Kenneth Block, managing principal with Kansas City’s Block Real Estate Services, entered the commercial real estate business in 1975. He has since been involved in the development of more than 220 buildings with a total value of more than $1.3 billion.
Throughout his career, Block has also been involved in more than $2.5 billion of property sales and dispositions.
It’s safe to say, then, that Block understands the Kansas City commercial real estate market. When he says that this market remains in the middle of its long hot streak, it means something. And when Block predicts that Kansas City’s commercial market should remain strong in the near future? Commercial real estate pros working this market should be thrilled.
Midwest Real Estate News recently spoke with Block about the state of Kansas City’s commercial market and its future. Here’s some of what this long-time Kansas City CRE veteran had to say.
How strong is the Kansas City commercial real estate market this year? That’s a good question. When you’re in the middle of everything, you don’t think that much about it. I’d probably say we are pretty close to the same pace of activity as we saw last year. Part of me, though, says it might be slowing down just a bit.
It’s pretty clear that as a country right now we are beginning to have a little bit of a slowdown. But we are still on par with last year, and last year was better than the year before. I would consider it really strong in terms of the market. Each sector is a little bit different. Each has its challenges.
What about Kansas City itself? The city is doing well economically, too, right? Kansas City is about as strong as it has been in a long time, economically and in how our citizens are doing. Our gross regional product is running very close to 3 percent, which is stronger than it has been. Our unemployment rate was down to 3.3 percent, which is lower than the national unemployment rate.
There are lot of job openings in the right sectors today. This includes education and health services, professional business services and government jobs. There are opportunities, too, in manufacturing and utilities. When I started out in this business, our economy was not nearly as expansive as it is today. We were strong in agriculture, manufacturing and the automobile industry. But we did not have the level of medical, professional, tech, business or any of the kind of jobs we have today. We are mirroring almost exactly the U.S. economy. We have a very strong economy spread out over every single job opportunity.
The industrial sector seems to be strong throughout the Midwest. How strong is it in Kansas City? We have always had great highways and rail. That continues to bring a lot of product across the United States and through Kansas City. That is a big key for us. Because of where we are in the country, within 24 to 48 hours you can reach most of the country. Companies can reach so many people in so short a time. That is why Amazon came into our city with the fulfillment centers.
The third-party logistics centers are following the ecommerce. Industrial today is extremely strong. Our vacancy rates are less than 6 percent across the board. From that standpoint, industrial is a very strong market overall historically.
Multifamily has been strong for a while, too. How is this sector doing in Kansas City? Our multifamily market has been strong for many years. We are benefitting from the changing desires of the marketplace just like everywhere else. We are benefitting from the influx of renters by choice, the young people who want a different type of living experience.
In the old days, we would consider adding 3,000 units in a year to be a super year. In the last 12 months, though, we have absorbed nearly 5,000 units. We have about 8,500 units under construction. The vacancy rate for multifamily is still low.
We do have a lot of units under construction, but the deliveries on those units are spread out over 27 to 28 months. You might have 8,000 or 9,000 units under construction, but you might only deliver 3,000 in any one year.
How is the office sector performing? We see demand for new office space in many of our communities. We have our new office building that we are developing in the Country Club Plaza, 46 Penn Centre. We are also planning Galleria 115, an office building in Overland Park on the Kansas side. There are also other options out there for companies. What is interesting to me is the potential activity in downtown Kansas City. There are a number of proposed office developments coming to downtown. Whether they all occur or not will be driven by the tenants they can attract. Waddell & Reed Financial is considering making the move from Overland Park to Missouri. If they do make that move and if they get the incentive package they want, they will probably land in a new building in either the Crown Center or downtown. That would be an enormous move.
How about retail? How is that sector performing? Retail is still hit and miss. We do see some strong niches, mostly in restaurant and entertainment. The retail market here is stronger than it has been the last couple of years. A lot of focus is on taking old retail centers and trying to manipulate them and add other uses, multifamily, office or whatever else developers come up with. The goal is to replace some of these soft goods that have been beat up by the Amazons of the world.
Your company is very busy today, especially with projects like CityPlace, the 90-acre mixed-use development you are planning in Kansas’ Overland Park. How excited are you about some of these major projects? We are really excited about CityPlace. There is a lot of energy out there regarding this project. It does take time, though, to build a small city. That is what we are trying to do out there. We talk about live/work/play a lot. We are actually doing it with CityPlace. We are creating it out of a piece of dirt. That is difficult to do.
Since we started working on the project, the assisted-living center is now up, as are some of the apartments. CityPlace Corporate Centre III opened in July. We are under construction on CityPlace Corporate Centre I. We are close to having 70,000 square feet of leases being signed there. We filed with the city in late June for CityPlace Corporate Centre II, which will be a 152,000-square-foot office building.
The Apex at CityPlace apartment development is also under construction. That is a luxury apartment project that will bring 407 units. It will also have two courtyards. It will be like noting seen in this town.
This project is all about density. It’s about creating the type of urban/suburban location the Millennials enjoy. There are many Millennials who would like to be in the suburbs, but who also like the density concept, the ability to walk across the street to work. We are building that. Eventually, we will have 1,400 residential units there and 3,000 people living there. We will have 600,000-plus-square-feet of office space there. Over the next year, a lot of this will come together.