real Estate.
Ken Jaggers of Integra laid out the basic numbers: Downtown had a 17 percent office vacancy rate, 42nd in the nation. Tulsa — believe it or not — leads the country with 5.8 percent, and San Antonio is close to the bottom with 31.7 percent.
Inside the metropolitan area — no surprise here — the Country Club Plaza remains the hottest office market with a 13 percent vacancy rate and rents around $24 per square foot. Southern Johnson County followed with just under $22 per foot and 14 percent vacancy. Downtown renters paid an average of just under $17 per foot.
Block, whose Block Real Estate Services scored a development coup last year with the opening of the Teva Neurosciences offices at College Boulevard and Nall Avenue, maintained that the Kansas side of the area would continue to dominate office development because the grass is greener there, literally.
“There are more green sites available for office development in Kansas than Missouri,” Block said. “The (Interstate) 435 loop is the location a lot of people want to be. It allows people to get in and out of their businesses and to their homes quicker, and it also links to I-70 and 35.”
Block predicted 2014 would see a return of speculative Class A office construction. In recent years, the bigger driver of office construction has been to housing companies moving as part of the Border War incentive game.
Just why the suburban Missouri side lacks attractive dirt wasn’t forthcoming.
But this is not the first time this subject has come up in development circles. There are some ideas out there, notably the Oxford on the Blue plan being pursued by Whitney Kerr Sr. and James Stowers III in south Kansas City near 87th Street and Interstate 435.
Harrison, whose VanTrust Real Estate recently developed the headquarters for AMC Entertainment at 115th Street and Nall in Leawood, and the Freightquote offices at State Line Road in Kansas City, agreed that I-435 was a big draw for suburban office development.
But Harrison, whose company recently took on the East Village redevelopment plan on the east side of downtown along with Swope Community Builders, tossed out a teasing surprise, too. When asked for his prediction for this year, he replied, “There will be a new downtown office building in 2014.”
When VanTrust signed on to the East Village project in November, Harrison said his firm ultimately would like to develop up to 600 apartments on the north half of the East Village site and modern office space on the south side.
Copaken, whose firm, Copaken Brooks, manages two of downtown’s biggest office buildings, the Town Pavilion and 1201 Walnut, is bullish about what the streetcar line will do to help spur more interest in the city core.
“I think 435 is yesterday’s development pattern,” he said. “People don’t want to be in a commodity building, even if it’s College Boulevard. We see the example of streetcar development. It’s more permanent, and it’s not just transportation.”
Copaken added, however, that it will be “hugely important” for the city to quickly expand the streetcar line beyond its initial two-mile run between Crown Center and the River Market to increase its usefulness as a way of connecting people. Copaken also predicted 2014 would be a breakout year for downtown office activity.
But with downtown — despite all the substantial reinvestment of the past decade — continuing to lose private jobs, Block said it would require a lot more activity to make it attractive to companies. He cited the Downtown Council’s goal of doubling the population as being a carrot.
“They need to do something to change the market and get 40,000 people to stabilize the office market,” he said. “It’s struggled for years.”
One downtown drag is the continued neglect of Washington Park. With its prime location near Crown Center, Union Station and major office buildings, including Two Pershing Square where 900 federal workers will be relocating soon, what should be the centerpiece for the area is a black hole.
“That’s the key visual for the whole area,” Harrison observed. “What is now a not really nice park needs to be the epicenter and focal point for that whole area.”