Downtown office vacancy

Issues concerning Downtown as described by the Downtown Council. River to 31st Street, I-35 to Bruce R. Watkins.
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kcjak
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Re: Downtown office vacancy

Post by kcjak »

KC_JAYHAWK wrote: Tue Oct 30, 2018 9:37 am
And those 900 jobs could eventually turn into 2,000 jobs, so it is a big loss.
And those 900 jobs could turn into hundreds of new residents downtown and employees paying the earnings tax (assuming no subsidies) and supporting local businesses in the area. It is a big loss.
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rxlexi
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Re: Downtown office vacancy

Post by rxlexi »

Interesting article by Collison. Overall I'd say the Starbucks story is more positive than negative. A company of that nature managed to take notice of DT KC and seriously consider it for a large office lease, presumably with little experience in the region beforehand. A lot of progress there.

Also a nice cautionary tale that I wish we could beat into the regional mindset - KC, at least the central DT to Plaza stretch, needs to get significantly more expensive psf (both residential and commercial) to see the kind of development occurring in places like Denver, Austin, ATL (healthy new construction office space downtown, in this case), get all those parking lots built over, and provide an economic engine that can help power other parts of the city.

Admittedly becoming more like those places is not a goal for everyone, but frankly "should" be if you're living in the core, most dense part of the region. There are plenty of low density, low cost parts of both city (north, south KC) and burbs that will be relatively unaffected by higher valuations in central city - but central city needs those values to justify new development and continue to build up...
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Re: Downtown office vacancy

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KC_JAYHAWK wrote: Tue Oct 30, 2018 9:37 am Yep saw that article from Kevin Collison. Really need some new Class A space downtown for just this type of opportunity. Most firms adding or re-locating jobs don't want to wait 24 months or so for a new tower to be built. Even a 10-15 story office tower would be a good start, anywhere between the Crossroads to the Rivermarket.

And those 900 jobs could eventually turn into 2,000 jobs, so it is a big loss.
Been saying this for years. If you have a chance to build new office space, always do it. ALWAYS. Even if it requires subsidies and you have a vacancy rate of 20%. In a city like KC where it's nearly impossible to build spec office space of small amounts, let alone a 600,000 sq ft tower, you have got to build space when you have a chance. IT WILL EVENTUALLY FILL UP and most times it will fill up with relocations (from out of town or suburbs).

If you sit around and wait for vacancies rates to drop to 5% and rates to jump to $35 a sq ft. Nothing will EVER happen. You will never get rates that high with a few 1980's office towers. You have to get some new space up.

Hopefully this taught a lot of people in city hall and the local development community a lesson. This is how places like Atlanta, Denver, Dallas, Charlotte, etc continue to bring in more and more companies. They have the office space ready to go. They may overbuild, but five years later, the space if full of thousands of employees and then they start overbuilding again. Meanwhile KC struggles to get its downtown employment back to 1990 levels.

This is why I was so perplexed when the city turned down KCPL when they wanted to build a new tower due to high vacancy rates. KC just doesn't get a lot of chances for new construction (which can raise rental rates much higher than low vacancy rates). KC needs a sexy "NEW" office tower. If it had one, it would fetch close to what they do in Nashville, Dallas etc and then the cycle would continue as more and more companies become interested in downtown office space.

It's the same thing that happened with apartment rates. KC maxed out on rent rates with renovated buildings and most people thought the market had peaked. Till One Light opened and created a whole new product to satisfy a market that didn't really exist yet in KC. Then new construction rentals took off and now rates that were once maxed out on renovated buildings are climbing again to keep up with new construction rates. KC needs to do the same thing with office space now.
Last edited by GRID on Tue Oct 30, 2018 11:49 am, edited 1 time in total.
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Re: Downtown office vacancy

Post by earthling »

The hard part is finding lenders willing to take the risk when metro suburban minded companies want lots of free parking (and can get it in burbs). KCMO would essentially have to take the risk.
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rxlexi
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Re: Downtown office vacancy

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It's the same thing that happened with apartment rates. KC maxed out on rent rates with renovated buildings and most people though the market had peaked. Till One Light opened and created a whole new product to satisfy a market that didn't really exist yet in KC and new construction rentals took off and now rates that were once maxed out on renovated buildings is climbing again to keep up with new construction rates. KC needs to do the same thing with office space now.
Exactly this.
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Re: Downtown office vacancy

Post by beautyfromashes »

Unfortunately, this doesn’t seem to be on the radar for topics in the mayoral election. Why is no one talking about bringing businesses DT? I hear about new residents and entertainment, but the core won’t continue to grow without high paying jobs.
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KC_JAYHAWK
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Re: Downtown office vacancy

Post by KC_JAYHAWK »

I'm surprised Cordish hasn't built some office downtown. Aren't they building an 8-10 story office building in downtown St. Louis along with One Cardinal Way apartments? Surely St. Louis' office vacancy rate is much higher with AT&T emptying out their office tower downtown.
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Re: Downtown office vacancy

Post by smh »

KC_JAYHAWK wrote: Tue Oct 30, 2018 1:23 pm I'm surprised Cordish hasn't built some office downtown. Aren't they building an 8-10 story office building in downtown St. Louis along with One Cardinal Way apartments? Surely St. Louis' office vacancy rate is much higher with AT&T emptying out their office tower downtown.
Isn't this the under the radar project that we keep hearing rumors on at the SW corner of 13th and Main?
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Re: Downtown office vacancy

Post by Highlander »

GRID wrote: Tue Oct 30, 2018 11:29 am
KC_JAYHAWK wrote: Tue Oct 30, 2018 9:37 am Yep saw that article from Kevin Collison. Really need some new Class A space downtown for just this type of opportunity. Most firms adding or re-locating jobs don't want to wait 24 months or so for a new tower to be built. Even a 10-15 story office tower would be a good start, anywhere between the Crossroads to the Rivermarket.

And those 900 jobs could eventually turn into 2,000 jobs, so it is a big loss.
Been saying this for years. If you have a chance to build new office space, always do it. ALWAYS. Even if it requires subsidies and you have a vacancy rate of 20%. In a city like KC where it's nearly impossible to build spec office space of small amounts, let alone a 600,000 sq ft tower, you have got to build space when you have a chance. IT WILL EVENTUALLY FILL UP and most times it will fill up with relocations (from out of town or suburbs).

If you sit around and wait for vacancies rates to drop to 5% and rates to jump to $35 a sq ft. Nothing will EVER happen. You will never get rates that high with a few 1980's office towers. You have to get some new space up.

Hopefully this taught a lot of people in city hall and the local development community a lesson. This is how places like Atlanta, Denver, Dallas, Charlotte, etc continue to bring in more and more companies. They have the office space ready to go. They may overbuild, but five years later, the space if full of thousands of employees and then they start overbuilding again. Meanwhile KC struggles to get its downtown employment back to 1990 levels.

This is why I was so perplexed when the city turned down KCPL when they wanted to build a new tower due to high vacancy rates. KC just doesn't get a lot of chances for new construction (which can raise rental rates much higher than low vacancy rates). KC needs a sexy "NEW" office tower. If it had one, it would fetch close to what they do in Nashville, Dallas etc and then the cycle would continue as more and more companies become interested in downtown office space.

It's the same thing that happened with apartment rates. KC maxed out on rent rates with renovated buildings and most people thought the market had peaked. Till One Light opened and created a whole new product to satisfy a market that didn't really exist yet in KC. Then new construction rentals took off and now rates that were once maxed out on renovated buildings are climbing again to keep up with new construction rates. KC needs to do the same thing with office space now.
I agree with what you are saying but I'm surprised KC didn't have 100,000 sq ft available. I've heard at times in the not that distant past that much of One KC Place and/or the ATT Building (whatever it's called now) were practically empty. It seemed like a company could have stitched that much space together easily in a couple of nearby buildings and waited for a tower to be built to accommodate them.
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Re: Downtown office vacancy

Post by FangKC »

From the Cityscene article:
As to where a sizable new office project might occur next, Schaeffer believes property controlled mostly by Copaken Brooks west of Broadway between Southwest Boulevard and I-670 would be attractive because its eligible for hefty federal tax breaks.
Does anyone know what hefty federal tax breaks are being referred to here?

New Market Tax Credits?

Development is limited by bank requirements. The only way around that is for someone with deep, deep pockets who is willing to build a speculative tower without financing from banks. There aren't many in Kansas City that can do that.
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Re: Downtown office vacancy

Post by normalthings »

FangKC wrote: Wed Oct 31, 2018 12:31 am From the Cityscene article:
As to where a sizable new office project might occur next, Schaeffer believes property controlled mostly by Copaken Brooks west of Broadway between Southwest Boulevard and I-670 would be attractive because its eligible for hefty federal tax breaks.
Does anyone know what hefty federal tax breaks are being referred to here?

New Market Tax Credits?

Development is limited by bank requirements. The only way around that is for someone with deep, deep pockets who is willing to build a speculative tower without financing from banks. There aren't many in Kansas City that can do that.
Opportunity Zone? I’m not sure
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KC_JAYHAWK
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Re: Downtown office vacancy

Post by KC_JAYHAWK »

Highlander wrote: Tue Oct 30, 2018 11:03 pm
GRID wrote: Tue Oct 30, 2018 11:29 am
KC_JAYHAWK wrote: Tue Oct 30, 2018 9:37 am Yep saw that article from Kevin Collison. Really need some new Class A space downtown for just this type of opportunity. Most firms adding or re-locating jobs don't want to wait 24 months or so for a new tower to be built. Even a 10-15 story office tower would be a good start, anywhere between the Crossroads to the Rivermarket.

And those 900 jobs could eventually turn into 2,000 jobs, so it is a big loss.
Been saying this for years. If you have a chance to build new office space, always do it. ALWAYS. Even if it requires subsidies and you have a vacancy rate of 20%. In a city like KC where it's nearly impossible to build spec office space of small amounts, let alone a 600,000 sq ft tower, you have got to build space when you have a chance. IT WILL EVENTUALLY FILL UP and most times it will fill up with relocations (from out of town or suburbs).

If you sit around and wait for vacancies rates to drop to 5% and rates to jump to $35 a sq ft. Nothing will EVER happen. You will never get rates that high with a few 1980's office towers. You have to get some new space up.

Hopefully this taught a lot of people in city hall and the local development community a lesson. This is how places like Atlanta, Denver, Dallas, Charlotte, etc continue to bring in more and more companies. They have the office space ready to go. They may overbuild, but five years later, the space if full of thousands of employees and then they start overbuilding again. Meanwhile KC struggles to get its downtown employment back to 1990 levels.

This is why I was so perplexed when the city turned down KCPL when they wanted to build a new tower due to high vacancy rates. KC just doesn't get a lot of chances for new construction (which can raise rental rates much higher than low vacancy rates). KC needs a sexy "NEW" office tower. If it had one, it would fetch close to what they do in Nashville, Dallas etc and then the cycle would continue as more and more companies become interested in downtown office space.

It's the same thing that happened with apartment rates. KC maxed out on rent rates with renovated buildings and most people thought the market had peaked. Till One Light opened and created a whole new product to satisfy a market that didn't really exist yet in KC. Then new construction rentals took off and now rates that were once maxed out on renovated buildings are climbing again to keep up with new construction rates. KC needs to do the same thing with office space now.
I agree with what you are saying but I'm surprised KC didn't have 100,000 sq ft available. I've heard at times in the not that distant past that much of One KC Place and/or the ATT Building (whatever it's called now) were practically empty. It seemed like a company could have stitched that much space together easily in a couple of nearby buildings and waited for a tower to be built to accommodate them.
1KCP is practically fully occupied, not sure about Town Pavillion (old AT&T), but I think it's pretty full along with 1201 Walnut. City Center probably has that much space available I would think, but maybe it's too dated, I don't know.
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FangKC
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Re: Downtown office vacancy

Post by FangKC »

I think a lot of vacant space was also leased to federal agencies when the GSA building in the East Village didn't get funded.
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Re: Downtown office vacancy

Post by flyingember »

A lot of the GSA is in One Pershing.
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Re: Downtown office vacancy

Post by gfenn11 »

What's OneKC place going to CPC for next week?
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Re: Downtown office vacancy

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gfenn11 wrote: Wed Oct 31, 2018 9:00 pm What's OneKC place going to CPC for next week?
Pretty sure this is for street-level monument signs. Nothing exciting.

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Re: Downtown office vacancy

Post by earthling »

Q3/2018 office report. As expected, downtown office movement pretty stagnant. Very little YTD net absorption with net loss in Class A even with Q3 boost.

Need to create acct to read report...
http://cbre.vo.llnwd.net/grgservices/se ... 09df7cc193

Image
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normalthings
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Re: Downtown office vacancy

Post by normalthings »

My napkin math shows that the purchase and lease up to 85% of City Center Square will push the downtown class a vacancy down to around 9%
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FangKC
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Re: Downtown office vacancy

Post by FangKC »

I was surprised they are planning to update the building, and not convert it to residential.
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Re: Downtown office vacancy

Post by TheLastGentleman »

FangKC wrote: Wed Jan 16, 2019 10:21 pm I was surprised they are planning to update the building, and not convert it to residential.
City center is a big building. Not sure if there would be enough demand to make it work right now honestly. Probably more demand for office space
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