The Noise You Didn’t Hear …

With the election of a new president, market gyrations after Donald Trump’s sweeping plan to impose tariffs on foreign goods, contentious Cabinet selections, followed by fire-and-brimstone congressional hearings, one could be forgiven for paying inordinate attention to events taking place outside this immediate region.

There’s no denying, though, that some very big things were taking place in and around the Kansas City area’s commercial real estate space.

So says Matt Nevinger, research director for Cushman & Wakefield here.

“The first quarter of 2025 was a stunning success for the Kansas City commercial real estate market in terms of absorption,” Nevinger reported in the firm’s first-quarter market assessment. “The office sector reported 366,000 square feet (sf) of absorption, which was the third-highest total of any single quarter in more than a decade and by far the highest total of any quarter since the pandemic.”

The big news, though, came on the industrial side, he said, where “absorption set a single-quarter record with 5.1 million square feet. Using just absorption statistics, a compelling case can be made that we just witnessed the best quarter in the history of Kansas City commercial real estate.”

That’s a bold statement, but one buttressed with plenty of facts in both that report and recent headlines. Consider where the region placed relative to other major metro areas in Q1 and what those metrics say about the region’s appeal for additional industrial growth and development:

• Nationwide, Kansas City sported the second-lowest average industrial rent, at $4.89 per square foot during that opening stanza of 2025.

• It also recorded the lowest year-over-year change in rents, at 3.2 percent increase.

• It came in No. 3 nationally with the lowest average rental rates over the previous 12-month period, just $4.80 psf.

• And it had the sixth-lowest vacancy rate at 7.0 percent, about the same as the national rate of 7.1 percent. 

At CBRE, managing director Leah Fitzgerald senses that momentum as well. 

“Our office is off to a great start for this year with our first quarter in Kansas City being one of our best on record,” she says. “Drilling into the industrial market, we continue to see evidence that we have arrived on the national stage.”

Driving that, CRE executives have long noted, is the region’s geographical position with five of the nation’s seven major rail lines converging here, along with the nation’s largest inland waterway. The firm’s own figures, Fitzgerald notes, ranked Kansas City the top industrial growth market in the U.S. in Q1, measured by net absorption. “This, combined with a slight increase in asking rents, gives us plenty to be optimistic about as we look toward the balance of the year,” she said. 

Even before you get into what could happen down the road, it’s worth noting what’s transpired in recent months. And all of it is set against the backdrop of the largest development project in the region’s history, the $4 billion Panasonic Energy electric-vehicle battery manufacturing plant in De Soto, Kan. Hiring has already ramped up for production at that site, where employment is expected to hit 4,000, and where follow-on development initiatives are already rolling out.

Not far away, De Soto scored big again with the announcement that Merck Animal Health, which makes livestock health products, will invest $895 million and add hundreds of new workers with the expansion of its manufacturing plant there. The company’s footprint, expanded by 200,000 square feet, will cover additional labs for research and development.  

“This investment in our site is designed to increase Merck Animal Health’s ability to meet the growing customer demand for its portfolio of animal biologics products and ensure the company remains at the forefront of innovation in the animal health sector,” said Richard DeLuca, president of Merck Animal Health. “This initiative also reflects our dedication to advancing animal health and our ongoing investment in the communities where we operate.”

It also enhances Kansas City’s status as a global center of animal-health manufacturing and distribution. Already home to more than 300 animal-health companies—the largest concentration in the world—the Animal Health Corridor boasts the presence of companies that account for 56 percent of the planet’s health, diagnostics and animal-food sales.

Elsewhere during Q1, another plum in the regional logistics basket arrived with the opening of the new 1.5-million-square-foot Ace Hardware retail support center in the Northland. The Hunt Midwest dev-elopment marks its first development at the massive, 3,300-acre KCI 29 Logistics Park, the largest of its kind in Missouri. The hardware concern will add more than 300 jobs there, and the total investment of nearly $277 million—$165 million for the building itself—will also help finance construction of the new Northland Work-force Development Center.

“Hunt Midwest was the first private contributor to the new workforce center with its pledge to contribute 10 cents per square foot of building space at KCI 29 Logistics Park—up to $2 million in total as buildings are completed—to help prepare area students for the high-paying distribution and advanced manufacturing jobs these developments require,” said Mike Bell, Hunt Midwest’s senior vice president of real estate development. 

That came on the heels of a Q4 2024 vote by Platte City’s Board of Aldermen to advance a 750,000-square-foot warehouse for Central Power Systems & Services at the Platte International Commerce Center. With Van Trust Real Estate driving development, an estimated 245 jobs are expected there, with an annual payroll projected at more than $15 million. In addition to the workers cranking out natural-gas and diesel generators, Central Power will partner with the Platte County public school district to develop a training program for high school students.

Nevinger’s assessment for Cushman & Wakefield provided some important context for what’s transpired recently. 

“It is important to understand that the absorption totals were driven by decisions and projects that got underway months and even years earlier,” he said. “On the office side, momentum has been steadily building in and around the Central Business District for a couple of years while the industrial market ended 2024 with a record amount of build-to-suit space under construction.”

Those primary drivers of absorption allowed the Kansas City market to wrap up Q1 in a strong position with each of those two CRE pillars. “However,” he cautioned, “the absorption totals on their own overstate what happened during the first three months of this year.”

By the second half of 2023, there were signs the Kansas City industrial market was slowing down, he noted, with annual leasing activity that averaged 13.0 million square feet in 2017 dropping to 11.1 million last year. “The market was still expanding, but the speculative investments that powered growth over the previous decade were slowing down,” Nevinger said. “At the end of 2022, speculative projects accounted for 81.2 percent of all space under construction in the market, before dropping to 51.3 percent of the total at the end of 2023 and then just 14.6 percent at the end of 2024.”

Still, the increasing shares of build-to-suit projects were keeping the momentum going. Will that sustain as the headlines continue to scream about equity-market unease and talk about a potential recession later this year?

“As for the headlines, tariffs and general uncertainty in the market today, my take is that we need to remember the fundamentals,” Fitzgerald says. “We didn’t overreact and overbuild when the headlines read how cheap money was a few years ago, and that contributes to our strength and resilience today. The reality is, when we make good decisions based on long-term metrics, we maintain predictable growth. Collectively, we should all take pride in our region’s more measured approach. Sensible returns based on cautious projections are what Kansas City is known for. This allows us to avoid the large dips brought on by reactive decisions and risky speculation.”