Posted February 6, 2024
This year could be a bounce-back year for office leasing as industry forecasts show a rise in active tenants in the Kansas City area despite lower activity and coinciding with national trends.
Jones Lang LaSalle IP (JLL), Inc., a global real estate services company, released its U.S. office market overview for Q4 2023, citing Kansas City as “resilient” in the broader market for the year. Leasing activity was down, however, active tenants in the market are up 15 percent year-over-year, according to JLL.
JLL notes that even though active tenants are increasing, ultimately not all tenants will lease space. But Kansas City’s 15 percent is consistent with national trends where tenants in the market are up nearly 20 percent year-over-year.
VTS Inc., a commercial real estate industry’s leading technology platform, reported office space activity was up 19.6 percent year-over-year. The VTS Office Demand Index (VODI) resulted in a score of 55 for the end of 2023, or, 55 percent of the average 2018-2019 level.
Additionally, several large tenant move-ins, signed in 2023, will positively impact absorption numbers in Kansas City, according to JLL. Blue Cross and Blue Shield of Kansas City are currently in the process of relocating to the $65 million 1400KC, a corporate office downtown. Blue KC is anticipating a full relocation by 2025.
Construction forecasts are also low with nearly 432,000 square feet of space under construction, down from previous JLL forecasts.
The Federal Reserve’s raising of interest rates to counteract inflation prices is leaving employers more open to the outcome of a “soft landing” for the economy, and thus more open to leasing office spaces again, according to VTS. Work-from-home rates are continuing to stabilize is also steering employers toward an office space search.
While the market is still recovering and stabilizing to a new normal, employers are showing more confidence in the market as opposed to the same time last year.