Real-Estate Values
Sidestepping the worst of the housing downturn, region sees a rebound.
Like other metropolitan areas, Kansas City experienced its share of pain in the economic recession and real-estate meltdown that began in 2007. Despite that, the area has experienced a more active real-estate economy than other parts of the United States.
Not only did Kansas City escape some of the severity of the recession, it began to recover from that downturn sooner, in many ways. Although there are exceptions, this positive trend has tended to keep area real-estate values stable, if not always as robust as local observers might wish.
Multiple factors account for that. Energy development has increased dramatically in some areas of the Midwest. This is a much larger factor in cities like Dallas than Kansas City, but even in this community on the Kansas-Missouri border, the availability of relatively low-cost natural gas and coal has economic impact. As a result, several large area manufacturing operations have expanded. But there’s is more: While often overlooked in other parts of the country, this region’s farm economy is a major growth element. Indeed, farmland prices have in some cases soared to the point of raising concerns about over-speculation—the next land “bubble.” Nevertheless, this solid part of the regional economy continues to be a strength that helps drive stability in real-estate markets.
In Kansas City, this is also linked to the parallel growth of agribusiness and biosciences. Just north of Kansas City, St. Joseph has become one of the nation’s hottest animal-science centers. Along Interstate 70, Kansas State University in Manhattan operates one of the nation’s most respected agricultural programs, while Kansas City itself is home to a number of ag- and bio-related programs, and the University of Missouri to the east closes out a 250-mile corridor of rapid sector academic research and commercialization growth.
Shifting Gears
The area did not escape the recession unscathed, nor have all the wounds healed completely. The residential housing market slowed here, but less so than seen in most major urban regions of the country. Commercial real estate, and especially office vacancy rates, have never been a local strong point, and remain soft.
Yet even here, Kansas City illustrates unique strengths. Often labeled a community that economically “doesn’t reach the peaks but avoids the valleys,” Kansas City is seeing some significant advances in several areas that both herald an end to the stagnant economy and promise some exciting new development.
In residential development, that advance was evident in early 2012, according to figures from the Home Builders Association of Greater Kansas City. Permit activity through April was up 50 percent compared to the same period in 2011. April alone saw a 32 percent increase, and activity in May indicated the trend was continuing. As with many aspects of the regional economy, the leading area was Johnson County, Kan., but surprising growth was evident from Clay County to Jackson and Platte counties in Missouri.
One cause is simply the availability of land. It’s no coincidence that one of the fastest-growing communities in Missouri each year is Kearney. Sitting on the northeast fringe of metropolitan Kansas City, it benefits from the presence of acres of rolling farmland that make for easy transition into residential subdivisions. Like areas of Leawood, Kan., or Belton, Mo., it’s not unusual to see dozens of new homes under construction with cattle grazing in the background.
This is also a leading factor in the relatively low cost of area housing, which can be as little as one-half or even one-third the cost of some East and West Coast markets.
The trend does have drawbacks. When gasoline prices increase, fringe development can become expensive and suffer mini-recessions that have nothing to do with subprime mortgages. Even in good times, Kansas City area residents on average spend more on transportation because of the area’s documented sprawl. However, a robust network of highways and interstates—more interstate miles per capita than any other city in the world—keeps travel times relatively short. Because of that, growth trend are likely to continue its healthy pace in the foreseeable future.
Commercial Growth
In another reflection of national trends, Kansas City saw a retail and commercial recession soon after the residential market slowed. Although it took a few years, the region eventually witnessed several delayed or canceled retail projects, including some of the biggest that had been under way in the region.
Although the market has yet to fully recover, several significant developments are again up and running. Notably, they are often part of a larger trend that impacts other commercial and residential real estate in their areas.
The best example is the extensive Village West and nearby developments in Wyandotte County, Kan. The latest aspects of this large and long-term story involve an approximately $190 million campus for Cerner Corp., an international medical software company based in nearby North Kansas City. The campus will initially employ approximately 1,000 high-tech and relatively high-paid workers, but up to 4,000 are expected.
But that’s just the tip of the iceberg. The principals of Cerner are behind the nearby, $200 million Livestrong Sporting Park, while 2011 also saw the opening of the $705 million Hollywood casino-hotel in that same development area. Those projects, and the continuing developments such as the Schlitterbahn Water Park and retail development, have turned Wyandotte County into a major regional destination and economic engine.
Downtown Developments
What makes Kansas City unique is that this greenfield development is taking place at the same time the region is seeing several of the most dramatic urban redevelopments in the country.
The city of Kansas City, Mo., is the leading example in this movement. At the dawn of the 21st century, Kansas City consciously began one of the most dramatic downtown revivals in recent U.S. history. Although the results brought some complaints about the effectiveness of tax breaks and other incentives used, the $6 billion in investment that occurred Downtown has been a huge factor in area real estate growth.
Although the pace of big-ticket items is slowing, in many ways the impact of all this is only beginning. For example, Kansas City’s core Downtown is usually defined as running from the River Market, through the Downtown Loop to Crown Center.
The world-famous Country Club Plaza, as well as the popular Westport entertainment neighborhood and new Brush Creek Corridor, are separated from Downtown, and the impact of dynamic growth is somewhat muted by that geography, which includes under-developed and sometimes blighted Midtown. Other, smaller areas with robust economies are also separated. Some observers have noted that if all of these areas could somehow be joined, Kansas City would have one of the most dynamic downtowns in the nation.
Time and the natural flow of economic development may be doing that. The Midtown area is seeing significant redevelopment of its own. As developers seek new opportunities with much of Downtown built out, renewed growth is closing the gap between downtown and areas like the Plaza.
The process actually began almost 10 years ago and will likely take a decade or more to complete. But the pattern is notable. Perhaps best of all, multi-million-dollar investment in historic buildings promises to continue Kansas City’s successful reuse of older properties, which helps maintain the area’s unique texture both architecturally and on a larger scale.