What's behind new office construction in KC?

Rob Roberts
Reporter, Kansas City Business Journal
January 30, 2015
Fueled by job growth, work is expected to begin on several new area office buildings in 2015, and construction of Downtown's first new office tower since 1991 may not be far behind.
On Jan. 13, the Bureau of Labor Statistics reported that area employment rose by 10,300 jobs between November 2013 and November 2014. That pushed seasonally adjusted employment to 1,021,100 — almost equaling its prerecession peak of 1,025,400 in 2008.
On the same day the job numbers were announced, Copaken Brooks principal Bucky Brooks unveiled a rendering of a spectacular new office building envisioned for a vacant site north of the Sprint Center on Grand Boulevard.
"It can really be (developed as) anything," Brooks said. "But we have it planned now preliminarily for 525,000 square feet of Class A office."
The rendering, by 360 Architecture, reveals a spiraling design, achieved by rotating each of the 25-story building's 21,000-square-foot floor plates 4 degrees from the floor plate below it.
Construction remains dependent on leasing. But several other new office projects are poised to advance in 2015. They include two from Block Real Estate Services LLC: the eight-story 46 Penn Centre tower on the Country Club Plaza and a five-story building in Overland Park. In addition, VanTrust Real Estate LLC plans to replace old office buildings at 4901 Main St. in Kansas City and 6666 W. 110th St. in Overland Park with Class A construction.
Deborah Field, a vice president with Newmark Grubb Zimmer, said job growth helped drive down the overall (Class A , B and C) vacancy rate to 13.4 percent — its lowest since 2008.
"Too many small spaces still flood the market," she said. "But we are experiencing a lack of large blocks of space caused by the lack of construction during the recession."
By Field's count, only nine alternatives exist in the five most active submarkets for users seeking 30,000 to 200,000 square feet.
Mike Mayer, managing principal for DTZ's Kansas City office, said office demand and employment will continue to grow. The Mid-America Regional Council projects job growth of 19,300 in 2015 and 17,500 for 2016.
About 60 percent of the new jobs will be office jobs, Mayer said, and two-thirds of them will go into leased space.
"Those assumptions bring you to 14,720 jobs over the two-year span," Mayer said. "At 200 square feet per head, that's 2.9 million square feet of absorption for 2015-16. That seems very optimistic to me. So cut it in half and hope to be that lucky. If we do get 1.5 million in net absorption, someone is going to have to build something."
And that construction, he said, will be on top of new owner-occupied structures, such as the 3.7 million square feet Cerner Corp. plans to add at its Trails Campus to accommodate 16,000 new Cerner jobs during the next decade.

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