Prime Location
Trying to find out where the action is in Kansas City? Residential realty is one clue, but retailer movement might be a better indicator.
Retail, as they say, follows rooftops. And sometimes, too closely: When the residential construction market hit the brakes hard in 2008, the retail sector was involved in a rear-end collision.
Things, however, are changing for the better. For most of the past year, residential realty figures showed declines in housing stock on the market, increases in building permits, and a reduction in the supply of homes that indicates we’re now in a market that slightly favors sellers. That’s something not seen in years.
No surprise, then, that retail activity has picked up, too, making certain areas of the Kansas City region prime locations for growth in 2013 and beyond. Some of that is new development from the ground up, but major progress has been made on projects that once been introduced with great fanfare, only to see the curtain drop in mid-construction. Elsewhere, in established areas, major retailers pulled out of some locations, but others immediately stepped into those buildings to keep up the demand for on desirable spaces. And as a region, Kansas City is now starving for those, commercial realty execs say.
Against that backdrop, the marketplace itself continues to evolve. Commercial real estate professionals say many retailers remain focused on six key factors, and without the right location, design, visibility, access, demographics and tenant mix, those retailers aren’t jumping into available spaces out there. The question unanswered after the first half of 2013 was whether that reluctance to make the best of less-than-optimum properties available would be enough to jump-start a wave of new construction in this market.
That’s putting pressure on landlords of retail centers, including some properties once considered prime locations themselves, to consider repurposing those venues for non-retail uses (medical offices, education-related concerns or non-profit spaces, for example). Their alternative is to find ways, including use of public financing, to address shortcomings and meet retailers’ demands for top-tier space.
For 2012, shopping-center occupancy rates ticked up by 0.4 percent across the Kansas City region, but even with increased demand in some areas, lease rates still fell by 60 cents a square foot, to $12.88 for the region.
Despite that, realty executives say the outlook continues to be more promising in 2013 than any time since the onset of the Great Recession. With central Kansas City as the hub, eight regions serve as spokes—north and south Johnson County and Wyandotte County in Kansas, Platte and Clay counties as northwest and northeast districts, east, southeast and south Jackson County. Within that “wheel,” here are a few hot spots throughout the metro area:
Southern Johnson County. This region is, relative to the others, a monster, accounting for nearly twice the district’s total average square footage of shopping center square feet, according to Lane4 Property Group, a retail-realty specialist. With the 1.1 million square-foot Corbin Park project in the Deer Creek area back in construction after a bankruptcy interruption, the promise of a 222,000-square-foot store from outdoor goods company Scheel’s was welcome news. That opens in 2015. Next door, the long-in-development PrairieFire project, a unique mixed-use venue with a $580 million price tag, is gathering additional momentum.
Northern Johnson County: Occupancy rates ticked upward in this older suburban swath, which held its own compared to its southern neighbor. While the trendier south saw more than 83,000 square feet of shopping center space added in 2012, the north nearly match that at 77,000. And combined, they accounted for nearly 38 percent of new square footage for the entire metro area. The planned IKEA store in Merriam is a huge acquisition for that community and the overall market; construction began in June at the stalled Merriam Village site. And the Mission Gateway project, after years of delay, is moving forward, a $200 million mixed-use development.
Wyandotte County: The success of the Village West development since the opening of the Legends shopping center in 2006 prompted hopes that additional retail would come to a county starving for it. That’s happening on two fronts: Across Parallel Parkway from the main Village West district, the Legends Speedway development has blossomed into a power center with retailers that meet the day-to-day needs of consumers nearby. Closer to the county’s center, redevelopment of the Wyandotte Plaza center at 78th and State Avenue will infuse new retailers and a state-of-the-art supermarket into that neighborhood.
Eastern Jackson County: Arguably the star performer of the region, this sector fueled by the successes of Independence Commons, Hartman Heritage and Adams Dairy Crossing centers saw the biggest single-sector bump in new space last year, more than 127,000 square feet of it. Major retailers moving in or relocating within that space—all unfolding along I-70 east of the Independence Center mall—means smaller shops will be scrambling for the remaining space.
Clay and Platte counties: From Zona Rosa on the western end to Liberty on the east, the Missouri-152 corridor has roared back. Zona Rosa, in fact, saw its highest occupancy rate ever in 2012, as did nearby Tiffany Springs Market Center. Even in cases where big retailers pulled out, others quickly stepped in, adding to the demand for large, quality spaces that could prompt additional construction. To the east, renewed interest from retailers is expected to give fresh legs to the long-planned Whitehill Station power center along I-35.
Central Kansas City: Although it suffered the biggest decline in lease rates—a drop of more than $4.50 per square foot, to $17.17—this district is home to the Country Club Plaza, which continues to outperform the rest of the Kansas City market, with double-digit sales increases there and the highest sales-to-square-feet ratio in the greater region among major centers.
In terms of other factors in Kansas City, such as residential realty activity, the vitality of all these areas is an indicator of where the real action is here. 