March changed everything for retailers across the United States. And as the COVID-19 pandemic continues its hold on the country, retailers have had to adapt, with restaurants shifting almost entirely to take-out and delivery in some parts of the nation and retailers adding curbside pick-up to their menus.
Some retailers have done this successfully. Others have struggled. Far too many have closed their doors as their revenues dried up after state-ordered shutdowns and restrictions.
This has played out in every market in the Midwest, including in Kansas City, Missouri. LANE4 Property Group recently released its 2021 Kansas City Retail Report. And this year? The report was a mixed bag, detailing the success stories of some innovative retailers and the closure of many others.
The good news? LANE4 says that despite the COVID-19 pandemic, the overall Kansas City retail market remained stable. Yes, some retail centers struggled. Others, though, adapted and endured.
Power centers and lifestyle centers, usually occupied by soft good retailers and sit-down dining, saw more struggles, not surprisingly. LANE4 says that tenants in these centers more frequently fell behind on their rent payments in 2020. Neighborhood centers, though, often anchored by grocers and convenience-oriented users, seemed to fair relatively well.
Occupancy rates at the end of 2020 were within 1.2% of year-end 2019, LANE4 wrote in its report, and average lease rates remained stable from 2019 in all shopping center types expect regional centers. Aggregate lease rates across the Kansas City metropolitan area increased from an average of $13.47 a square foot at year-end 2019, to $14.21 a sqiare foot in 2020.
On the constructin side, the pandemic did halt or slow many developments in the Kansas City market. That didn’t mean, though, that all commercial construction stopped last year.
LANE4 pointed to south Kansas City, where the Cerner Innovations Campus delivered two new office buildings in 2020 totaling 755,000 square feet during phases 3 and 4 of the 16-phase total project. Ranch Mart Shopping Center, located in Leawood, Kansas, continues to make progress on its long-awaited redevelopment of the 217,000-square-foot center. A two-story mixed-use building with office space is under construction at the center with expected delivery in the summer of 2021.
In south Overland Park, Kansas, the mixed-use development Bluhawk is anticipating a 2021 groundbreaking of its 309,000-square-foot indoor sports complex and 120,000-square-foot sports arena with completion in the fall of 2022.
The COVID-19 crisis accelerated many trends in the commercial real estate industry that were already impacting how retailers and consumers used physical space, and the Kansas City market was no different, according to LANE4. An increase in e-commerce, contactless pickup and delivery services; open-air shopping and dining options; and strategically designed stores that accommodate drive-thru and curbside to-go are all trends expected to stay.
LANE4 Property Group is predicting a stronger 2021 for the Kansas City retail market. The company says that it is already seeing increased leasing activity in retail markets. There will still be challenges, though. LANE4 said that more vacancy is projected in certain property types where demand remains limited.
Steady growth is anticipated in residential real estate transactions, population and median household incomes. These underlying fundamentals should continue to underpin stability in the Kansas City retail market as retailers and business owners confront the challenges of 2020 and beyond.