Key Takeaways For The Office Market In Kansas City
- Number of office sales in Kansas City has grown by 35% since 2014
- Average sales price of office buildings in Kansas City has increased by 65% since 2014
- Office property sales in Kansas City priced at $500,000 or less make up more than 50% of the total transaction volume
- Most active office submarkets in Kansas City include Overland Park, Kansas City Downtown, and South Johnson County
After 5 Years The Kansas City Office Market Is Still Going Strong
The office market in Kansas City covers both Kansas and Missouri with over 76 million square feet of inventory. In fact, there’s more office space in Kansas City than other national office markets such as Austin, Indianapolis, Miami, Portland, and St. Louis.
Since 2014 office sales in Kansas City have consistently grown, the five-year sale price average has increased by nearly 70%, and transactions have been well-balanced between the urban and suburban office markets in Kansas City.
When Cushman & Wakefield researched demand for Class A and B office space in Kansas City over the last five years, the firm found:
- Vacancy rates have steadily declined from 19% to 14.3%.
- Asking rents have consistently increased from $18 per square foot to $21.43 per square foot.
- Net absorption of office space in Kansas City has been positive for each and every quarter since 2013.
Economic Growth of Kansas City
The growing economy of Kansas City helps the office market here stay robust.
Located near the junction of the Kansas and Missouri Rivers, the Kansas City metropolitan area is home to over 2.1 million residents with a diverse economy powered by both private and public sector employers including:
- Internal Revenue Service
- Social Security Administration
- Ford Motor Company
- Kansas City Board of Trade
- H&R Block
- Novation Companies, Inc.
Economic sectors in Kansas City with the fastest forecasted growth are the government and service sectors, wholesale trade and transportation, and manufacturing. In fact, the government and service employment sectors are expected to add more than 9,000 new jobs by the end of 2019.
Office-Using Employment Sectors Driving The Market
In addition to creating thousands of new jobs, the government and service sectors are also large users of office space in Kansas City. Cushman & Wakefield’s Five Fast Facts: Kansas City Office Market notes that the Kansas City office market remains strong as asking rates continue to climb:
- Kansas City submarket of South Johnson County saw the most deals.
- Class B office space in Kansas City made up 73% of the largest leases.
- Creative industries accounted for more than 1/3rd of the top 23 biggest leases.
- Tenant expansions and relocations made up more than 50% of the leasing activity through H1 2019.
Over the next 12 months, vacancy rates are expected to keep declining, while average asking rents and net absorption are forecast to increase, according to the MarketBeat Kansas City Office Q3 2019 report by Cushman & Wakefield.
5-Year Trend of Kansas City Office Sales
The powerful demand for office space in the market also helps to explain why the 5-year trend of office sales transactions in Kansas City has been consistently strong year-over-year.
Number of Office Sales in Kansas City
The number of office sales in Kansas City has grown by nearly 35% between 2014 and 2018:
Average Sales Price of Office Properties in Kansas City
Between 2014 and 2018, the average sales prices of office properties in Kansas City increased by over 65%.
In 2018 the average price was $1.3 million, up from an average of $786,000 in 2014. Through H2 2019 prices have averaged $960,000 per transaction.
Office Sales in Kansas City by Price Range
Office buildings sold in Kansas City with price points less than $500,000 have accounted for about 50% of the total office sales volume between 2014 and H2 2019. Properties priced between $500,000 and $5 million make up about 45% of the transactions over the same time period.
The share of office buildings in Kansas City selling for $5 million or more has also been increasing since 2015.
Properties priced between $5 million to $10 million or more have accounted for about 5.5% of the total sales transactions over the last few years, with office buildings sold in 2018 for $5 million or more accounting for nearly 9% of the year’s total sales volume.
Office Sales by Kansas City Submarket
Over the last five years, the most active urban-suburban office sales submarkets in Kansas City included:
- 2014: Overland Park and Olathe, Kansas, and Blue Springs, Missouri
- 2015: Overland Park, South Kansas City, and Southeast Jackson County
- 2016: Overland Park, Belton and Lee’s Summit, Missouri, and Kansas City Downtown and Crown Center/Crossroads
- 2017: North Johnson County and South Johnson County
- 2018: Blue Springs, South Johnson County, and South Kansas City
- 2019 H2: South Johnson County, Olathe, and Overland Park