2017 Looks Promising for Downtown Office Market, Reports Cushman & Wakefield
KANSAS CITY, January 23, 2017 – Cushman & Wakefield announced today that while the performance of the Kansas City industrial real estate market was spectacular throughout 2016, the fourth quarter was the strongest with 1.8 million square feet of absorption.
“5.5 million square feet of space were absorbed in 2016, a record total for the Kansas City industrial market and almost 10% higher than the previous record set in 2007,” said Michael Mayer, SIOR, Cushman & Wakefield Managing Principal. “The market is as strong as it has ever been. New construction in Johnson County continued to be a major driver in the fourth quarter.”
The office market also experienced strong absorption in the fourth quarter with 249,000 square feet, bringing the year-end total to 287,000 square feet.
Q4 2016 Highlights by Industry Sector
(Click here to view the full industrial and office reports.)
- Quick Summary: The vacancy rate at the end of 2016 was 8.3%, a full point higher than at the end of 2015. This was due in large part to the delivery of 8.3 million square feet of new space in 2016, with 3.8 million square feet delivered in the fourth quarter alone.
- Growth Areas: The Johnson County submarket was the strongest driver of demand with 1.8 million square feet of positive absorption in the fourth quarter and 4 million square feet for the year.
- Outlook: There is plenty to be optimistic about in 2017. Build-to-suit projects totaling 3.1 million square feet are currently underway for Amazon, Sioux Chief, Garmin and General Motors, while ongoing speculative construction was at 3.9 million square feet at the end of 2016.
- Quick Summary: Downtown’s vacancy rate dropped from 27.1% at the end of 2015 to 25.2% at the end of 2016, despite negative absorption for the year. Downtown has completed the first phase of its re-emergence and should perform well in 2017.
- Growth Areas: The South Johnson County submarket drove demand, with 694,050 square feet of leasing activity. North Johnson County followed with 529,683 square feet.
- Asking Rents: Asking rates jumped to $19.26 as compared to $18.61 in the fourth quarter of 2015.
- Outlook: Asking rates grew significantly in 2016, although it remains to be seen if all the properties will achieve these new levels of rent.