2013 downtown housing report

[kboish]

$1.50 psf rent will not cover the cost of new housing construction in midrise/highrise urban core settings.

So, developers want/need higher psf rental rates.

Ah, I thought Cordish Tower was triggered based on $1.50/sqft.

Edit: Found that downtown Denver is targeting $2 psf. Hope KC doesn't need to be that high to attract new hirise construction.
http://outfrontonline.com/living/denver ... tion-boom/

It was triggered based on the 8 million dollar subsidy they will receive (and maybe contractual obligations?). But i do remember seeing we were getting close to the sqft $ needed to pull unsubsidized development in the core. Couldn't find the article, but I know I read an article previously that identified somewhere in the >$2.00/sqft range...maybe even around 1.75.

[loftguy]

$1.50 psf rent will not cover the cost of new housing construction in midrise/highrise urban core settings.

So, developers want/need higher psf rental rates.

Ah, I thought Cordish Tower was triggered based on $1.50/sqft.

Edit: Found that downtown Denver is targeting $2 psf. Hope KC doesn't need to be that high to attract new hirise construction.
http://outfrontonline.com/living/denver ... tion-boom/

It was triggered based on the 8 million dollar subsidy they will receive (and maybe contractual obligations?). But i do remember seeing we were getting close to the sqft $ needed to pull unsubsidized development in the core. Couldn't find the article, but I know I read an article previously that identified somewhere in the >$2.00/sqft range...maybe even around 1.75.

Average market rents in downtown KC are roughly 1.10 psf. There are examples of superprime, small spaces renting for as high as $2.00 psf. I believe Cordish will achieve 2.00 in their tower, but you can't judge the market on that single project and a moment in time in the marketplace. Let's hope, though.

[smh]

Since the discussion as headed this direction, I'll just throw out that I was in Denver in early May having not been for 10-15 years and I was astounded at how many apartment buildings, both high-rise and mid-rise, there are downtown. In addition, there must have been another 20 under construction. I keep expecting that explosion of new residential development to start here. I'm hoping that Cordish tower is what kicks it off.

[FangKC]

I agree Smh, I have looked at Denver on Google maps and envy the number of apartment projects they have built, and have under construction in and around their downtown. It's really remarkable.

I imagine the Cordish tower is going to be a more exclusive luxury apartment building that will pursue higher-income residents, and provide amenities for those willing to pay premium rents. The project is different because the apartments will have more window space (floor-to-ceiling), and light than most downtown apartment buildings as well as balconies, great views, and on-site garage parking.

[shinatoo]

I was in DT Denver earler this week and it seams like mid rise apartments are popping up like weeds. Six to eight storied blocks, which seams about perfect. Mainly in an area that would be analogous to the Crossroads (Five Points?).

[kcexpress]

The Board of Education Building might go residential at some point, and the former library space could be retail or commercial. I know the City looked at that building at one point, but I don't think they were interested. The old library space probably needs to be completely gutted.


.

I've been in that building numerous times. It's a hellhole. They would be better off just knocking it down. Seriously, I would love it if somebody just bought that building, razed it, and put up a nice looking 35 story residential tower!! If I had the money, I would do it myself!!

[aknowledgeableperson]

However, even then it's going to be a challenge because of so many mergers and acquisitions reducing the number of employers who need space. Add to that that the few growing KC-based companies like Cerner and Garmin aren't downtown. Other large employers like CorEnergy, Inergy LP, Ferrellgas, Applebee's, Embarq/CenturyLink, YRC Worldwide, BATS, Farmer's Insurance Group, American Century, Waddell & Reed, and Lockton aren't downtown. Black & Veatch and Burns & McDonnell aren't downtown. Citigroup isn't downtown.

I know that this may not be popular with many on this site but why try to go after these employers, especially now? What has downtown been successful at in development these past few years? Residential, performing arts, education, and government jobs. Well play to your strengths. Push for more residential, even harder than now. If not new construction there are still plenty of older buildings to be rehabbed. There is going to be a Downtown UMKC Arts Campus, well, build on that and go after the Law School again. Lobby hard. Go to UMKC with a plan in hand. Go after a public or charter school for the old Manual High location if the building is not being used now. It might be in competition with the Paseo school but try to get performing arts charter high school sponsored UMKC. Or a middle and high school that concentrates on STEM education. Lobby hard for the Federal Building for East Village.

Instead of going after the bigger employers go after the smaller ones. Set up an incubator or two in current office buildings or in various Crossroads buildings . Who knows, you just may have another Garmin or Cerner in 10 years wanting to be downtown because that is where it started.

[FangKC]

I'm all for incubating new companies downtown. One of the historical purposes of older buildings were that they are cheaper to rent.

Cities tend to do better, and are stronger, when many of the largest companies congregate in centrally-located districts. There is a fair amount of evidence to support this. There are all sorts of benefits when workers from many fields and disciplines interact in focused areas, and there is cross-pollination of ideas.

I'll give you one example. On the upper east side of Manhattan adjacent to each other are New York Presbyterian Hospital, Weill Medical College of Cornell University, Sloan-Kettering Cancer Center, the Hospital for Special Surgery, Manhattan Eye, Ear & Throat Hospital, and Rockefeller University. Staff from all these enterprises work together on basic science work, and other medical research projects. Even if they work for different institutions, physicians, researchers and scientists talk to each other, and innovation comes out of that.

Living and working in a concentrated economic hive made me stronger, smarter, more competitive and innovative in my job because I was exposed to other people from many different disciplines, lifestyles, and backgrounds. One thing feeds into another. This cannot be discounted.

Our metro is disadvantaged when its' economic activity is too spread out.

[aknowledgeableperson]

Cities tend to do better, and are stronger, when many of the largest companies congregate in centrally-located districts. There is a fair amount of evidence to support this. There are all sorts of benefits when workers from many fields and disciplines interact in focused areas, and there is cross-pollination of ideas.

No dispute. But that is a battle that downtown is losing, and losing badly, I might add. It is a battle that downtown and losing to the Plaza, South KC, and KC North of the river. And the city as a whole to the suburbs. Why not use time and resources on items you do have a greater chance of winning?

[TheBigChuckbowski]

I actually think AKP has a really good point. Those companies aren't downtown for a reason. 1. They got major incentives that we probably shouldn't give them. 2. The ownership has no connection to downtown whatsoever and probably wants to live in the burbs and have a short drive to work. In its current state, downtown can't compete with any of those things. The way to get those companies to move downtown is to make it stupid for them not to. With a world-class urban core, their employees and clients would not want to drive out to College and Antioch. Make them feel like they have to have a downtown location for business reasons and they will.

[aknowledgeableperson]

If you got some expensive, Plaza type, condo housing downtown that might help.

[Highlander]

I actually think AKP has a really good point. Those companies aren't downtown for a reason. 1. They got major incentives that we probably shouldn't give them. 2. The ownership has no connection to downtown whatsoever and probably wants to live in the burbs and have a short drive to work. In its current state, downtown can't compete with any of those things. The way to get those companies to move downtown is to make it stupid for them not to. With a world-class urban core, their employees and clients would not want to drive out to College and Antioch. Make them feel like they have to have a downtown location for business reasons and they will.

Doing all that may bring companies into downtown eventually. KC is bucking national trends right now (as companies generally tend to be moving out of the burbs into downtowns) so we'll eventually catch on. While AKP's tact is fine in the interim, I sure would not pass on offering incentives to a 1000 employee company that is seriously looking at downtown.

[flyingember]

KC is bucking national trends right now (as companies generally tend to be moving out of the burbs into downtowns)

I doubt most states are spending a huge percentage of their budget to draw businesses like Kansas is. That can't continue forever. They're quickly getting to the point they won't have any more space in the budget to do this. You can't give 5,10,15+ year tax benefits to every business forever and each large business is going to demand the same to move.

When that's over KC's going to end up in a hugely enviable position. Empty office space ready to use, tons of land to build new on and a growing worker population right nearby. Increasing rental rates draws ever more highly educated workers who can afford to live downtown.

[earthling]

Doing all that may bring companies into downtown eventually. KC is bucking national trends right now (as companies generally tend to be moving out of the burbs into downtowns) so we'll eventually catch on.

According to labor reports (I'll look for the source), suburban office labor force is growing at a faster relative rate (per area) than downtowns in all but a few metros. Downtowns are becoming less and less % of the metro workforce in all but a few metros. Downtown KC is doing OK gaining small employers, it's the 1K+ who are leaving or not moving in. More and more large biz want large floor plates and (perception of ) 'free' parking. It's interesting that for KC, Class B/C office space has much higher occupancy than Class A. Hip raw space in the Xroads is more desirable than newer hirise it seems with many creative type businesses. Many small biz employing 1K net can often have a higher net GDP impact than a single company with 1K, so is not a bad thing not to have large biz downtown.

Downtown KC should pursue large biz of course but a higher priority should be increasing population and then the rest will more easily follow. There is real demand for downtown living, not much large biz demand. Given KS incentive competition, downtown will have more success with residential growth and then when it hits a critical mass, maybe downtown will become 'the' place to do business again, or at least comparable to other successful downtown ratios.

[aknowledgeableperson]

I sure would not pass on offering incentives to a 1000 employee company that is seriously looking at downtown.

And I wouldn't pass either. But how many of those happen annually?

Empty office space ready to use

How much is Class A? Yes, B/C is also in demand but many of the medium to larger employers prefer Class A.

[rxlexi]

AKP, I so very rarely agree with your contrarian views, but I commend you for a string of logical and well-written posts in this thread. Well said.

I think in the here and now, DT has to play to it's strengths. Be ready if/when a big outside opportuniy hits, but in the interim continue to build up what we've got going until it really snowballs - residential, arts/entertainment (incl. UMKC campus), financial and government. I would add that continued, major infrastructure improvement is also key (streetscaping, lighting, safety measures, road diets, placemaking).

On a side note, I was recently in DT San Diego, and similar to the comments above re: Denver, the amount of n/c mid-rise residential, hotel, and office space is astounding. So many great looking n/c residential buildings, seemingly all occupied, and so many more going up, even in formerly forlorn stretches on the outskirts of DT. Just amazing progress driven by exceptionally high real estate values.

[chingon]

KC is bucking national trends right now (as companies generally tend to be moving out of the burbs into downtowns

I don't know where you're getting that idea, everything I read suggests the overwhelming national trend right now and for some time has been job losses in almost every major metropolitan downtown. The downtown that have added jobs in the last decade or 25 years are the ones bucking the national trend.

[earthling]

Here's the office inventory across the country. What they call 'downtown' is actually city cores and for KC it includes midtown/Plaza. KC has a massive amount of office space in city core compared to similar cities and yet the vacancy rate is only around 14%, slightly above US avg. The US avg absorption rate shrank over last 2 Q's yet KC core actually increased.

See page 8...

http://www.colliers.com/~/media/files/m ... final.ashx

A new report for Q2 should come out sometime this month.

[aknowledgeableperson]

Is that office space include owner-occupied or just leasable?

[earthling]

KC Market:
http://www.colliers.com/~/media/files/m ... eport.ashx

It has two slightly different descriptions in same document...

Note: Inventory includes office properties 10,000 SF and up. It excludes office properties that were built with the intent to house only medical users and those properties where the government is both 100% owner and occupier.

Includes all existing multi- or single-tenant leased and owner-occupied office properties greater than or equal to 10,000 SF (net rentable area). Does not include medical or government buildings.

So it appears to include owner-occupied but that has at least 10K rentable space. IE, Sprint owns their complex but leases out lots of space. Doesn't include govt buildings, is IRS center Fed owned?

All Markets:
http://www.colliers.com/~/media/files/m ... final.ashx