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A Home Run for the CBD, Infill, and Other Kansas City Trends to Watch in 2020

Michael Mayer • 2/6/2020

2019 was a year of transition for Kansas City, but as the new decade gets underway the local commercial real estate market should expect growth and evolution in 2020.

Kansas City Trends

This year, we should see the high-end Class A+ office product that has driven other markets start arriving in Kansas City. Our region will continue to be one of the most rapidly expanding industrial areas anywhere in the country. Evolution, change, and growth will disrupt many of the existing practices and habits in our market.

Here are ten trends to keep an eye on in the coming year.

  1. Kansas City will see continued investment from outside markets. Institutional groups have been put off by cap rate compression in the gateway markets like San Francisco, Boston, Los Angeles, and Chicago, while Kansas City is increasingly being recognized as a market that offers both value and growth potential.
  2. The demand for newly constructed modern distribution buildings in Kansas City will remain strong, with an increased focus on infill sites. These developments will command higher rates than projects in outlying areas, but demand will support those prices. The spaces in existing buildings will continue to backfill well.
  3. The Central Business District will hit a major, out-of-market home run. The only piece missing from Kansas City’s urban revival has been winning the relocation of a high-profile corporate relocation that will bring hundreds of jobs. In 2020, I predict Kansas City will get a prestigious new office user for the CBD.
  4. Construction and project development costs will be vital. With costs rising and the labor market at record low unemployment, companies will need a project management advocate working on their side to maximize their budget.
  5. High-end multifamily development will continue in Kansas City. Investment in Class A multi-family construction declined in the second half of 2019 across most of the US, but the Kansas City market still has room for more investment grade multi-family properties.
  6. Speculative office development will move forward. Tenants now have the opportunity to occupy space that is recognized as A+ on a national level, and they’re jumping at the opportunity. Action will continue to pick up to meet that demand, while other property owners face decisions about investment in their properties.
  7. Asset services will continue to evolve. Robots won’t be cleaning buildings by the end of 2020, but expect to see the evolution of how a property is managed and operated accelerate over the coming year.
  8. Workplace strategies will become a bigger focus for all sizes of office tenants. Smart leadership teams are embracing efficient space layout, workflow, and the ability to support the 15-hour workday, key tools to attract and retain employees in a highly competitive market for talent.
  9. Coworking is here to stay. The near collapse of the leading firm that had become almost synonymous with coworking garnered a lot of attention, but it won’t have much effect on the market in Kansas City. There are a variety of coworking options here, and there is a demand for them that will not be going away.
  10. Clients will demand more from their real estate service providers. Firms that provide not only transaction representation and asset services but also lease administration, valuation & advisory, project development services, portfolio management, and other service lines will increase their market share.

12 months from now, these trends and how occupiers and investors have dealt with them will be the key topics of discussion. As a community, Kansas City has moved in a very positive direction over the past few years. There are great opportunities and challenges ahead for all facets of the commercial real estate industry, but I’m confident our market has the talent and resourcefulness to continue the upward trajectory we have been on.

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