Economist, leaders forecast steady 2017 real estate market

Dr. Ted Jones, chief economist and senior vice president, Stewart Title Guaranty Company

Tweeting, Newton’s third law of motion and pumpkin spice Doritos aren’t exactly what you’d expect from an economic forecast, but all three were relevant subjects in a recent presentation by Ted Jones, chief economist and senior vice president of Stewart Title.  Jones offered his predictions for the real estate market in 2017 to members of KCRAR Commercial.

He said that although there are always events that could change the economy drastically, things in Kansas City seem to be going pretty well. That’s reflected in statistics like a recent figure from Colliers International that shows average rents in Kansas City have increased by 3.8 percent.

“That’s pretty cool to me,” he said.

Jones stressed that for every action, there is an equal and opposite reaction, especially when it comes to the economy. He illustrated this theme by pointing out how plummeting oil and gas prices have had both positive and negative effects on the economy.

Although Kansas ranked nearly last in job growth rates over the past year, in July of 2016, more Kansans were working than ever before. While overall job loss was affected by slashed fossil fuel prices, job growth was actually also tied to the low cost of energy and the advances in fracking technology and capabilities in the U.S.

“That is what’s going to help Kansas City continue to boom: your centralized location and your cheap energy input,” Jones said. “Your former industrial strong arm is coming back and that’s great news.”

Kansas City’s real estate market has also been affected for the better, he said, adding that when there’s more money coming in, people tend to spend more. In Kansas City, we’re getting even more bang for our buck, because of our higher yields.

“The average driver this year compared to 2014 is going to save 550 bucks,” Jones said. “With a couple of teenage drivers, that’s $2,200. That makes a difference in cities such as Kansas City. It’s a deal changer.”

* * *


Tim Cowden, Bob Mayer, and Wayne Bennett

Moderator Tim Cowden, president and CEO, Kansas City Area Development Council: Why move Sungevity to Kansas City? Why move your family here?

Shawn Yerkes, senior vice president, US Sales and Services, Sungevity:

“Sungevity is a solar energy company, but we’re really more of a technology platform company. The two things that we really value the most are our culture and our mission. We were really looking for a place that fit our culture, fit our mission, had a lot of younger people in the area, new families on their second or third job out of school that we could pay a fair wage and they could afford to own a home and grow their family. That just is not the case in Oakland, California; The real estate market there is crazy.

“Kansas City is kind of hidden gem that we just didn’t know much about. The people making these decisions were either from California or the East Coast, so most of us hadn’t been here, and as soon as we arrived, our eyes opened really quickly as to what a great city it was.

“We realized as we went through the process of evaluating different cities that not only did [Kansas City] have the workforce we were looking for, but the cost associated with opening up a relatively large office space. This city really went out of its way to welcome us. We felt like in the long-term, it was a great place to build a workforce that was mission-driven, where we have very little turnover and we can take care of the employees.

“On a personal level, I spent a year and a half helping build the office here, and over time I got to realize what a great place it really was. Not only did we love the city and its urban feel, but it’s also much more affordable than California is in terms of raising a family. You can have the great home, great schools and a great life without having to be the CEO of a major technology company, so it really checked off all the boxes for us.”


Dow Draper, CEO, Virgin Mobile (center)

Cowden: Is your greatest challenge finding talent and keeping it? How are you addressing the talent issue and how does Kansas City compare with some other markets that you’re familiar with?

Dow Draper, CEO, Virgin Mobile: "We’re early in our growth; Two months ago we were three people, and now we’re 24. We’ve been very fortunate with marketing and customer service areas. The interesting thing is that a lot of people that grew up here move away and come back with their spouse and bring some really interesting experience with different brands and different industries that otherwise wouldn’t be here."


Cowden: What successes and challenges has your team had when selling Kansas City to convention and tourism activities?

Ronnie Burt, president and CEO, VisitKC: "Two and a half years ago when I took over VisitKC, it was called the Kansas City Convention and Visitors Association. We are directly responsible for the image of this destination and going out and promoting that image and creating a level of excitement and energy. What became clear to me was that we weren’t building that energy and excitement; We led with barbecue and jazz and said that Kansas City was a fly-over state with a dated perception. I began working with our team to change how we talk about Kansas City.

"It is a very Midwest modern destination. There’s a great independent restaurant scene here, a great culinary scene, great arts and culture -- things people enjoy when they travel: the real fabric of a community.

"This community would say things like, ‘This is the best kept secret!’ and I would say, ‘Don’t say that; You’ve got to tell everybody how great this city is.’ We tell the story of Kansas City today as a cool, hip, eclectic, creative, innovative city. Yes, the arts and culture is a driver, the barbecue is a driver, the jazz is a driver, but we’re talking about all those things.

"KC on KC" is a new collaborative video series by Visit KC and a group of local filmmakers to showcase the creativity of Kansas City.

"We’re also using different marketing strategies, like our digital storytelling series. If you’re interested in barbecue, craft beer, pizza, arts and culture, Made in KC, or sports, there are individual videos that tell that story. Our most successful one is a video on the fountains where we partnered with the symphony. It’s been shared 185,000 plus times on Facebook, because the culture of people today is when they see something that they like, they share it and the easiest way to share something you like is on a digital platform and so those are some of the things that we’ve done to help change the perception of this destination. And it’s working.

"When it comes to the challenges… there seems to be a mentality or a culture of slowing down activity, evaluating, talking about it. But if we slow down, other destinations that are on the fast pace to developing their downtowns. What we need to change here is we need a new airport. An airport is the economic driver of the way people evaluate the destination.

"We’re competing for groups that do business here, so when they come here and do a site visit that they just left Indianapolis or Dallas Love Field or Austin, Texas, there is a pretty clear difference in the arrival and so we need to elevate that presence. We need that new convention center hotel. Yes, there’s a lot of hotel developments taking place, but it’s not giving us a large group of hotel rooms close to the convention center, so we need that new convention center hotel and anything that expands the experience of a travelers’ time here, we’re supportive of, so we would like to see the streetcar expand. We’d like to see the cultural district and anything that development continue to boom the work front development because those are all things that makes a city vibrant and direct so if it’s economic development and it’s adding more product that brings more people in and people moving about the city, we’re going to be supportive of it.

"Two and a half years later I look at it and there’s not a day that goes by where I say what the hell did I come here for. It’s really been a good move, so I’m excited about it and I share that don’t say this is the best-kept secret, tell everyone about it. We have a team of 45 and we need 450,000 people that are as excited about this destination and look forward to the advancement of it."


Cowden: How would you characterize the current investment climate in Kansas City for multifamily, industrial, and office, and does that compare with other markets you’re in?

Rich Muller, executive vice president, VanTrust Real Estate: "I think what’s exciting right now is that there are a lot of macro reasons why Kansas City is starting to become an attractive investment. We’ve been a fly-over country as it relates to the institutional investor and especially the international investor. Trading with the ghosts of the gateway cities, there just wasn’t much here for them, but we’ve seen so much cap rate compression with low interest rates and cheap money that those international and institutional groups are looking outside of their typical geography to find. That’s bringing them to Kansas City with a pretty big appetite for all different types of real estate products: multifamily, office, industrial or retail. When they show up, we’ve got to show them the product of a lot of public and private investment; It’s not just putting buildings up and filling them up with people. We think very hard about what it is that we want to do.

"In our former lives did a whole bunch of commodity office buildings out in corn fields and those were great, but as an organization we’ve shifted our focus and want to take on some of the more difficult in-fill types of projects that are good for a city where they’re missing teeth in a smile. We want to come in and do the right project in the right place and sometimes that costs a little bit more, so the fact that this money is showing up from outside with a different set of investment parameters, it’s allowed us to get away from this race to the bottom where it’s a limbo contest with rents and driving cost down. The cost of everything is still important and you still have to make sense for the businesses that end up in your buildings, but a lot of times what that means is that we’re able to build the right project in the right way in the pursuit of quality that is very attractive to these out-of-town investment groups."