MWM panelists agree: 2020 inspired new opportunities for 2021

Nearly 100 Kansas City-area commercial real estate professionals gathered at Stone Pillar Vineyard & Winery on Wednesday for MWM’s annual KC Market Forecast event.

The event was moderated by Randy Bredar, executive vice president and Kansas City office director of JE Dunn Construction; featuring panelists Sheryl Vickers, CCIM, CEO and vice president of project partnerships of Select Sites LLC, president of Complete Construction Service and co-founder of Women in Real Estate Development (WIRED); Rob Welker, president and partner of Hoefer Wysocki; and Chad Stafford, president of Occidental Management, Inc.

Lessons from 2020:

As a solopreneur, Vickers emphasized how the past year has reminded her of the importance of having a source of passive income when a crisis arises.

The pandemic created opportunities for Vickers to turn long-term rentals into short-term AirBnB rentals because customers preferred to stay in places with fewer people, opposed to large hotels.

“It provides relief in times like this. I feel poised with an expanded network to grow exponentially,” Vickers said.

Thanks to Stafford’s aggressive approach at Occidental Management, his company was able to provide tenants with expanded resources in information and services.

“The past year did cost us some leasing deals so we had to do a hard pivot to engage with our tenants. We hired a marketing firm to help. It’s all about communication,” Stafford said.

For Welker the past year created opportunities for new activities, including launching a plumbing/electrical unit and using the PPP funds to hire new staff.

“The biggest thing for us was getting back in touch with clients. We started a daily executive council ‘happy hour’ to share information and knowledge and act as a sounding board. We didn’t hide; we outreached and outreached and outreached some more. The key, though, is that outreach has to have value,” Welker said.

Thanks to being designated as an essential business, JE Dunn “kept going,” said Bredar.

“We used 2020 as an opportunity and could cherry-pick new people (to hire). Some markets were very active; one was logistics and transportation. KC is positioned very well in those areas for the new year,” Bredar said.

Somewhat surprisingly, the commercial vacancy rate decreased last year, Welker noted.

“Companies that we represent in multifamily are suddenly all involved. Logistics more than doubled over every other sector in the industrial market. I think that trend will continue as more companies get into the omni-channel,” Welker said.

Not surprisingly, business for retail and restaurants fared the worst in 2020.

“A lot more (retail and restaurants) will close this year before it all comes back in the fall; however, a small handful are expanding. The national chains are doing well, especially if they already had drive-throughs and delivery services. It’s a struggle for those that are not omni-channel or used to being online,” Vickers said.

Perspectives on the new year:

Vickers expects that restaurants that can provide outdoor dining and maintain online ordering and delivery service will do well in 2021.

“They won’t go back,” Vickers said. “We will see stability. There’s pent-up demand and the restaurant sector will do better by the fourth quarter and into 2022.”

Calling the current moment “a good time to build,” Bredar predicted “an explosion in demand that might lead to inflation.”

“Multifamily has been on a long run, but might see more supply than the market can absorb,” Bredar said.

Welker’s experience has been that “Johnson County restaurants are packed.” He’s also “seeing a new phase of retail” that should lead to an explosion of new building.

“Multifamily is catching up from the past few years, and that will continue in some demographics. The trend will be toward smaller units,” Welker said.

Vickers believes that trend will depend on the pocket of demographics.

“There is an affordable-housing crisis now, but I’m optimistic about that sector bouncing back. I’d put my money on midtown or the center of the city,” Vickers said.

Vickers noted that the KC Streetcar project is having an impact on commercial real estate in the downtwon area.

“People are buying up properties” to profit from it, and that project will “cause some down-time with construction, but multifamily building is already occurring. We’ll have to work through the legislative and neighborhood pieces. Inclusion and diversity will help with reducing pushback and problems with gentrification,” Vickers said.

The streetcar project is “not developer-friendly,” though, according to Bredar, “so it’s a concern. We’ll need collaboration and mentoring to know the tipping point of going back to what (the area) used to be a lot of empty commercial space.”

The future of commercial space is an open question for the moment. Vickers expects that people will “adapt and change the space. Half of the people are scared and half are ready to go back to using space as before,” Vickers said.

The panel agreed more attention needs to go towards balancing the live-work-play concept; however, office productivity has been a challenge.

“We aren’t getting the best from our people by having everyone work from home, so they’ll be back in offices soon,” Welker said.

“We will have flexibility, (but) you can’t build corporate culture over Zoom or a vibrant environment without group space to (connect in person and) promote growth,” Stafford said.

“We’re looking at a longer timeline — an 18-month timeline for Aspiria (the former Sprint campus)— we have to be engaging now because we’re looking to June or July when the vaccines are available,” said Stafford.

When asked what will trigger new business in the new year, panelists found several points of optimism.

“The pandemic is making the industry do things smarter,” Welker said.

Bredar pointed out that healthcare has been and will continue to be an important part of the commercial market in Kansas City, especially now that hospitals can return to doing elective procedures that the pandemic put on hold for much of 2020.

Panelists agreed smaller healthcare facilities in more locations are likely to be a trend for 2021.

“We’re seeing hospitals becoming more a part of communities. The economics make a big difference,” Welker said.

Bredar also sees technology as a major factor in new building patterns by making it possible to build commercial properties that are more efficient.  

Panelists agreed that the KCI (airport) project should have a hugely positive impact on commercial real estate in the Kansas City region.

“The airport is like the front door for the city,” said Welker. “Institutional money has started to flow into the city and we’re super-excited. We’ll be seeing new buildings going up as professional services workers return.”

Vickers expects walkable communities to be drivers for the commercial real estate sector — “If it isn’t walkable, I wouldn’t invest” — and industrial to be “the next big area.”

“The public sector will be interesting to watch because the need is there,” Bredar said.

Welker agreed that the development side of public-private partnerships (PPPs) should be big this year to capitalize on that need for space and services, although TIFFs might suffer.

“New development will be slow until the third quarter, and then will be robust. We all have to have hope, believe in ourselves, stay united and make things happen,” Welker said.

A huge thank you to the event sponsors: JE Dunn, McClure, Hoefer Wysocki, Seal-O-Matic Paving Company, Contegra Construction, Occidental Management and Arch Photo KC.

To view photos from the event, please visit the MWM facebook page.

$60 million 'The Residences at Galleria' to open in 2022

The Residences at Galleria, a $60 million multifamily complex located adjacent to the former Sprint World Headquarters in the Galleria 115 development in Overland Park, Kan., is set to begin construction this summer and slated to open in 2022.

The four-story, luxury apartment complex is included in the first phase of the 5-plus acre development by Block Real Estate Services, LLC (BRES). The $350 million Galleria mixed-use development master plan includes two apartment buildings, office space, retail and entertainment.

JLL Capital Markets (JLL) arranged $21 million in joint venture equity partnership with Hartford Investment Management Company (“HIMCO”) on behalf of BRES for the development of the 322-unit, Class-A, podium multi-housing community.

"We are excited to partner with HIMCO on this project, and, from the beginning of discussions with them, it was clear that we had a shared vision for the quality of this project and its high-demographics location within Overland Park” said Ken Block, BRES managing principal.

The Residences include 322 one-, two- and three-bedroom units and will average 927 SF. Features include high ceilings, large walk-in closets with custom shelving, high-end appliances and finishes, European-style cabinetry, outdoor terraces, in-unit laundry rooms with full-size washers and dryers, double-paned windows and more.

A hallmark of the new community, designed by Hoefer Wysocki, is the walkable lifestyle. Adjacent to the site is a thriving commercial corridor, multiple entertainment districts, theaters, and endless restaurant choices. Outdoor patios are linked to The Residences by walking trails that encircle greenspace, sitting areas, a rolling rock waterfall and dog park.

"We are very excited to work with Block Real Estate Services on the Galleria. This community will raise the bar on luxury living in the area,” said Hoefer Wysocki vice president and director of multifamily design, Chris Armer, AIA, NCARB.

The project will feature the best community amenities offered in the submarket and include a large resort-style swimming pool with shallow ledge features; pool deck with cabanas, hot tub, sports courts and water features; fitness center with Peloton bikes, massage therapy and virtual training; outdoor group fitness areas; clubhouse with fireplace, game room and social media room; executive business center; dog park and pet spa; and covered and surface parking.

“Galleria will be BRES’ most exciting project to date, building on our successful experiences with this high-end podium product, which allows for a large, outdoor amenity deck and other amenities that are unique in this market,” Block said. 

The JLL capital markets debt placement team representing the borrower was led by executive managing director Jody Thornton, senior director Mark Erland, director Matt Benson and analyst Kellan Liem.

Other partners on the development team include Titan, Polsinelli and McClure.

JE Dunn awarded north and south regional military projects

JE Dunn Construction has been selected by the U.S. Army Corps of Engineers to manage the $24 million design-build Mountain Home Air Force Base clinic modernization project in Idaho as well as the $21.7 million design-build Eglin Air Force Base pharmacy in Florida.

The Mountain Home Air Force Base clinic modernization will support the 366th Medical Group and entail renovating 41,165 SF of multiple departments.

Construction at Mountain Home AFB will begin in 2020 and will be complete in July 2021.

JE Dunn and Hoefer Wysocki have partnered to design and construct the Eglin Air Force Base pharmacy renovations for the 96th Medical Group. This is the 21st project award within the U.S. Air Force Healthcare Facilities Modernization Program. 

“We are thrilled to continue building our federal healthcare portfolio alongside a trusted partner, Hoefer Wysocki,” said JE Dunn group manager, Craig Stearns.

The first phase of renovations includes the outpatient and inpatient pharmacies in the hospital. The satellite pharmacy addition and renovation, which will be designed around an Rx auto-fill robotic system, are included in the second phase of renovations.

The scope includes other MEP work, architectural improvements, and improving the existing classrooms and administrative offices.

This will be the second project JE Dunn has worked on at Eglin. The firm completed the hospital realignment in 2016.

JE Dunn has designed and constructed over $800 million in healthcare facilities at more than 13 military bases across the nation to support the U.S. Air Force Healthcare Facilities Modernization Program over the past 10 years.

Other local partners on the AFB projects include BHC Rhodes, Branch Pattern and Henderson Engineers.