The Downtown office market was the focus of the 5th Annual Downtown Office Summit held on November 9, hosted by the Downtown Council of Kansas City.
Opening the summit, Richard Wetzel, partner at Centric, assured the attendees that although the office market has not been immune to the pandemic’s impact, there is a light at the end of the tunnel and beyond, and leading indicators are positive and promising.
More than 500,000 SF of potential office occupiers will be coming into the Downtown office market in early to mid-2022, said Suzanne Dimmel, director at Cushman & Wakefield. Flight to quality is one objective of these users, so Class A space is key, she said. In addition, Dimmel said larger users are not fearful about signing long-term leases.
A combination of new construction, redevelopment, and renovation comprises recently completed and soon-to-be-completed Downtown office projects.
“As we look at post-pandemic data, data suggests occupiers will look for quality office product driven by lifestyle and strong amenity packages for tenants and their attraction to retain top talent,” said Andrew Greene, senior associate at Cushman & Wakefield.
Currently under construction is 1400KC, which offers 260,000 SF of new Class A office space to be delivered in the third quarter of 2022, with floor-to-ceiling windows and 34,000-SF floor plates. New construction like this has not been available in the Downtown market for quite some time, Greene said.
In addition, plans are underway for a new 11-story, 165,000-SF office building just to the south of 27th and Main Street. This proposed building would be anchored by Fidelity Security Life Insurance Company, with approximately 50,000 SF available for third-party leasing.
“Both of these projects further prove that companies want to be strategically located Downtown in high-end Class A office space. We know that projects such as these will continue to gain momentum and propel other projects such as Platform Ventures and the Strata project,” said Greene.
Meshing the new with the old, are two Downtown redevelopment projects which have strong office components: Grand Place, which will offer 250,000 SF of office space within the mixed-use development at the former headquarters site for The Kansas City Star and Corrigan Station.
Downtown also has seen large-scale, multimillion dollar renovations of some iconic buildings into which local and coastal investors have pumped new life, Greene said. These include 2345 Grand, Town Pavilion and Lightwell.
“While all of these projects are differentiated with unique amenities, they are finding commonality in the flight to quality which appears to us that the trend is here and will continue as companies return to the workplace,” said Greene.
Leonard Popplewell, senior associate at Cushman & Wakefield, discussed the continuing growth of residential, retail and entertainment offerings in Downtown and its adjacent areas, including the Riverfront, east Crossroads, 18th & Vine, West Bottoms and Midtown, which, he said, “will help propel Downtown to be the number one office market in Kansas City going forward.”
Drivers of the continued success of the Downtown office market include population growth, Popplewell said. Fifteen years ago, there were less than 10,000 people living in Downtown. Today, there are more than 32,000 Downtown residents.
“And if we look at the pipeline going forward, it’s exciting to see that by 2025, we’re going to see a 40 percent increase. . . . All these people are going to want a place to work that’s convenient and walkable. So, that’s going to bode well for Downtown office development,” said Popplewell.
Another driver is the culture and arts in Kansas City, Popplewell said. Thrillist ranks Kansas City as the number two city in the country for creatives. And, next year, Kansas City will add the Rabbit hOle, a 165,000 SF children’s literature museum, the first of its kind in the world.
Popplewell said another driver is Kansas City’s well-diversified economy, with key industries including logistics, e-commerce and industrial, followed by financial services and tech. In the last five years, Kansas City has ranked as the fifth largest-growing industrial market, he said.
“This doesn’t just bode well for our industrial market but it’s also going to have some great ramifications for our office market as companies expand and look to relocate to Kansas City,” Popplewell said.
Kansas City ranks number eight out of 38 major metropolitan areas which have seen migration gains since the start of the pandemic, said Dimmel, according to LinkedIn in March 2021.
“This migration for employers and people results from spacious geography, national transportation hub, living affordability and quality of life, and a well-educated workforce,” Dimmel said.
Dimmel said Kansas City can expect to see on its horizon in the next five years other developments which will enhance the attractiveness of Kansas City: a new international airport; the NFL draft in 2023; the streetcar extension; a possible World Cup game; and the debut of the Kansas City Current in their new riverfront stadium.
“And did I say Kansas City Royals downtown? Just maybe,” said Dimmel.