Kansas City Industrial Market – 3Q24
The regional labor market remains historically strong despite evolving macroeconomic conditions. In August, the unemployment rate was 3.5%, 40 basis points below the 10-year average of 3.9%. Year-over-year, the Manufacturing and Leisure & Hospitality sectors saw the strongest job growth, while the Business & Professional and Information sectors faced the most significant job reductions. Industrial firms continue to adjust their labor needs. Locally, all three industrial sectors experienced growth over the past year: Manufacturing grew by 7.6%, Construction by 2.1%, and Trade/Transportation/Utilities by 1.4%.
The market tightened with 1.5 million SF of net absorption during the third quarter of 2024. Vacancy decreased by 10 basis points to 5.4%, as net absorption offset 695,000 SF of new deliveries. Leasing activity and rent growth for midsized and small bay industrial spaces will continue to be robust over the next year. The construction pipeline expanded to 10.6 million SF, up from 9.9 million SF last quarter. As the recently completed inventory is leased, the next construction cycle will offer limited alternatives, likely reducing vacancy rates. Of the combined 10.6 million SF build-to-suit and speculative pipeline, over 9.0 million SF (84%) is dedicated to build-to-suit 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: $6.06/SF
- Vacancy Rate: 5.4%
- Net Absorption: 1.5M SF
Kansas City Office Market – 3Q24
The region’s labor market remains historically strong despite evolving macroeconomic conditions. In August, the unemployment rate was 3.5%, 40 basis points below the 10-year historical average of 3.9%. Year-over-year, the strongest job growth has occurred in the Manufacturing and Leisure and Hospitality sectors, while job reductions have been most notable in the Business and Professional and Information sectors. Professional business and technology firms are adjusting their workforce needs. Locally, employment has declined in two of the three office-occupying sectors compared to the previous year.
The market tightened with 267,827 SF of net absorption this quarter, bringing the total to negative 24,163 SF over the past year. This marks the second consecutive quarter of positive absorption as tenants capitalize on favorable leasing conditions. Since the fourth quarter of 2018, the non-owner-occupied construction pipeline has been inactive, with just 60,100 SF currently under construction. Vacancy decreased by 30 basis points to 17.0% and is projected to decline further toward 16.0% as the market continues to adjust. Asking rental rates are expected to ease over the coming quarters, with the market rental rate increasing 2.3% year-over-year.
- Average Asking Rent: $22.40/SF
- Vacancy Rate: 17.0%
- Net Absorption: 267,827 SF
Kansas City Retail Market – 3Q24
Consumer habits combined with market demands for retail space will continue to be a driving force behind the acquisition and use of space. Location has always been a dominating factor in site selection, but a lack of desirable locations is leading to more flexibility in prototypes. Retailers are adjusting to smaller formats both in the food service and soft goods retail sectors. They are also moving away from a strict template as far as size and store frontage width, and stressing design of the space and how it translates to the brand, marketing and relevance among social media and consumers. We anticipate this continues to be a priority for retail and restaurants as vacancy will remain tight for the foreseeable future.
- Average Asking Rent: $15.05/SF
- Vacancy Rate: 3.9%
- Net Absorption: 56,313 SF
Kansas City Capital Markets – 3Q24
The pace of investment activity in the Kansas City market slowed during the past four quarters, with sales volume totaling $1.7 billion, a decrease of 51.9% 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 retail assets combining for 75.6% of the Metro’s activity.
- 12-Month Capitalization Rates: 6.7%
- 12-Month Total Sales Volume: $1.7 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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