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Kansas City office market vacancy rates fair better nationally in 2020 as tenants, investors hold on

Negative absorption and increasing vacancy in 2020 landed softer blows on the Kansas City office market. The metro saw minimal changes compared to the U.S. overall, showing that the region’s economic diversity and lower cost of living should lend to better recovery moving forward.

A lesser impact overall reflected in data on the Kansas City office market show the minimal impact will lead the region toward quicker healing.

According to a Q4 report by JLL, although negative absorption and increasing vacancy and availability was seen in 2020, Kansas City’s vacancy rates remained well below the current U.S. average.

Comparing the Kansas City and national market proves that economic diversity and low cost of living keep Kansas City well-positioned for recovery, according to the report.

While some tenants abandon office space in favor of work-from-home, most metro tenants are waiting out the storm.

Investment sales sharply declined in 2020 and few buildings traded, and owner-user sales are increasing as companies seek more control of their office space.

The year finished at -68,484 s.f. of absorption in Kansas City, caused mostly by suburban sublease vacancies. Negative absorption was also caused by companies like Cisco that have moved to a work-from-home model and vacated, or will soon vacate, space in South Johnson County.

Although a few companies have chosen to forego office space and move fully remote, the larger trend is to stay put and wait.

Many companies are renewing leases and deferring decisions with the hope that late 2021 will offer a return to some normalcy. This trend is causing leasing and sale activity to slow, but changes in statistics are minimal.

Sublease vacancy has increased to 0.8%, but is still far below the U.S. sublease vacancy around 1.8%. The low comparative vacancy indicates that Kansas City is less impacted by this recession than other cities. Direct and sublease average asking rents increased marginally throughout 2020 and in Q4.

However, concessions increased, especially for long term deals. Landlords offered up to 6 months of free rent and $50 p.s.f. in tenant improvements. Investment sales dramatically slowed, or stopped, in 2020. As concessions continue to rise, we may see asking rates peak and slightly decline in 2021, the report said.