Kansas City Office Market
Absorption in the first quarter of 2024 totaled negative 594,182 SF. Total net absorption has averaged negative 287,131 SF per quarter during the past three years, demonstrating a contractionary environment. The 347,320-SF construction pipeline has fluctuated between 300,000 SF and 700,000 SF during the past four years, with a limited number of major projects. Vacancy increased from 16.2% to 17.9% during the past year as negative net absorption continued across multiple submarkets. Landlords are motivated to provide lease concessions in the form of free rent or tenant improvements rather than reducing quoted rates. In addition, expansive landlord investment in property upgrades, driven by solid demand for highly-amenitized Class A space, drove slow but positive 12-month rent growth of 2.9%.
Kansas City Industrial Market
Absorption in the first quarter of 2024 recalibrated totaling negative 295,788 SF. The slowdown is more acute in large bulk buildings, while leasing velocity and rent growth in midsized and small bay industrial spaces was strong and is expected to remain active. Other factors contributing to the slowdown include lower international trade volume, an uncertain economic climate, the upcoming election and a tapering demand for short-term space needs, recently solved exiting the pandemic. The construction pipeline increased to 9.7 million SF as 222,090 SF delivered to the market during the quarter, while 854,310 SF of new product started construction. As this recently-completed inventory leases, the next construction cycle will offer very few alternatives, leading to a tightening of vacancy. Vacancy increased 10 basis points to 5.5% during the quarter.