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1st Quarter 2022 Office Trends | Kansas City

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Companies have began to re-enter workplaces and continue to pivot away from a fully-remote environment.

Firms seeking quality space will help bring employees back to the office as well as attract talent by providing space in quality buildings with enhanced amenities. 2022 will continue to bring clarity on space use as COVID-19-related challenges continue to lessen.

Key Takeaways

• Kansas City metro vacancy is up 20-basis-points relative to last quarter
• Office occupiers will continue to embrace hybrid working to some extent
• Pressure on rents could increase in the coming months as landlords compete to capture tenants in the market

Kansas City Highlights

Following close to two years of pandemic-driven correction, signs of stabilization are emerging throughout the office market. Market fundamentals related to the office sector continue to remain soft, but indicators are beginning to trend in a positive direction. Currently the vacancy rate in the Kansas City metro stands at 10.4%, a 20-basis-point increase relative to last quarter and a 90-basis-point increase from this time one year ago. Sublease space remains a key contributor to the increase in vacancy. Throughout Q1 2022 the Kansas City metro experienced 203,387 SF of negative absorption as additional sublease space continues to be added to the market.

Overall asking rents within the Kansas City metro continue to remain relatively steady at $20.49/SF across all product classes. Due to the prolonged length of limited leasing activity, the gap between asking and effective rents continues to widen due to soft market fundamentals. However, as more active requirements emerge, pressure on rents could increase in the coming months as landlords compete to capture tenants in the market.

Workplace and the Return to the Office

Businesses continue to reassess their space requirements, including work models and space use. Many office occupiers will continue to embrace hybrid working to some extent but will vary greatly between each company and business sector. We anticipate that the remainder of 2022 will bring additional clarity on approach and space use as COVID-19-related challenges continue to lessen.

Kastle’s Back to Work Barometer report, which tracks office occupancy through key card activations, has recently reported the highest office occupancy levels since pre-COVID-19, an encouraging sign for office users and the return to their workplaces.

A flight to quality office space will continue for office occupiers as more Class A space options become available at competitive rental rates. Firms seeking quality space will help bring employees back to the office as well as attract talent by providing space in quality buildings with enhanced amenities. Lease commitments remain tepid at this point as many firms evaluate their real estate strategy, but leasing activity is continuing to gain traction.

Moves and Growth Around the Metro

A handful of sizeable deals were signed throughout the first quarter, which continue to signal growing confidence from decision makers about their real estate needs going forward. Touring activity continues to increase as some companies re-enter workplaces and continue to pivot away from a fully-remote environment.

Wellsky continues to grow in South Johnson County as they announced plans to occupy an additional 132,000 SF within a new building in the CityPlace development. As a result, construction for CityPlace Centre IV is expected to commence soon on the $51 million, six-story 190,000 SF office building.

Activity within the downtown submarkets continue to improve as a handful of leases were signed throughout the first quarter. Academy Bank will lease 55,000 SF at 1201 Walnut, while ProMax will sublease nearly 26,000 SF at 2555 Grand. Additionally, Northwestern Mutual leased 14,000 SF at 2345 Grand. The highly-anticipated 1400KC building is expected to be delivered in Q2 2022. The 260,000 SF tower originally planned for Waddell & Reed will be the first major office development in downtown since 2009. The available sublet space offers a first-generation Class A office opportunity within the downtown market, which will attract new office occupiers seeking modern office space to the area.

Momentum related to office transactional activity continues to gain traction at local and national levels, but remains limited relative to other commercial property sectors. Nazareth Enterprises acquired 9201 State Line from Real Capital Solutions for $27.6 million. The nearly 156,000 SF building is fully leased to Burns & McDonnell. In downtown Kansas City, Jackson County purchased 1300 Washington for $9 million. Jackson County purchased the 82,664 SF building for use as administrative offices.


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1st Quarter 2022 Office Trends | Kansas City

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