Mixed-Use
Owen Buckley raised the question of mixed-use developments and their future in the Kansas City area.
“I think that they work in certain markets and they don’t in others,” answered Dan Lowe. He contended that Kansas City, outside of the Plaza, is a challenging market in which to develop mixed-use projects.
Tom O’Leary with LANE4 Property Group questioned whether Kansas City is dense enough for major developments of this nature. The challenge, as he saw it, is “identifying the next Plaza.” He cited Zona Rosa as a possibility.
“But even Zona Rosa, in my opinion, barely touches mixed-use,” replied Lowe. “It’s got 20 units in residential, maybe?”
The question was raised as to whether Metro North and Metcalf South present real mixed-use opportunities.
“I think they certainly have the potential,” said Buckley. The challenge now, he continued, is to rework the site plans to make them economically feasible. “I think the jury is still out on that as we await those plans to come our way,” he added.
Buckley then asked about the construction side of mixed-use and whether there are sufficient economies of scale to be had in building up rather than spreading out.
“Kansas City has still cheap enough ground that going up isn’t always your answer,” said Roger Meyer of the Meyer Brothers Building Company. In addition, the parking component can be prohibitive. “Mid-rise, to a certain point, is probably feasible,” he added, “but when you get above six or seven stories, well then you’re talking about another beast.”
As John Sweeney of Terra Venture explained, the cost of building condos may come in at $250 dollars a square foot, which means they have to sell for $300 dollars a square foot to be feasible. As a result, an empty nester in southern Johnson County might be selling a 4,000 square-foot home for $500,000 and buying a 2,000 square-foot condo for $600–700,000.
“So the numbers don’t work very well,” said Sweeney. He suggested rental units might make more sense for a mixed-use development than condominium, for-sale units.
Buckley observed that despite the discouraging numbers, area cities are still pressing for mixed-used projects with condo, office and retail.
John Rubenstein of Rubenstein Real Estate cited Lenexa as a case in point. The city is apparently tying to force a mixed-use development west of I-435 in a veritable cornfield. “I don’t understand it,” said Rubinstein. “I mean, show me the tenants. Show me the deal.”
“In Kansas City, historically,” said Jeff Haney with Harpool Morgan Haney. “It is easier to buy a home. Drop further south you get a bigger home. Same thing with retail.” He argued that what city planners want may sound great in theory, “but for people around here to make it happen, it’s a rare occasion.”
“Psychologically, the customers in markets like this don’t want to go up parking ramps and park,” attested Jody House with CBL & Associates Properties. “They want to go in front of the store and they want to park.”
David Hickman with CB Richard Ellis suggested that a shift has taken place away from regional malls—only two of which now exist in the greater Kansas City area—to lifestyle centers.
“The Kansas City market is very difficult,” affirmed Glenn Stephenson with Highwoods Properties. “What actually saved the Plaza over the years was the tourist business. 40 to 45 percent of our business was tourism.”
Kevin Nunnink of Integra Realty Resources contended that the group was “talking around the question.” The real question, he contended, was that per capita Kansas City has a great deal of retail, more than most other cities, a lot of which, however, is “old and tired.”
The challenge, as Nunnink saw it, was how to get tenants across the finish line, especially at centers where the
CAM [common area maintenance] charges are high.
Stephenson countered tenants are not that concerned about paying extra charges if the sales justify them. “It’s all about sales,” he added.
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