Mixed-Use Projects Breathe New Life Into Kansas City Retail Market
The overall Kansas City retail market remains very healthy and active. As retailers continue to navigate through e-commerce challenges, developers continue to get creative with the redevelopment of existing centers, adding mixed-use components and consolidation of big box vacancies. Restaurants and hospitality seem to be catalysts in helping to kick-start these redevelopments from the retail side.
Over the past year, retail spending in Kansas City has continued to increase, but there remains a limited amount of speculative construction in the market. Therefore, the vacancy rate has dropped from 6.2 percent in 2016 to 5.7 percent as of the third quarter of 2017.
The average rental rate has increased from $12.85 to $13.05 per square foot as of the third quarter. Solid job creation from major employers like Cerner and Garmin has helped the unemployment rate of 3.7 percent stay below the national average of 4.1 percent.
The restaurant sector is in the process of evolving just as the retail sector is. We are seeing a lot of the major chains slowly shuttering locations where the larger footprint is no longer viable. These properties are getting backfilled fairly quickly by retailers and smaller local restaurant groups.
Retail investors have stayed active. Out-of-state private investment groups continue to put Kansas City on the radar in order to find product that will hit their targeted returns versus the major markets where cap rates are in the mid-single digits. Combined with a lack of new inventory, this has caused cap rates to compress.
Let’s take a look at some of the current projects within the various submarkets.
Johnson County, Kansas
JOCO continues to thrive as one of the strongest submarkets in the metro. With some of the higher demographics, the retailers continue to focus on the area when bringing new concepts like Arhaus, Restoration Hardware and The Container Store to the KC metro.
• Sonoma Plaza — A new $220 million development located at 87th Street and I-435 will add apartments and up to 175,000 square feet of retail space.
• Promontory — This $97.5 million mixed-use redevelopment project, located at 91st Street and Metcalf Avenue, consists of 420 multifamily units and 153,000 square feet of retail shops.
• 95 Metcalf South — Demolition is complete and construction has begun on the new 165,000-square-foot development that will be anchored by Lowe’s and feature pad sites for additional retail/restaurant use.
• Bluhawk — This mixed-use project in southern JOCO spans 300 acres. A new 63,000-square-foot Price Chopper anchors the retail component, which includes an additional 42,000 square feet of space.
• Floor & Décor — The flooring and tile store will occupy 81,000 square feet of a former J.C. Penney store located along I-35 and 75th Street.
• Merriam Kmart — The 12-acre site along Shawnee Mission Parkway and I-35 will be redeveloped into a mixed-use property including a hotel, restaurants and entertainment.
Jackson County, Missouri
The majority of the activity in Jackson County seems to be focused on the revitalization of downtown and surrounding neighborhoods like Crossroads, Rivermarket and Westport.
• Ward Parkway Center — A new 31,000-square-foot addition consisting of five restaurants just welcomed the opening of two Hal Smith concepts, Charleston’s and The Garage, along with MidiCi Pizza.
• Brookside 51 — A 216,000-square-foot mixed-use development, anchored by Whole Foods Market, will feature 170 multifamily units. Delivery is slated for early 2018.
• Crossroads/Downtown — This area is a hotbed for redevelopment as the urbanism trend continues. Old buildings like Corrigan Station are being retrofitted with either office or multifamily space above and street-level restaurants.
• Blue Springs — The new Price Chopper just opened after redevelopment of the former White Oak Shopping Plaza, which will have adjacent retail/restaurant space available.
The Northland, consisting of Platte and Clay Counties in Missouri, is experiencing an uptick in growth due to the relatively low cost of living and good school systems. Vacancy rates are some of the lowest in the area, with corridors like the Liberty Triangle at 2 percent. New inventory is fetching premium rates at approximately $30 per square foot.
• I-35 and Armour Road — Meierotto Jewelers kicked off this new 62-acre, $133 million development by opening a 34,000-square-foot building. DRIV Golf Lounge, two hotels, 200 multifamily units and additional retail/restaurant space will follow.
• Edgewood Farms — Texas Roadhouse just opened in this new 225,000-square-foot development at I-29 and Barry Road. The restaurant joins the 50,000-square-foot Main Event and Freddy’s Frozen Custard & Steakburgers.
• Twin Creeks — New ownership purchased the Target-anchored center and rebranded it to go along with the facelift. New junior-box tenants will be announced to the lineup soon.
• Metro North Crossing — The former site of Metro North Mall has been demolished to make way for a new $187 million mixed-use project.
— By Phil Peck, Retail & Investment Specialist, Block & Co. Inc. Realtors. This article first appeared in the January 2018 issue of Heartland Real Estate Business magazine.