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:

Concerns For Office Properties Rise As Leases Roll Over To Reduced Rates

Despite forecasts of decreasing vacancies and increasing rental rates in 2012, there are still major concerns for owners of office properties. In a recent Wall Street Journal article, authors Craig Karmin and Eliot Brown cite that the national delinquency rate of securitized office loans increased 1.4 points from 7.4% last June to 9.0% in December. This is familiar news to real estate professionals in Kansas City who recently witnessed owner Hertz Investment Group default on their $21.5M note for Commerce Tower in Downtown Kansas City. Karmin and Brown explain this trend by saying that due to the typical 5 year office lease, leases signed at peak rates in 2007 are now rolling over with tenants signing at drastically reduced rates.