Kansas City Industrial Market – 2Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. May’s 3.3% unemployment rate was 40 basis points lower than the 3.7% 10-year historical average. Year over year, job gains have been most pronounced in the Education & Health and Leisure/Hospitality industries, while job losses have been most pronounced in the Information and Business & Professional sectors. Industrial firms are continuing to adjust labor needs. Locally, all three industrial sectors experienced growth during the past year: Trade/Transportation/Utilities, by 1.2%; Manufacturing, by 1.1%; and Construction, by 0.7%.
The market tightened as leasing activity equated to 2.3 million SF of net absorption during the second quarter of 2024. Vacancy remained flat at 5.5% as net absorption counterbalanced 2.4 million SF of deliveries during the quarter, with a sizeable amount of space delivering unoccupied. Leasing velocity and rent growth in midsized and small bay industrial spaces will remain active during the next four quarters. The construction pipeline increased to 9.9 million SF from 9.5 million SF last quarter. As this recently completed inventory leases, the next construction cycle will offer very few alternatives, leading to a tightening of vacancy. Although the combined build-to-suit and speculative construction pipeline totals 9.9 million SF, over 80%, equating to 7.9 million SF, are in BTS projects including: Panasonic’s 5.5 MSF; Ace Hardware’s 1.5 MSF; Heartland Coca Cola’s 600,000 SF; and Walmart’s 330,000-SF beef plant.
- Average Asking Rent: $6.02/SF
- Vacancy Rate: 5.5%
- Net Absorption: 2.4M SF
Kansas City Office Market – 2Q24
The region’s labor market remained historically strong amid shifting macroeconomic conditions. May’s 3.3% unemployment rate was 40 basis points lower than the 3.7% 10-year historical average.
Year over year, job gains have been most pronounced in the Education & Health and Leisure/Hospitality 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 1.3%.
Net absorption in the second quarter of 2024 totaled 229,041 SF. Net absorption during the past four quarters totaled negative 548,799 SF, demonstrating a contractionary environment. The 273,950-SF non-owner-occupied construction pipeline has trended downward since the third quarter of 2023 due to recent deliveries and sharply decelerating new starts.
Vacancy decreased 30 basis points to 17.5% during the quarter. Landlords are motivated to provide lease concessions in the form of free rent or tenant improvements, rather than reducing quoted rates. In the current financial environment, multiple landlords may now be forced by liquidity constraints to trade elevated concession packages for lower rents. Expect asking rents to begin to reset in the second half of the year. The market rental rate grew 0.9%, year over year.
- Average Asking Rent: $22.37/SF
- Vacancy Rate: 17.5%
- Net Absorption: -548,799 SF
Kansas City Retail Market – 1Q24
The Kansas City retail landscape continues to see high demand for prime retail space in both the suburban and urban areas of the market. Tenants are right sizing their spaces, refining their real estate site selection process, and actively expanding where space is available. As the economy has shifted, we are seeing trends in Landlord’s providing concessions more in the form of free rent versus increasing out of pocket TI Allowance funds. Demand for retail space along the main corridors, with excellent visibility and strong co-tenancy, is at an all-time high and availability is extremely limited. This environment is creating premium rents across the board for retail space. A leveling-out is anticipated to start as we approach 2025.
- Average Asking Rent: $14.94/SF
- Vacancy Rate: 4.0%
- Net Absorption: 203,093 SF
Kansas City Capital Markets – 1Q24
The pace of investment activity in the Kansas City market slowed during the past four quarters, with sales volume totaling $1.6 billion, a decrease of 56.3% compared to the prior five-year average. As a leading second-tier market, the Kansas City Metropolitan area ranked eighth out of the largest 13 Midwest markets in total sales volume during the past 12 months, with multifamily and office assets combining for 54.4% of the Metro’s activity.
- 12-Month Capitalization Rates: 6.3%
- 12-Month Total Sales Volume: $1.6 Billion
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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