Kansas City CRE Investments: The Office Market

Last year, the Kansas City commercial real estate investment market came back to life.  Sales activity rose to levels not seen since the first part of 2008. Low interest rates, the pressure to place equity, and the fear of missing out on good pricing, made commercial real estate investment activity rebound. However, these three factors alone would not have increased activity without sellers and buyers changing their mindset in 2011 as it relates to pricing and expected returns.

In all investment classes, the activity pace in Kansas City heightened in 2011. In actuality, the number and quality of sales completed outpaced prior year projections. Kansas City continues to have a large number of institutional buyers that have invested locally.


The Office Market
With the willing seller’s change of strategy, the vast bid/ask spread of the last several years began to tighten from a buyer’s and seller’s prospective. The largest office sale of the year was the US Bank Building in Overland Park for $38.2 million ($198 per square foot) at a 7.52% cap rate, bought by Whiterock Acquisition Corporation.

US Bank Building, located in Overland Park, was bought by the Whiterock Acquisition Company

The other notable office sales of 2011 included Park Central Plaza I & II on the Country Club Plaza for $18 million ($122 per square foot) at an in-place cap rate of 8.95% to Sun Life Assurance from TA Associates. TA Associates had the building under contract in 2007 for $30 million ($205 per square foot), but the buyer failed to close and the market deteriorated. Two other recent offerings on the building also failed to attract a buyer until Sun Life Assurance stepped up to the table. Also, the Midwest Trust building on College Boulevard was sold to lead user, Midwest Trust, for an 8% cap rate or $14.5 million ($123 per square foot).

Other smaller office sales included the Greenview Office Building in Prairie Village, Kansas, to the Price Brothers, the user sale of a Bank Building in Overland Park, Kansas, to Arvest Bank, and 7501 Tiffany Springs Parkway, in a distressed sale to a local investor. While there was significantly increased investment activity in the market, institutional and private investors continued to show favoritism for Johnson County and the Country Club Plaza. As referenced in years past, South Kansas City, Lee’s Summit, Independence and Blue Springs stay on investors’ radar when quality product becomes available.

New entrants in the Kansas City market in 2011 included Whiterock Acquisition Corporation, GoldOller Real Estate and Town Management. Kansas City will continue to be an attractive investment market as institutions see more stable investment returns at rates which are 75 to 125 basis points higher than other first tier markets.

  
Stay tuned to read more blog posts on Kansas City CRE investments and gain more insight into Industrial and Retail, Muli-Family markets and more.

Gather all the KC CRE investment market details. Like our Facebook page to download the 2012 BRES Market Report or get the report on our website.  

Contributing Author:

Grant Reves

Investment Sales

Block Real Estate Services

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