Kansas City Office Market
Net absorption in the second quarter of 2024 totaled 229,041 SF. Net absorption during the past four quarters totaled negative 548,799 SF, demonstrating a contractionary environment. The 273,950-SF non-owner-occupied construction pipeline has trended downward since the third quarter of 2023 due to recent deliveries and sharply decelerating new starts. Vacancy decreased 30 basis points to 17.5% during the quarter. Landlords are motivated to provide lease concessions in the form of free rent or tenant improvements, rather than reducing quoted rates. In the current financial environment, multiple landlords may now be forced by liquidity constraints to trade elevated concession packages for lower rents. Expect asking rents to begin to reset in the second half of the year. The market rental rate grew 0.9%, year over year.
Kansas City Industrial Market
The market tightened as leasing activity equated to 2.3 million SF of net absorption during the second quarter of 2024. Vacancy remained flat at 5.5% as net absorption counterbalanced 2.4 million SF of deliveries during the quarter, with a sizeable amount of space delivering unoccupied. Leasing velocity and rent growth in midsized and small bay industrial spaces will remain active during the next four quarters. The construction pipeline increased to 9.9 million SF from 9.5 million SF last quarter. As this recently completed inventory leases, the next construction cycle will offer very few alternatives, leading to a tightening of vacancy. Although the combined build-to-suit and speculative construction pipeline totals 9.9 million SF, over 80%, equating to 7.9 million SF, are in BTS projects including: Panasonic’s 5.5 MSF; Ace Hardware’s 1.5 MSF; Heartland Coca Cola’s 600,000 SF; and Walmart’s 330,000-SF beef plant.