Kansas City 1Q25 Market Overview

Newmark Zimmer’s Kansas City market reports provide a comprehensive overview of current real estate conditions by sector and submarket. Newmark Zimmer is constantly monitoring market indicators, tracking and analyzing supply and demand drivers, cyclical patterns and industry trends. The following quarterly research data examines the multifaceted Kansas City commercial real estate market.

The Kansas City industrial market recorded 7.5 MSF of positive net absorption in first-quarter 2025, the second-highest quarterly absorption total in the market’s recorded history. The absorption was a result of three primary factors: multiple build-to-suit deliveries (Ace Hardware in 1.5 MSF, Blue Buffalo in 727,350 SF and Heartland Coca-Cola Bottling in 677,000 SF); bulk building leasing (USPS subleased the 1.1-MSF Coleman building); and above-average first quarter demand resulting from a softer-than-expected 4Q24. While steady demand and a slowing speculative construction pipeline drove vacancy down 90 basis points year over year to 4.6%, the elevated net absorption recorded in 1Q25 is not expected to become a continuing trend.

The Kansas City office market recorded 75,411 SF of net absorption during the quarter, bringing the four-quarter total to 269,465 SF. This marks the third consecutive quarter of positive absorption, driven by tenants capitalizing on favorable leasing conditions. The non-owner-occupied construction pipeline has remained inactive since the fourth quarter of 2018, with just 120,100 SF currently under construction. Vacancy decreased by 10 basis points to 16.4% and is expected to edge down toward 16.0% as the market continues to stabilize. Asking rental rates are anticipated to soften in the coming quarters, following a modest year-over-year increase of 0.8%.

The Kansas City retail market continued its resilient performance in the first quarter of 2025, marked by strong leasing activity and continued preference for well-located, experiential retail. Average asking rental rates increased significantly during the quarter from $20.02/SF to $20.43/SF in the South Johnson County submarket, demonstrating robust tenant demand in one of the Metro’s largest submarkets.

The pace of investment activity in the Kansas City market increased during the past four quarters, with sales volume totaling $2.7 billion. As a leading second-tier market, the Kansas City Metropolitan area ranked sixth out of the 13 largest Midwest markets in total sales volume during the past 12 months, with multifamily and industrial assets combining for 70.8% of the Metro’s activity.

For a more detailed view of the industrial, office, retail and investment commercial real estate markets, please visit the research section of Newmark Zimmer’s website. Additionally, national reports and market insights are available online through Newmark.