Like virtually every major metropolitan area, the Kansas City market has suffered in the economic malaise of the past few years. However, it hasn’t experienced the irrational highs and devastating lows that have beset markets in Arizona, Nevada and Florida. In fact, the submarkets that are struggling the most are the few that got ahead of themselves in anticipation of housing construction and leasing that never materialized.
In many ways, this scenario has enhanced the position of well-located, established centers in fully developed submarkets. Many developers are renovating and, in some cases, re-tenanting their shopping centers situated in more established Kansas City neighborhoods.
While demand is certainly not as robust as it was in the heyday of 2006-2007, we are still seeing more-than-respectable leasing of small tenant spaces of 1,200 to 1,500 square feet and of “mid-box” spaces ranging from 5,000 to 10,000 square feet throughout the market. Service firms such as cleaners and hair stylists, plus small eateries including breakfast/lunch-only restaurants such as Big Biscuit, as well as Starbucks, are taking smaller spaces. Dollar Tree, Dollar General and other value merchandisers are mostly taking the mid-box vacancies. Traditional lifestyle centers, however, seem to be the exception. They continue to suffer vacancies following the bankruptcies of several major big-box retailers in the past 2 years and a general scaling back of store footprints.
Grocers are also refreshing their concepts in infill locations. In August, Hy-Vee acquired a former Kmart location from Tri-Land on the Missouri side of the market in Blue Springs with plans to completely renovate the space for a new 83,000-square-foot supermarket. The store, pegged for Blue Springs Market at Highway 40 and Highway 7, will replace a smaller Hy-Vee that’s adjacent to the center.
Hy-Vee also recently announced plans for an 83,000-square-foot supermarket in the Valley View center at the corner of 95th Street and Antioch Road in Overland Park, Kansas — part of a renovation/re-tenanting that calls for a portion of the space to be demolished and replaced. Cherokee South Plaza also got a facelift at the same intersection. Tri-Land demolished about 30,000 square feet of the Cherokee center to free up space for a Walgreens store that opened in the spring. Both Walgreens and CVS remain active in growing their market share in the region.
While some submarkets enjoy around 90 percent occupancy, overall retail occupancy in the Kansas City market is running in the low-to-mid 80 percent range — and slowly rising. That’s in part due to the fact that there’s been no significant retail construction in the region during the past 3 years.
Unique retail properties continue to do surprisingly well, particularly mixed-use “new urban” developments. The $850 million Power & Light District, a shopping and entertainment hub in downtown Kansas City, Missouri, known for its theatres, nightclubs and restaurants, has very few vacancies. The development debuted in late 2007 and was completed in 2009. Kansas City’s first modern downtown grocery, Cosentino’s Market, is posting good numbers there.
Zona Rosa, a Main Street-style shopping center in the Northland area of Kansas City with about 1.1 million square feet of space and about 90 stores, also enjoys high occupancy and steady traffic.
The Kansas City region has seen a modest amount of retailer expansions. Specialty grocer Trader Joe’s will enter the market with two stores in 2011; a 14,000-square-foot store in the Ward Parkway Shopping Center in Kansas City and a 12,000-square-foot location in the One Nineteen center in Leawood, the chain’s first Kansas location. Taking advantage of cheap rents, Gen X Clothing has taken over an old 30,000-square-foot supermarket space in inner city Kansas.
A series of frozen yogurt concepts are entering the market as well. Bon Bon Frozen Yogurt has recently signed onto a Tri-Land project, while Red Mango, Orange Leaf and Yogurtini are also expanding in the area.
In addition, there are a few sizable infill projects in the works. Notable among them, Lane4 Property Group plans to redevelop the site of the former Bannister Mall, situated between I-435 and Hillcrest Road on the Missouri side of Kansas City, as a mixed-use retail and office project. The mall was demolished in 2009.
In late 2010, the market stands at an inflection point where healthy retailers are either improving their cost structures at existing locations or bettering their positions in higher quality centers — and where developers are improving and re-tenanting their spaces in established markets. Though it is still a renters’ market, requests for tenant rent reductions have slowed since last summer. Landlords also say they’re getting less resistance for asking rents. Overall, continued retail resurgence for this stable Midwestern region appears imminent, particularly since it didn’t get caught in the major housing downturn that has dampened retail recovery in other markets.
— Richard Dube is the founder, president and owner of Westchester, Ill.-based Tri-Land Properties, Inc.