Developers Confident New Downtown Office Construction Coming Soon as Supply Continues to Tighten

Downtown Kansas City is on the cusp of new office construction to meet the needs of employers who want to recruit and retain younger workers seeking the diversity and energy of an urban environment.

That was one of the takeaways at the Downtown Council of Kansas City‘s first ever office summit Wednesday, an event attended by 170 people in the newly redeveloped Corrigan Station office project.

It’s goal was to explore how downtown can attract more private employers.

“Since our move, we’ve acquired a lot more talent,” said Meg Stapleton of Auto Alert, a software firm that recently relocated its headquarters from California and is occupying 45,000 square feet in a building at 114 W. 11th St.

“We’re attracting the younger, new talent that wants an urban mix.”

The summit was kicked off by Mayor Sly James, who said major projects including the renovation of Union Station, the Sprint Center, Power & Light District and Kauffman Center for the Performing Arts, plus events like First Fridays set the stage for a more vibrant downtown.

“The key to any city’s success is attracting businesses and companies in the future who need talent that wants to take advantage of the downtown lifestyle,” James said. “If we corner the market on talent, the businesses will follow.”

Mayor Sly James opened the Downtown Office Summit at Corrigan Station

Gib Kerr, vice president at Cushman & Wakefield, said downtown has seen a major influx of residents over the past decade and if current rates continue, should reach 30,000 residents by 2020. It currently has about 25,000 residents, twice the population of downtown Austin, Texas, he said.

Much of that population growth has been assisted by the conversion of a number of obsolete downtown office buildings into apartments.

Kerr estimated 2.3 million square feet of former downtown office space has been converted to apartments and hotel space over the last three years, roughly the size of the Sprint Campus.

Downtown’s vacancy rate for top quality office space is now 16.8 percent. In addition to the conversions, there have been several significant leases completed in recent years.

Besides Auto Alert, other major recent office deals including the federal General Services Administration, 140,000 square feet; Spring Venture Group, 130,000 square feet; Hollis + Miller, 33,000 square feet, and WeWork, 44,000 square feet.

Copaken Brooks is proposing this office tower for a site at 13th and Grand if a tenant can be lined up.

Between the older buildings being removed from the inventory and new leases, the panel agreed downtown is ready for new construction.

Jon Copaken of Copaken Brooks said downtown has reached a point where its appeal to recruiting talent can justify higher lease rates.

“People are willing to pay something more for something new,” Copaken said. “I think we’re on the verge of new space.”

Bryan Johnson, CEO of Colliers International, said there are currently only a few buildings downtown that could handle a tenant needing 50,000 square feet.

Johnson said he’s currently representing a firm with 400 employees that’s interested in relocating from Kansas to downtown and is optimistic the deal will happen.

Developer Dave Harrison of VanTrust Real Estate, the firm in charge of the six-block East Village redevelopment project on the east side of Ilus W. Davis Park, expects a project to go up within five years, probably in the 150,000 square foot range.

“There hasn’t been pressure on dirt to warrant a speculative development,” Harrison said. “I use that in the past tense. There’s pressure now and demand…I think you’ll see a spec office building coming very soon.”

Harrison added, “We need to thank the millennials. I think we have a great trajectory. Kansas City is considered cool. Twenty years ago, that generation wasn’t coming to Kansas City, they were going to Chicago or Denver.”

The new streetcar line was praised by several of the new tenants downtown who observed it added the urban atmosphere and easy transportation dimension craved by millennials.

“The streetcar made a huge difference,” said Julie Pierce of Henderson engineering.

John Southward of Hollis + Miller said relocating to the Corrigan Station project proved popular with his employees.

“Our younger staff embraced it,” he said. “They live in the River Market and take the streetcar here. It’s been fantastic.”

Jeff Spencer of Holmes Murphy, said the move to the Corrigan Station project has helped with his recruiting.

“Young talent doesn’t like 143rd and Lamar,” he said. “They like the Corrigan building. It’s been a really good change. The vibe is great and the energy is high.”

One of the more interesting debates among the panelists was the need for parking downtown. Johnson of Colliers said it was still essential to provide adequate parking to attract tenants, saying “I think parking could be a deal stopper going forward.”

Harrison, on the other hand, observed that as downtown attracts more street level retail, bars and restaurants, it makes walking farther to park less challenging. The streetcar also has become an important asset, allowing people to park farther away and ride it to their job.

Both Harrison and City Manager Troy Schulte speculated a challenge in the next 20 years or more could be figuring out new ways to reuse parking garages as the demand diminishes.

A question from moderator Steve Vockrodt, a reporter at The Kansas City Star, about why no major corporations have relocated downtown since H&R Block in 2003 prompted Schulte to recall efforts by the city to encourage Cerner to build its new headquarters there.

The firm instead is building its sprawling new office campus at the site of the former Bannister Mall at I-435 and Bannister Road.

“In our conversations with Cerner, the CEO (the late Neal Patterson) was focused on a suburban development,” Schulte said. “He didn’t see his organization interested in downtown. He wanted parking and wanted to be to his suburban home in 15 minutes.”

“(Former H&R Block CEO) Mark Ernst saw the potential and was willing to stick his neck out. I’m much more confident if we were presented with a corporate opportunity today we could land them if they’re interested because we have something to market them.

“It comes down to the CEO’s comfort level and what environment they want to be at on a daily basis.”

Panelists at the Downtown Office Summit from left: City Manager Troy Schulte, Bryan Johnson of Colliers, Dave Harrison of VanTrust and Jon Copaken of Copaken Brooks.