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Chris Kuehl reveals his economic forecast for KC

Chris Kuehl is managing director of Armada Corporate Intelligence, and the featured speaker at this month's KC CREW luncheon.

Chris Kuehl is managing director of Armada Corporate Intelligence, and the featured speaker at this month’s KC CREW luncheon.

For better or for worse, Kansas City has a unique position in the United States’ rocky road to recovery. “It’s a very middle of the road city in a lot of good ways,” Chris Kuehl, managing director of Armada Corporate Intelligence said in his mid-year economic update for Kansas City Commercial Real Estate Women (KC CREW) on Tuesday. “It never really feels the high, and never really feels the lows. We don’t experience the big surges that the rest of the country goes through.”

But the United States business community is beginning to learn that what happens in other parts of the world has a reciprocal local effect. That was evident during the first quarter of the year when – as Kuehl put it – mother nature took her revenge. Winter hit transportation hardest, cancelling 12 percent of all commercial airline fights – a feat that will take the industry a year to recover. Other areas suffered as well: retail, housing, construction, and exports overall. But as economists began to dig deeper, they revealed that the issue was more than winter, Kuehl said, but rather the effects of other countries’ economic suffering.

Chris Kuehl gives an overview on the struggles the southern part of the country is going through when it comes to finding highly skilled labor.

Chris Kuehl gives an overview on the struggles the southern part of the country is going through when it comes to finding highly skilled labor.

“As we go forward we need to pay attention to the fact that what happens around the world matters to us,” he said. “Europe is a huge market for the U.S.; It used to be almost 25 percent of our imports and exports – but it’s half that now. Europe has been in dire straits now for close to 10 years and without that market, it affects us.”

So how exactly does that impact real estate? Interest rates have been low for years now and their inevitable rise is on the horizon. But Stanley Fisher, new vice chair of the Federal Reserve Bank, is paying close attention to hardships in international markets: He believes those struggling economies contributed to a 3 percent reduction in the U.S. economy in the first quarter – its biggest contraction in 5 years. (More from Bloomberg on that here.)  “Fisher is saying, ‘Your economy is starting to recover, but the rest of the world really hasn’t,’” Kuehl said.

Nearly a quarter of Kansas City's economy revolves around agriculture. Garmin's second largest part of its business is agricultural GPS, he says, which allows farmer to plow throughout the night using the device.

Nearly a quarter of Kansas City’s economy revolves around agriculture. Garmin’s second largest part of its business is agricultural GPS, he says, which allows farmer to plow throughout the night using the device.

Other industries – particularly construction, manufacturing and transportation – are currently struggling thanks to another issue that Kuehl calls an endemic. While these sectors used to share workers who could easily transfer from one area to another during hard times, those industries are becoming more sophisticated and as a result, aren’t seeing the mobility they used to. Small businesses in particular are having a tough time training workers who are then poached by larger, higher-paying employers looking for skilled workers.

“Within manufacturing, the estimate is there’s almost 100,000 jobs going unfilled right now – good paying, $70,000 to $90,000-a-year jobs going unfilled because no one has the right skills,” he said.

Skilled laborers are hard to find in the southern part of the United States, Kuehl said, leaving behind as much as 100,000 high-paying jobs.

Skilled laborers are hard to find in the southern part of the United States, Kuehl said, leaving behind as much as 100,000 high-paying jobs.

But there is some hope. Bankers are beginning to find their way out from under the “monstrosity” of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and are working with regulators to begin lending again. As the economist for the National Association of Credit Management, he’s beginning to see trade credit begin to opening up.

“We’re also beginning to see a lot of activity with manufacturers and service companies, pretty much across the board,” Kuehl said. “Part of this is that small banks are getting engaged again. The other part is that companies are feeling a little more comfortable giving each other credit, which had not been the case for several years. This is really good news for a lot of projects that are stuck.”

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For better or for worse, Kansas City doesn’t experience the same economic turbulence that the rest of the world does, Kuehl says.

One area that Kansas City is excelling tremendously in is transportation, Kuehl said, particularly as manufacturing makes its way back to the United States. On top of its advantageous position in the middle of the United States, sitting on both north-south routes and east-west routes, Kansas City has a concentration of companies like YRC Freight, TransSystems and Kansas City Southern that are facilitating the explosion of intermodals across the metro.

“The intermodal is something really growing in rail, as it is very expensive now to do cross-country trucking with new rules that have made it very difficult,” he said. “But the next thing that happens is a lot of warehouse space begins to follow that intermodal… You’re seeing a complete change in terms of the manufacturing mindset where we have got to start warehousing parts.”

Trammel Crow and Clarion Partners have nearly finished the first phase of LogisticsCentreII Distribution Center at the KCI Intermodal BusinessCentre.

Trammel Crow and Clarion Partners have nearly finished the first phase of LogisticsCentreII Distribution Center at the KCI Intermodal BusinessCentre near Kansas City International Airport. Kuehl says he expects to see new warehouses follow the development of intermodal systems.

So what would Keuhl like to see happen in Kansas City in the near future? “Kansas City could use investment,” he said. “We have airport modernization to discuss; It would be nice if more of that bill was being picked up by the government instead of locally.”

Did you miss this month’s KC CREW luncheon? Make sure to mark your calendar for the next presentation on August 19. For more information and to register for the event, click here.


CBRE’S Deal of the Week

1-11005 Metcalf

11005 Metcalf, Overland Park, Kan.

Brent Roberts of CBRE takes home this week’s Deal of the Week with the renewal of a lease in Overland Park. Roberts renewed the 14,233-square-foot lease at the Financial Plaza building for Partners Inc., DBA Keller Williams Realty.

Roberts represented the tenant, while Matt Spachman of Block & Company Inc. represented the landlord, Colony Realty Partners.

Did you recently help sign a significant lease or close a significant sale? Let us know and we may feature it as our Deal of the Week! Contact our managing editor for more information.

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Developer Bob Frye re-imagines urban living

Bob Frye stands outside the final phase of The Founders at Union Hill apartment project -- one of many pieces he's preparing to wrap up after 30 years of working on the neighborhood.

Bob Frye stands outside the final phase of The Founders at Union Hill apartment project — one of many pieces he’s preparing to wrap up after 30 years of working on the neighborhood.

A project that developer Bob Frye has had in the works for 30 years is finally emerging, becoming one of the very first multifamily projects to emerge in Kansas City’s urban core since the recession. But by taking a couple strategic steps, Frye says he’s positioned the Union Hill neighborhood to where “it doesn’t need us anymore,” he said. “And that feels good. It feels stable.” Here’s how he did it.

Kansas City officials celebrate the ribbon cutting of Union Hill's final phase of The Founders at Union Hill, which includes five new apartment buildings as well as 13 new single-family homes to the neighborhood.

Kansas City officials celebrate the ribbon cutting of Union Hill’s final phase of The Founders at Union Hill, which includes five new apartment buildings as well as 13 new single-family homes to the neighborhood. Photo credit: Landon Vonderschmidt Photography.

WHAT ATTRACTED YOU TO THIS AREA?

“In 1982, when I was still in college, a friend of my brother’s heard about a six-plex being sold on the courthouse steps for $6,000,” Frye said. “Our entire genius was that it’s close to Crown Center, so it can’t be all that bad. That was the entire thought process.”

By the time he tackled his college thesis, he knew he wanted to focus on the Union Hill neighborhood. In his research, he stumbled on original developer Jim Young’s plan for the area, and began buying pieces of ground from him until fully buying him out in 1986. Frye took Young’s plans for multi-family apartment buildings in the middle of the neighborhood and pushed them out to the perimeter, where he knew the busier streets could handle a higher density. And after 55 arrests, he cleared a number of crime-ridden apartment buildings before demolishing them altogether.

“Within 30 days of that event, it feels like a safe neighborhood,” he said.

The Taylor Building,Union Hill’s newest apartment home building is named for John Taylor, a soldier in the Union Army that helped defend Kansas City during General Price’s Raid. He later helped collect books to stock the city’s first public library. He is buried in nearby Union Cemetery.

The Taylor Building, Union Hill’s newest apartment home building at 230 E. 30th St., is named after John Taylor, a soldier in the Union Army that helped defend Kansas City during General Price’s Raid. He later helped collect books to stock the city’s first public library. Photo credit: Landon Vonderschmidt Photography.

ON THE BENEFITS OF DENSITY:

Kansas City developers are finally becoming comfortable with the issue of density. But thirty years ago, when the project that would eventually become Union Hill began, that wasn’t the case.

“What you see in most successful urban cores is that it’s very dense,” he said. “That’s a very positive thing. It’s good for the environment, because for every mile of infrastructure, we have a lot more people. But it also allows you to pay for better materials. The reason we can have these stone and brick buildings is because we’re spreading that land cost over more units so we can build a better product.”

Developer Bob Frye, who manages the multifamily projects he builds, takes great pride in how Union Hill serves its residents. "I specifically did not hire my staff from the apartment industry;  I brought in people from hospitality background. I can teach them about buildings – I get buildings – but someone who high service is ingrained."

Developer Bob Frye, who manages the multifamily projects he builds, takes great pride in how Union Hill serves its residents. “I specifically did not hire my staff from the apartment industry; I brought in people from hospitality background,” he said. “I can teach them about buildings – I get buildings – but someone who high service is ingrained.”

He gets inspiration from cities like New York City – the greenest city in the world – and Chicago, where he’s spent a lot of time.

“Most major metro areas have that super nice neighborhood right next to the central business district,” he said. “We always felt that Union Hill was geographically properly placed to be that neighborhood… We’re trying to make this Kansas City’s Linkin Park, and I think we’re getting close.”

Kansas City Mayor Sly James and developer Bob Frye celebrate the grand opening of Union Hill's final phase.

Kansas City Mayor Sly James and developer Bob Frye celebrate the grand opening of Union Hill’s final phase. Photo credit: Landon Vonderschmidt Photography.

WHAT’S BEEN YOUR BIGGEST CHALLENGE?

“Site assemblage is really difficult, and presents the highest risk,” he said. “When the recession hit and we had all this land, I certainly was wishing I didn’t have all that land we carried for all those years through the recession.”

He says it would be nearly impossible to assemble Union Hill’s land today. “In the early years, we were a condemning authority as a redevelopment corporation,” he said. “We used eminent domain a lot, but the laws have changed on that and now the tool is dramatically reduced as an ability. It’d be almost impossible to assemble the sites that we assembled through eminent domain. It’s very difficult to do.”

Because Frye had sold out the condominiums he built just prior to recession, it put him in a position to have his Union Hill project ready to go once the market turned upward.

Because Frye had sold out the condominiums he built just prior to recession, it put him in a position to have his Union Hill project ready to go once the market turned upward. Photo credit: Landon Vonderschmidt Photography.

HOW DO YOU APPEAL TO EMPTY-NESTERS?

“Essentially the renter by choice is a person who, ten years ago, would buy a condominium or a townhome,” Frye said. “But they don’t want to tie up their money in a home, and there are huge advantages to renting.”

Thus, Frye says he builds a “condo-level product” for rent rather than sale. The age and demographics of those renters can vary from empty nesters to young professional couples, as he learned in listening to the community.

“During the first couple years of the recession, our two-bedroom units in our apartments were very soft, and we started hearing really early on that young people felt trapped in their houses,” he said. “What we found was that when the recession hit, in order to get a better job – or sometimes a job at all – people needed to relocate, but couldn’t because they were locked into the house. We did an informal poll and asked people if they thought buying a house was a smart financial personal decision. It came back overwhelmingly ‘No, it’s reckless.’ That’s a major shift from post-World War II baby boomers.”

Kansas City Mayor Sly James praises a born-again Union Hill neighborhood, thanks to Bob Frye's 30-year development project.

Kansas City Mayor Sly James praises a born-again Union Hill neighborhood, thanks to Bob Frye’s 30-year development project. Photo credit: Landon Vonderschmidt Photography.

So how does he sell to a person who could buy a house but chooses not to? Lots of storage, big pantries, great parking, and ample security systems, among other amenities. But most importantly, he does so by listening to the ever-changing market. And that’s important, especially considering this statistic:

“Right now in Kansas City, there are 7,500 apartment units in the pipeline,” he said. “But Kansas City’s historic absorption rate is 1,700 units a year. Now, there’s probably a bit of pent-up demand because construction was down for a number of years – but it still makes you think.”

Still, he has hope not only for his project but the urban core as well.

“I think we are certainly in a better position than the suburbs. There’s no question,” he said.

Photo credit: Landon Vonderschmidt Photography.

Photo credit: Landon Vonderschmidt Photography.

HOW DOES IT FEEL TO APPROACH THE PROJECT’S END?

“We have a project being built in a neighborhood, but once it’s done, we want it to feel like a neighborhood – not a project,” he said. “And it does. It feels really good. It isn’t easy doing what we do. We’ve done it a long time. And it would really suck if 30 years from now, someone had to re-develop what we’ve redeveloped. That would be a fail. My objective has always been to create a sound real estate that’s not personality-driven; that the next owner would take care of it as well or better than we would because the inherent underlying real estate value is there. I think we’ve accomplished that.”

For more information on available multifamily units and single-family homes, visit Union Hill’s website here.


Cassidy Turley’s
Deal of the Week

ECCO Select will move into its new home at 4100 N. Mulberry Dr., at Briarcliff Village in November.

ECCO Select will move into its new home at 4100 N. Mulberry Dr., at Briarcliff Village in November.

A professional services and consulting firm, ECCO Select, has found a new home in Briarcliff I, thanks to a pair of Cassidy Turley brokers who take home this week’s Deal of the Week. After outgrowing its current space downtown, Mike Mayer and Callie Jones represented the firm in its lease of 12,221 square feet at 4100 N. Mulberry Dr., Suite 105, that will provide it with additional offices, more desk space for employees and consultants, and added conference rooms.

“Briarcliff I is the perfect fit for ECCO Select, and I am confident its employees are going to enjoy their new work environment,” Jones said. “Having a headquarters like ECCO Select is a true win for Briarcliff I.”

By November, the firm will join a handful of other growing companies located in the popular Riverside commercial development.

“I’m excited that our two offices will be consolidated,” ECCO Select CEO Jeanette Prenger said. “I believe in collaboration and feel that our associates will be even more energized by our new space. With the company’s double-digit growth over the past several years, we need to expand our office footprint to accommodate our new service offerings for our clients, as well as the addition of consultants and support staff.”

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A Family Affair: How the Kerr family is building Kansas City

A Family Affair:
How the Kerr family is building
Kansas City

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Left to right: Gib Kerr, Whitney Kerr Sr., and Whitney Kerr Jr. of Cassidy Turley.

Two generations of the Kerr family sit around a conference table in Crown Center overlooking the city they’re helping to build. With nearly 100 combined years of commercial real estate experience, Whitney Kerr Sr., Whitney Kerr Jr., and Gib Kerr discuss what it’s like to work together under the same company as well as some of their most memorable experiences in the industry thus far.

WHAT ADVICE DID YOU HAVE FOR YOUR SONS AS THEY ENTERED THE BUSINESS?

Whitney Kerr Sr.: “I think the single most important thing is to always be honest and be a straight-shooter. You can fail to sell a property or lease it when someone has given it to you as a listing — we don’t always sell the properties that we’re listing — but the one thing that’s unforgivable in this business from the standpoint of the public is to not be honest with people and trustworthy. That’s the one thing they’ll remember. I don’t think there’s anything more important than running your business ethically. It’s the golden rule. And some people who don’t follow that have made money in spite of that, but they never earn the respect and affection of their competitors or the public. You’re permanently impaired.”

Whitney Kerr Jr. of Cassidy Turley primarily focuses on the industrial real estate market.

After his former life as a stock broker, Whitney Kerr Jr. of Cassidy Turley primarily focuses on Kansas City’s industrial real estate market.

Whitney Kerr Jr.: “Kansas City is a small town when you really think about it; You can’t burn bridges here and survive long-term. You cross paths with a lot of the same people whether they’re customers, clients, or other real estate people. You really have to make sure that you don’t damage relationships. Negative talk gets around real quickly.”

Gib Kerr: “Another lesson he really pounded into our heads from an early age was to be your own boss. We heard that a lot. This is one of the few industries where as brokers or independent contractors, we really are our own boss. And so it’s up to us to decide how hard and how smart we want to work. You have to go find your own business, you have to sell the property, close the deal, and you’re totally responsible for your own success or failure.”

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“Getting your sons into the real estate business — ” Whitney Kerr Sr. jokingly asks, “Isn’t that called child abuse?”

WHAT’S THE MOST MEMORABLE PROJECT YOU’VE EVER WORKED ON?

Whitney Kerr Sr.: “While working on that project down there,” he said, pointing to the Kauffman Center for the Performing Arts, “there were times when I wondered whether I would lose everything I had because of the risks that were taken. I believe that you don’t make progress unless you take risks but it can be very scary too. It’s kind of like swimming. I don’t think a person can learn how to swim until he or she is convinced that they’re going to float.”

It was his namesake that helped him stay afloat during the development of that site, which after 38 full-blown presentations, Kerr Sr. said, interested no one. He recalls “the answer to his prayers,” when Ross Perot Jr. – a former classmate and fraternity brother of Whitney Kerr Jr. – visited Kansas City on a whim just after his father had made $4 billion off the sale of Electronic Data Systems to General Motors. The Perots were looking to purchase city-center properties with local partners, and  a little over a month of being introduced to the Kauffman Center site, closed that deal.

Gib Kerr

After heading up his own firm and being part of several others, Gib Kerr has returned to Cassidy Turley to work alongside his brother and father, with a focus on Kansas City’s urban core.

Gib: “I think my favorite project is always the next one, so it would probably be the Power & Light Building project that I’ve been working on that for quite some time. We’re getting close to getting that thing completed. I think it’s going to be great for Kansas City to have such a key part of the skyline that’s been dark for several years to be lit up again. Since I’ve had it listed we’ve had it under contract now for the third time and now I think we have the right guys with NorthPoint (Development) to do it. We’re real close to getting that thing finalized.

“It’s about a $65 million project. There will be some commercial on the lower floors, but everything else will be really nice luxury apartments. The building itself will be about 200 units, and then they’ll build a garage with almost 500 spots on the lot to the north. They’ll wrap the garage with more apartments – about 70 – around the garage or on top of it, and there will be a swimming pool there. They have some great plans. It’s going to be really nice. I think they’re planning to start construction this fall.”

The Kansas City Power and Light building has sat dark for years -- until now. Photo credit: Michael Mihalevich.

The Kansas City Power and Light building has sat dark for years — until now. Photo credit: Michael Mihalevich.

WHAT’S A KERR FAMILY GET-TOGETHER LOOK LIKE?

“Crowded and loud,” Gib says with a laugh. At his father’s farm in central Missouri, he and his brothers like to go hunting and fishing. But his father stays busy restoring antique cars. Currently, he’s restoring a 1925 Hudson Super Six. “That’s a challenge finding parts for it; It’s like solving a puzzle,” he said. “But it’s fun when you get it all put back together.”

WHAT DRAWS YOU TO THIS INDUSTRY?

Whitney Kerr Sr.: “Land is the basis of all wealth. Every worthwhile human endeavor occurs on the earth. It’s pretty basic – food, clothing, and shelter – it’s a basic industry. It always has been and I think will be for the foreseeable future. And how human beings use the land has always been fascinating to all of us, because, as Gib said, you can’t be in this business without being aware of how people have used the land, the history of it, and what’s caused it to be this or that way, or to thrive or decline. It’s very interesting and constantly changing.”

Whitney Kerr Sr. is preparing to take his "Oxford on the Blue" biotech science park project before the zoning and planning commission. For an overview of that project, click here. http://metrowiremedia.com/kc-real-estate-lane4s-plan-for-metcalf-south/

Whitney Kerr Sr. is preparing to take his “Oxford on the Blue” biotech science park project before the zoning and planning commission. For an overview of that project, click here.

WHAT’S THE BIGGEST BENEFIT OF WORKING WITH FAMILY?

Gib Kerr: “I think having access to his encyclopedic knowledge is great because I’m 50 years old and have been in the business for more than 25 years – Whitney for 30-35 years – and every time I talk to my dad I learn something new. You never stop learning in this business.”

GIB, YOU HAVE AN INTERESTING BACHELOR’S DEGREE IN EUROPEAN HISTORY AND ROMANCE LANGUAGES. WHAT DREW YOU TO THAT?

Gib Kerr: “That degree didn’t really prepare me for the business world as much as it just prepared me for life in general.”

Whitney Kerr Sr.: “Of all the things that people can study, I think being able to handle the written and spoken word well, is the single most important thing in our biz or almost any other business or profession. And you’ll find people who are very brilliant but cannot express themselves or can’t sell anything or can’t explain a concept because they don’t know how to write it out or speak about it. And they’re handicapped. It’s been my experience you’ll find people who are successful at whatever they’re doing, they all seem to have that ability. There are very few exceptions.”


New KCI Intermodal warehouse
hits the market

Trammel Crow and Clarion Partners have nearly finished the first phase of LogisticsCentreII Distribution Center at the KCI Intermodal BusinessCentre.

Trammel Crow and Clarion Partners have nearly finished the first phase of LogisticsCentreII Distribution Center at the KCI Intermodal BusinessCentre.

Developers Trammel Crow Co. and Clarion Partners are wrapping up construction of the first phase of LogisticsCenterII Distribution Center at KCI Intermodal BusinessCentre, and CBRE brokers are ready to entertain prospective new tenants. Final touches are being put on the first phase of the building, a 351,000-square-foot modern warehouse which has potential to expand to 703,040 square feet overall.

The 703,040-square-foot warehouse includes two phases, consisting of 351,520 square feet of a LEED certified, multi-tenant cross-dock modern bulk warehouse/distribution center. Photo credit: CBRE.

The 703,040-square-foot warehouse includes two phases, consisting of 351,520 square feet of a LEED certified, multi-tenant cross-dock modern bulk warehouse/distribution center. Photo credit: CBRE.

It’s in a prime location, too – at 112th Street and I-29 in Platte County – a stone’s throw to the east of Kansas City International Airport, providing easy access for customers and visitors as well as air shipments. It’s also just the beginning for the 697-acre park, which in Phase 1 consists of 182 acres and up to 1.8 million square feet. Total construction of all phases will be up to 5.4 million square feet – or $226 million – worth of development, including air cargo and air freight facilities.

Every open house has to have a gimmick, right? David Hinchman of CBRE, who is marketing the project, chose a dunk tank.

Every open house has to have a gimmick, right? David Hinchman of CBRE, who is marketing the project, chose a dunk tank to help bring brokers to his open house on Friday.

CBRE brokers David Hinchman and Joe Orscheln are assigned to market the space. For more information, contact them or visit kcilogistics.com.

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