Real Estate Values

When the real-estate market crash started to unfold in 2007, it didn't take a genius to see which areas of the country were in trouble: The Sun Belt states and the coastal vacation/retirement meccas has seen enormous run-up in property values through the 1990s and the first few years of the 21st century.

It couldn’t last—and didn’t. But just as the Kansas City region has been praised as a zone of sanity for conservative banking practices, housing values here have declined far less in those hyper-speculative coastal communities.

To be sure, the residential market here has experienced significant slowdowns seen throughout the nation following the sub-prime shakeup. However, the region is better positioned for recovery, some experts say, because of its built-in overall price advantage compared to other parts of the nation.

Residential real estate offers one example of that strength. Entering the traditional home-buying season for 2011, Realty Times said home prices in the Kansas City region were rising moderately, but that, overall, this remained a buyer’s market.

That delicate balance will shift as economic recovery unfolds, but even in a thriving economy, Kansas City has a distinct advantage over many other regions of the country in terms of residential, commercial and industrial property valuations. And those values are significant parts of the calculus any business must perform when analyzing its own costs for labor and land.

Historic Foundation

In traditional residential and commercial real estate terms, Greater Kansas City reflects the contrast typical of many Midwestern regions with large rural segments surrounding more intense urban development.

In terms of square miles, large portions of Greater Kansas City remain primarily focused on agricultural production. This includes some of the most productive farmland in the world along the Missouri River valley, as well as rich areas of plains and prairie in Kansas and south of Kansas City. Grazing remains active where crops are not predominant. Prices vary dramatically, from rich bottom land bringing $2,000 an acre or far less for upland properties.

A recent trend involves upscale residential development in these areas. With many of these rural areas lying near small cities or the large, metropolitan Kansas City area, and a network of interstate highways rated as among the best of any city in America, demand has increased for small residential acreages of three to 10 acres. This development includes small, large-lot subdivisions and individual properties, including frequent examples of “luxury ranches” and other upscale, rural retreats. This trend is especially significant in some areas such as southern Jackson, Cass and Buchanan counties in Missouri, and Douglas County, Kan.

The availability of land relative to the demand serves as a governor on prices when compared to values in similar-sized cities where geography prohibits expansion in any direction but up.

Retail Revival

As with residential markets, retail development saw its own downturn in the region, with some long-stalled large-scale developments now showing signs of being placed back on track. Yet the area has nonetheless seen progress in light industrial and in transportation and distribution markets, and retail construction has been surprisingly strong in certain parts of the region.

The clear leader of that is Wyandotte County, where nine-figure projects are the order of the day. The Village West retail development that took off in 2006 with the opening of what is now Legends Outlets continues unabated.

Chief among those is a $705 million casino-hotel project that began in 2010, which will put that part of Kansas in competition for gaming dollars long ceded to Missouri, as well as the new $200 million home of the city’s pro soccer team, Sporting Kansas City. Those projects, and the continuing development of the Schlitterbahn Water Park resort and retail development, have burnished Wyandotte County’s credentials as a Midwestern destination.

Large lifestyle projects under construction or advancing include the $350 million Park Place Community in Leawood, where the first phase is in place, and the $400 million mixed-use Prairiefire at Lionsgate in southern Overland Park.

North of the Missouri River, recent retail additions include the Tiffany Springs Market Center and the Shoppes at Riverstone. In Clay County, the Highway 152 corridor near Liberty includes two shopping centers estimated at $80 million in value. Briarcliff Development has added to its luxury homes and office spaces with a $30 million retail area.

St. Joseph has seen several major retail developments in recent years, especially on I-29, including the Shoppes at North Village and nearby Tuscany Towers.

Some of the region’s most dramatic real estate growth is in eastern Jackson County. In Blue Springs, major growth has unfolded along the Adams Dairy Parkway corridor, while Lee’s Summit boasts several projects, including Summit Fair, with 550,000 square feet of retail.

Other impressive activity has taken place in Independence, where Bass Pro Shops opened in February 2008, southwest of I-70 and M-291. Sitting on an 18-acre lake created as a centerpiece for the project, it’s part of a continuing $174 million development that will include a hotel, extensive landscaping and new retail area, the Falls, a separate 465,000 square-foot retail center. The nearby Independence Events Center, a 5,800-seat venue for minor league sports, added a significant entertainment component when it opened in 2009.

All of this pales compared to Downtown KC, which has witnessed more than $7 billion in urban core development since 2003. The sheer size and scope of the effort has been noted by multiple media outlets nationally, attention that will be directed this way again with the fall 2011 debut of the $414 million Kauffman Center for the Performing Arts. That revival has brought 20,000 new residents into the Downtown area, changing the market dynamic considerably.

Expansion-Minded

While not as large, downtown redevelopment is also occurring throughout Greater Kansas City. Growth in markets such as distribution and warehousing, intermodal centers and other logistics development has been strong.

This trend also included such unique markets as the animal sciences. In St. Joseph, less than an hour north of Kansas City, a 125,000-square food processing plant for Triumph Foods was part of the employment resurgence, as well as redevelopment of that billion-dollar company’s former stockyard. And pet-products giant Boehringer Ingelheim Vetmedica continues to expand its footprint in that area with a new headquarters building and new employees.

Finally, for sheer size—and likely impact on surrounding real estate—it’s hard to surpass the development of huge intermodal sites near Gardner and Edgerton, Kan., and Belton, Mo. The Burlington Northern Santa Fe Logistics Park near Edgerton alone is expected to generate 3,000 new jobs.