MWM panelists agree: 2020 inspired new opportunities for 2021

Nearly 100 Kansas City-area commercial real estate professionals gathered at Stone Pillar Vineyard & Winery on Wednesday for MWM’s annual KC Market Forecast event.

The event was moderated by Randy Bredar, executive vice president and Kansas City office director of JE Dunn Construction; featuring panelists Sheryl Vickers, CCIM, CEO and vice president of project partnerships of Select Sites LLC, president of Complete Construction Service and co-founder of Women in Real Estate Development (WIRED); Rob Welker, president and partner of Hoefer Wysocki; and Chad Stafford, president of Occidental Management, Inc.

Lessons from 2020:

As a solopreneur, Vickers emphasized how the past year has reminded her of the importance of having a source of passive income when a crisis arises.

The pandemic created opportunities for Vickers to turn long-term rentals into short-term AirBnB rentals because customers preferred to stay in places with fewer people, opposed to large hotels.

“It provides relief in times like this. I feel poised with an expanded network to grow exponentially,” Vickers said.

Thanks to Stafford’s aggressive approach at Occidental Management, his company was able to provide tenants with expanded resources in information and services.

“The past year did cost us some leasing deals so we had to do a hard pivot to engage with our tenants. We hired a marketing firm to help. It’s all about communication,” Stafford said.

For Welker the past year created opportunities for new activities, including launching a plumbing/electrical unit and using the PPP funds to hire new staff.

“The biggest thing for us was getting back in touch with clients. We started a daily executive council ‘happy hour’ to share information and knowledge and act as a sounding board. We didn’t hide; we outreached and outreached and outreached some more. The key, though, is that outreach has to have value,” Welker said.

Thanks to being designated as an essential business, JE Dunn “kept going,” said Bredar.

“We used 2020 as an opportunity and could cherry-pick new people (to hire). Some markets were very active; one was logistics and transportation. KC is positioned very well in those areas for the new year,” Bredar said.

Somewhat surprisingly, the commercial vacancy rate decreased last year, Welker noted.

“Companies that we represent in multifamily are suddenly all involved. Logistics more than doubled over every other sector in the industrial market. I think that trend will continue as more companies get into the omni-channel,” Welker said.

Not surprisingly, business for retail and restaurants fared the worst in 2020.

“A lot more (retail and restaurants) will close this year before it all comes back in the fall; however, a small handful are expanding. The national chains are doing well, especially if they already had drive-throughs and delivery services. It’s a struggle for those that are not omni-channel or used to being online,” Vickers said.

Perspectives on the new year:

Vickers expects that restaurants that can provide outdoor dining and maintain online ordering and delivery service will do well in 2021.

“They won’t go back,” Vickers said. “We will see stability. There’s pent-up demand and the restaurant sector will do better by the fourth quarter and into 2022.”

Calling the current moment “a good time to build,” Bredar predicted “an explosion in demand that might lead to inflation.”

“Multifamily has been on a long run, but might see more supply than the market can absorb,” Bredar said.

Welker’s experience has been that “Johnson County restaurants are packed.” He’s also “seeing a new phase of retail” that should lead to an explosion of new building.

“Multifamily is catching up from the past few years, and that will continue in some demographics. The trend will be toward smaller units,” Welker said.

Vickers believes that trend will depend on the pocket of demographics.

“There is an affordable-housing crisis now, but I’m optimistic about that sector bouncing back. I’d put my money on midtown or the center of the city,” Vickers said.

Vickers noted that the KC Streetcar project is having an impact on commercial real estate in the downtwon area.

“People are buying up properties” to profit from it, and that project will “cause some down-time with construction, but multifamily building is already occurring. We’ll have to work through the legislative and neighborhood pieces. Inclusion and diversity will help with reducing pushback and problems with gentrification,” Vickers said.

The streetcar project is “not developer-friendly,” though, according to Bredar, “so it’s a concern. We’ll need collaboration and mentoring to know the tipping point of going back to what (the area) used to be a lot of empty commercial space.”

The future of commercial space is an open question for the moment. Vickers expects that people will “adapt and change the space. Half of the people are scared and half are ready to go back to using space as before,” Vickers said.

The panel agreed more attention needs to go towards balancing the live-work-play concept; however, office productivity has been a challenge.

“We aren’t getting the best from our people by having everyone work from home, so they’ll be back in offices soon,” Welker said.

“We will have flexibility, (but) you can’t build corporate culture over Zoom or a vibrant environment without group space to (connect in person and) promote growth,” Stafford said.

“We’re looking at a longer timeline — an 18-month timeline for Aspiria (the former Sprint campus)— we have to be engaging now because we’re looking to June or July when the vaccines are available,” said Stafford.

When asked what will trigger new business in the new year, panelists found several points of optimism.

“The pandemic is making the industry do things smarter,” Welker said.

Bredar pointed out that healthcare has been and will continue to be an important part of the commercial market in Kansas City, especially now that hospitals can return to doing elective procedures that the pandemic put on hold for much of 2020.

Panelists agreed smaller healthcare facilities in more locations are likely to be a trend for 2021.

“We’re seeing hospitals becoming more a part of communities. The economics make a big difference,” Welker said.

Bredar also sees technology as a major factor in new building patterns by making it possible to build commercial properties that are more efficient.  

Panelists agreed that the KCI (airport) project should have a hugely positive impact on commercial real estate in the Kansas City region.

“The airport is like the front door for the city,” said Welker. “Institutional money has started to flow into the city and we’re super-excited. We’ll be seeing new buildings going up as professional services workers return.”

Vickers expects walkable communities to be drivers for the commercial real estate sector — “If it isn’t walkable, I wouldn’t invest” — and industrial to be “the next big area.”

“The public sector will be interesting to watch because the need is there,” Bredar said.

Welker agreed that the development side of public-private partnerships (PPPs) should be big this year to capitalize on that need for space and services, although TIFFs might suffer.

“New development will be slow until the third quarter, and then will be robust. We all have to have hope, believe in ourselves, stay united and make things happen,” Welker said.

A huge thank you to the event sponsors: JE Dunn, McClure, Hoefer Wysocki, Seal-O-Matic Paving Company, Contegra Construction, Occidental Management and Arch Photo KC.

To view photos from the event, please visit the MWM facebook page.

COVID-19 business survey results optimistic

A December 2020 survey of area businesses shows that respondents are feeling more optimistic about the future of their companies.

A total of 236 businesses and nonprofits responded to the survey, conducted by the Greater Kansas City Area Chamber of Commerce, Kansas City Area Development Council, KCSourceLink, the Black Chamber of Commerce of Greater Kansas City, the Mid-America LGBT Chamber and Visit KC.

Sixty-four percent of those surveyed are “very confident” their business will fully recover from the pandemic and related economic downturn; 31 percent were “somewhat confident;” four percent were “not very confident;” and one percent said they were “not at all confident.”

“We see that passion, perseverance and tenacity in these survey results as well as in the number of people who are looking to start businesses during this pandemic. These business owners need our support now and in the future so they can continue to solve problems, bridge the wealth gap, fuel our local economy and build their own resiliency," said Maria Meyers, executive director of the UMKC Innovation Center and founder of SourceLink.

In terms of revenue since March 2020, 20 percent said they’ve seen revenues decrease more than 50 percent; 37.83 percent reported a revenue decrease of 50 percent or less; while 33.48 percent saw their revenues stay the same or increase. A total of 31.74 percent say they’ve laid off employees. Of their biggest concerns going forward, the largest response – 29.13 percent – said they were concerned about losing sales.

A majority of those responding said the pandemic has had some positive effect in the way they do business, including development of new e-commerce options and increases in online sales. Others noted that pivoting their business as a result of the pandemic has forced them to “think outside the box more,” or has accelerated their future business direction.

Responses were mixed regarding business travel once a vaccine is readily available. A total of 47.3 percent said the impact would be small, with some amount of reduced travel; 27.49 percent predicted no impact, though they weren’t traveling yet; while 20.47 percent said there would be a large impact on their business travel, expecting their role to no longer require/allow as much travel in the longterm.

On the subject of vaccines, 26 percent of respondents said they planned to require employees to be vaccinated before returning to the workplace.

New KC city manager shares future plans, priorities

Improving efficiencies and supporting underserved communities are among the top priorities for Kansas City, Missouri’s new city manager, Brian Platt.

This week, KC Downtowners welcomed Platt as their monthly virtual luncheon speaker.  Kim Gile, community reference manager for Kansas City Public Library and president of KC Downtowners, moderated. 

Platt, who formerly served as city manager/business administrator for Jersey City, New Jersey, began his role in Kansas City on December 7, 2020.

Citing the city’s $70 million budget deficit for the next year, Platt said he is committed to finding ways to provide and deliver city services without reducing personnel, emergency response times or any crucial services. 

“We’re looking at a lot of ways where we can provide the same services, possibly even provide more of those services, in a much more efficient and cost-effective manner,” said Platt. 

Platt said that since he arrived, the city already has made some specific and aggressive changes to the snow removal policy to make sure that the city is removing snow quickly and efficiently.

As an example, Platt pointed out converting city street lights to LED lights could, over time, cut the annual cost for street lights and their maintenance by nearly one-half.

Platt said he is approaching his new position by listening and learning from the city’s residents and stakeholders to see what the biggest challenges are and will work collectively and collaboratively to identify the best path forward.

“I’m not coming in here and saying this is how I think things should be,” said Platt.

The day before Platt assumed his position, the Kansas City Star released its report on racism in the fire department.  One of the first challenges with which Platt was tasked was tackling systemic racism within city government.

“This problem exists and transcends far beyond the fire department.  It’s in all of our departments and it’s even beyond the halls of city hall, so to speak. It’s a cultural challenge that is not going to be something that we solve overnight,” Platt said.

Platt said the city will be making some big investments to increase staffing in its human resources department and providing management training to make sure managers know the types of behaviors that are acceptable and the best ways to support their staff.

Platt supports making economic development incentives more widely available to underserved communities where there might be some local developers or property owners that have the ability to build a successful project, but might not know or understand the incentive process.

Platt has been speaking with city council members privately - and discussing publicly with community groups - the need for a very detailed, specific and comprehensive development and incentive policy for the entire city.

“One of the ways that a better policy (with) more transparency, more openness will be helpful is anyone in the city, not just the biggest players, not just those with the means and those with the most resources, have access to those incentives.  There seem to be plenty of incentives available.  It’s not a question necessarily of, for the most part, making more incentives available, it’s a question of getting them into the right hands and ensuring that we’re giving them only in the circumstances and cases with the highest need,” Platt said.

Moving from a part of the country where the river is such an important part of the city, Platt was surprised to see so little development along Kansas City’s Riverfront.

“I think there’s a huge opportunity to do more stuff along the waterfront even if it’s just like restaurants and social activities and that sort of thing.  But, it’s one of those resources that absolutely has a lot more potential,” Platt said.

He also said that discussions are underway internally about the opportunity for energy capture from the river itself.

“You think about solar, you think about wind, but we also should think about hydroelectric power.  The water flowing down that river, you may not notice if you look at it, but there are tens of thousands of gallons flowing by every second and that energy and that force of water can be a big, literally, creator of power for the city,” said Platt.