2013 KC Office Report

 B.E Smith's New Office in Lenexa, Kansas

One positive aspect of the economic downturn and slow recovery of these past three years is the supply of new office product has fortunately been held at historically low rates.        

Vacancy rates as well have slowly descended from their peak levels despite and market fundamentals have gradually improved as a result. However, tenants continue to exhibit a “wait and see” cautious approach, and remain exceptionally cost and risk adverse in every market due to the uncertainty resulting from the weak economic environment.


Locally, Kansas City has not performed as well as the national market, but the vacancy rate in KC is closely following the national average and decreasing. These market improvements have yielded several significant deals over the year:

Some of the major deals from 2012 in office were:

• B.E. Smith moved into new offices in Lenexa (pictured above)
• Country Club Bank purchased One Ward Parkway
• Coventry Health Care of Kansas Inc. will be moving its 300 employees
• TEVA Neuroscience Inc. will have a new home in Kansas (pictured below)
• The General Services Administration signed a new lease that will accommodate 500 employees

Teva Neuroscience future headquarters in Overland Park, Kansas

All this development leads us to ask...

WHAT’S IN STORE FOR THE COMING YEAR?

The U.S. office vacancy rate is expected to continue to slowly improve. One national economist believes the economy is gaining traction and expects vacancy on the national level, which Costar pegged at 12.1%, to drop lower in 2013 and 2014. At the same time, average rents are projected to increase as much as 3.5% in 2013 on a national basis. Based on historical data, achieving that strong rental growth in one year in the Kansas City market is highly questionable.

Click here for more insight to the BRES 2013 KC Market Report

Contributing Author:

Matt Spachman

Vice President
Block Real Estate Services
LinkedIn