Q&A with: John  Petersen, Polsinelli

John Petersen of the Polsinelli law firm in Kansas City is one of the biggest names in real-estate development law. He took some time to chat with Ingram’s about current megatrends shaping the market before the COVID-19 outbreak, but addressed conditions that the Kansas City market will continue to face after the health crisis has ebbed.

We’ve all followed the shake-out in retail commercial properties in recent years; is the worst o fit over?

We all know retail, with the issue of headwinds, the hurricane is past, and people are trying to figure out in the carnage what retail is left. We’re not going to see, in my estimation, any significant new major retail-oriented development in the near term. Bluhawk is probably the last major retail-centric development in southern Johnson County for some time.

When you talk about “after the carnage,” what do you mean?

We’ve heard a lot about new retail is going to be the experience of retail and all kinds of entertainment, all mixed into one. I think we’ll see that in the right locations. We will see some retail food/beverage, along with small-format-type retail with it in certain locations, but generally as stand-alone projects, but there are always exceptions.

What are the fundamental differences you see in commercial today?

Two thing always drove commercial: big-box retail, now that’s just not in the mix any more, or not enough to drive a number of projects. Once the big boxes decided they had enough and were repositioning, we saw growth in grocery-anchored centers. We all know what’s going on there; it’s getting harder to get a grocery deal.

And this is largely driven by shift in consumer preferences, that people are willing to pay more for convenience to have something shipped to their homes instead of going to stores?

“I think that’s a big part of it. The new generation, they are younger, and convenience is primary on their chart of their priorities. With my generation, it was all cost-driven, but convenience drives it now. Not only in groceries, but the amazing stat is restaurants. You better have, if you used to be fast food, a pickup window. Now if you’re fast casual, and what we think of as not as white tablecloth, but a sit-down venue, you’d better have a window for pickup, either for as a traditional stop for spur of moment buyers, or for Uber Eats coming to pick up dinner.

What about on the office side of development?

Even with the whiff of spec being built Downtown, that is the exception to the rule. You’ve got to have at least 50 percent leased to make it work. That goes to growth. We have to have new companies coming into Kansas City to drive more Class A office development. We’ve moved people across the  state line for years, and we can talk about the border war, a truce and who’s playing fair or not. Maybe the goal now is net job gain.

How do we get that?

Out-of-town companies are interested to be in a place where employees can  live, work and play. We’ve  got to have places for them to go that have all of those elements going. Kansas City doesn’t have but maybe one, two or three places that even speak to that concept, like Brookside. Our competing cities do, even Omaha, but Dallas, Cleveland, Indianapolis, those cities in our peer groups, they are developing those areas; we’re not. The driving force behind Waddell & Reed’s move Downtown was, they needed to be in a place that attracts that Millennial work force, and it’s Downtown right now. Look out window on the Plaza, and it has transformed itself back into that. It was a retail center, then retail with apartments, then all the sudden look out—I’m in a new office building here, and there’s another new one going up. Lenexa has done a nice job with City Center, but beyond that, not much, and that’s what Kansas City has to focus on.