HEARTLAND SNAPSHOT, APRIL 2011

Kansas City Office Market

Chamberlain

As the Kansas City office market continues to move forward, one of the biggest influences on the area is what some of us are calling “the Sprint factor”. During the last year-and-a-half, Sprint has made available portions of its 4 million-square-foot campus to third-party tenants. Since this began occurring a number of deals with new tenants have been announced that have a big impact on not just the South Johnson County submarket where the campus is located, but also on the entire Kansas City market. Some of the more notable announcements include Key Bank, JP Morgan Chase, Apria Healthcare and MIQ Logistics. Some of those, like Key Bank and JP Morgan, are companies who are leaving offices on the Missouri side into the new space on the campus in Kansas.

In conjunction with the influx of available space coming from the Sprint Campus, incentives are being offered by the State of Kansas. The Kansas economic development engine has been aggressive during the past couple of years and continues to make strong moves in an effort to attract business to Kansas. The entire market has seen state incentives act as a driver behind big deals. Key Bank was previously located in downtown Kansas City, Missouri, and JP Morgan will be leaving its space in a building owned by engineering firm Burns and McDonnell in the South Kansas City submarket. When JP Morgan moves out, Burns and McDonnell will occupy the entirety of its building. SCD Probiotics, a bio-science firm, opted to remain in the downtown submarket with its expansion plans after Missouri Governor Jay Nixon announced state incentives to help secure the deal.

Another current trend is companies searching for call center space. These are groups typically looking for large, open floor plates with a need for heavy parking availability. A recent example is Dex One Corporation, which will be investing $20 million in a call center facility in Overland Park. The building previously housed Chrysler Financial, which closed its operation. Dex One is expanding an existing operation and adding more than 350 jobs to the area.

According to CoStar analytics, the Kansas City office market has experienced a 12.8 percent vacancy rate in the time period ranging from January 1 through March 15, 2011.  The average asking rental rate during that time period was $17.19 per square foot, full service.

— Rick Chamberlain is a vice president-principal with Kansas City, Missouri-based Zimmer Real Estate Services.

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