Office Sharing Is on the Rise in Overland Park, Kansas
For those of you not familiar with Overland Park, Kansas, and its progressive office market, below are a few key points to help illustrate the relative size and economic strength of one of Kansas City’s most dynamic suburbs.
• Incorporated in 1960, Overland Park is the second-most populous city in Kansas.
• As of 2017, the unemployment rate was 3.1 percent.
• It contains 17 percent +/- of metro Kansas City’s total office inventory.
• $69,888 per capita income in 2017
• AAA bond rating status from the nation’s top three bond rating agencies, received by only a small handful of municipalities
The Overland Park office market has led the metro in new office deliveries, occupancy and rent growth for much of the past two decades. It is the headquarters location of choice for a host of large corporations, such as Sprint, AMC Theaters, Black and Veatch, Waddell & Reed and YRC, to name a few. Access to a highly educated workforce, affordable housing, top-rated public schools and healthcare is a sampling of the reasons companies are attracted to the area.
However, large corporations are not the only companies interested in locating here. Overland Park has a deep and vibrant entrepreneurial community whose office needs have traditionally been serviced by executive suites, small direct office leases and by the home office. But times are changing.
From coast to coast, coworking and office-sharing operations are putting their stamp on office markets. While similar in many respects, there is a distinction. Both offer the flexibility of short-term leases, common areas and amenities shared by multiple unique tenants, however, office sharing provides each tenant with a higher degree of privacy and security than does coworking.
These facilities are absorbing vacant spaces, filling the gap between landlords who try to avoid investing in short-term leases, and tenants whose unknown growth expectations or frail balance sheets would normally put them in a bind when searching for quality, flexible office space with amenities and enough curb appeal to attract the talent needed for success. To this point, these operations have offered somewhat of a boost to occupancy, taking moderate- to large-sized vacancies off the market, without significantly cannibalizing landlords existing tenant base.
On a local level
Several major regional office-sharing operators have joined the ranks and entered the Overland Park market with varying degrees of success. In addition, the rumor mill has spawned whispers that WeWork is in the initial planning stages of creating a large technology-focused incubator within a portion of the 4 million-square-foot Sprint headquarters campus. This would make a great deal of sense considering SoftBank, the majority owner of Sprint, has recently invested $4.4 billion in WeWork.
However, to date, none have made an investment or the local commitment to their concept equal to that of Overland Park’s homegrown Edison Spaces.
The brainchild of Tim Barton and Matt Druten (formerly of Freightquote), Edison Spaces opened its first location in Overland Park’s primary office corridor in late 2016. Shortly thereafter, only two miles to the west, a second location followed. Both are first-class facilities offering short-term leases, high-end amenities common to all tenants, yet secure and private quarters for each individual company that leases from them. Thus far, the model has been a success and spawned the groundbreaking of the Edison District in October 2018.
Nestled in the heart of historic downtown Overland Park, the Edison District will boast a five-story, 125,000-square-foot primary building with 100,000 square feet of class A office space, 10,000 square feet of first-floor retail space and a seven-chef food hall featuring up-and-coming culinary talents eager to bring their creations to the public.
In addition, a parking garage with almost 400 spaces, and a central event plaza with green space will accommodate not only the occupants of this development, but all visitors to the downtown area.
Barton and Druten contracted with The Opus Group for construction services and development support, and AREA Real Estate Advisors have been hired to lead the leasing initiative. In total, the project is budgeted at $48.5 million with an anticipated delivery of November 2019. Unless pre-leasing efforts leave no vacancy,
Edison Spaces plans to open another facility within the development.
I believe that up to this point in time, coworking and office sharing have had a net positive effect on the market. It has tapped an end user that has come out of the woodwork eager to occupy high-end space without a long-term obligation.
What I am not sure of is the staying power of this end user, as we work our way through the fourth quarter of this economic cycle. The fourth quarter is the final quarter of growth before a slowdown. It will remain to be seen whether these short-term leases are extended or if there will be a resurgence of the traditional home office as belts are tightened. Either way, I believe we can all look forward to the evolution of office space and the opportunities and challenges to come.
— By Mark Talley, Office Specialist, NAI Heartland. This article originally appeared in the January 2019 issue of Heartland Real Estate Business magazine.