As winter approaches Kansas City, the latest figures seem to indicate that the retail landscape is cooling as well. But is that really true? CBRE’s third quarter MarketView report breaks down activity in the market and offers a glimpse into the future.
Since the third quarter of 2014, the overall vacancy rate had seen a steady downtick, but the third quarter brought that trend to a halt as the rate remained flat at 7.8 percent. While it may not have decreased, 7.8 percent still represents an eight-year low for Kansas City, according to the report. However, the unchanged rate could be a sign that the local retail market is beginning to stabilize.
“Despite a lack of movement in rate, vacancy is still at an eight year low and with construction projects in the metro approaching completion, demand for Class A retail space will remain, allowing for rates to continue their downward trend,” the report says.
Kansas City’s crown jewel, the signature retail power center known as the Country Club Plaza, has been put up for sale and is expected to attract national attention from the country’s biggest commercial real estate players. With more than 800,00 square feet of retail and more than 600,000 square feet of office space, the Plaza boasts the lowest vacancy rate in the market at 3.3 percent, as well as the highest asking lease rate at $25.13 per square foot. Highwoods Properties, current owner, and Eastdil Secured, the firm marketing the Plaza, hope to sell the asset by early 2016.
Average asking lease rates are on the rise, increasing from $12.39 the previous quarter to reach $12.46 per square foot. Lease rates across submarkets remained stable, except in South Kansas City where rates increased by a staggering 10.5 percent to $12.49 per square foot. As new Class A retail developments open their doors, lease rates should continue to climb.
Retail seems to be the last real estate sector to climb its way back after the recession, and is now beginning to see rental rate growth and solid construction numbers. For that reason, CBRE is optimistic and expects the market to continue to steadily improve.
In the third quarter, Kansas City had a whopping 210,237 square feet of retail projects under development. That’s an increase in construction by more than 119,000 square feet. Much of that is thanks to North Kansas City, which has piqued developers’ interest lately with its desirable demographics and strong existing retail, as well as the area’s largest share of new residential construction permits.