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The Roasterie in Kansas City brews $5M expansion plans for factory,event space

From the Kansas City Business Journal website dated:June 2,2011

Danny O’Neill is flying high about his Kansas City coffee factory’s roughly $5 million expansion project.

And that’s not just because The Roasterie Inc.bizWatch The Roasterie Inc. Follow this company ’s factory will have a new,larger entrance,an expanded cafe and event space across the street. The renovated space at 1204 W. 27th St. will have a full DC-3 airplane mounted out front,in line with the company’s logo. (Last year,The Roasterie did a rebranding that included adding a large DC-3 airplane mural off Interstate 35 near Downtown proclaiming the new tag line:“Live Life on the Rim!”)

“We just want to make a real statement,” said O’Neill,the company’s founder. “We want it to be kind of like,‘Wow,this is one of the top five things to do in Kansas City.’”

O’Neill was looking for a way to expand after daily tours started to overwhelm the factory and the list of changes to make kept growing. With about 33 people at the factory,space was getting tight.

“We’re finding out lots of ways to do more with less,” he said. “We’re becoming a lot more efficient.”

He originally eyed the Folgers plant at 701 Broadway,which is set to shut its doors next year,but an alternative presented itself when the property across the street from his current plant became available.

“It just opened up all kinds of opportunities,” O’Neill said.

The time was right for the company,which he said has experienced 30 percent revenue growth from 2010. O’Neill projects more than $10 million in sales this year.

He intends to turn the new property,which includes three separate buildings totaling 50,000 square feet,into an event space that he hopes will be perfect for weddings,as well as provide new parking for the factory and events. The roughly $3.5 million project should be completed by the end of the year.

A separate factory renovation will cost about $1.5 million and wrap up by the fall,O’Neill said. It will provide an expanded cafe,a larger cuppery,a nicer entrance and loading docks moved to the back of the building,adding about 2,000 square feet to the already 34,000-square-foot property.

And O’Neill is in no rush if project timetables expand.

“We’re comfortable,” he said. “We’re doing it right.”

1st Quarter 2011 Commercial real estate results for our Kansas City clients

Click here to view report in PDF color format

Economic Environment

The best news about the economy during first quarter 2011 was that the unemployment rate ended the quarter at 8.8 percent,down from 9.4 percent at the end of fourth quarter 2010,according to the Bureau of Labor Statistics (BLS). Payroll began to increase by slightly better numbers. However,first-time unemployment claims began inching up again in April 2011,jumping to more than 400,000 per week for several weeks in a row.

Real gross domestic product (GDP) growth increased at an annual rate of only 1.8 percent in first quarter 2011,according to the advance estimate released by the Commerce Department. This was a deceleration from the 3.1-percent growth in fourth quarter 2010,with the slowing growth largely due to reduced personal consumption expenditures,a sharp upturn in imports,and the decrease in government spending.

Standard &Poor’s (S&P) lowered its outlook for U.S. sovereign debt from “stable” to “negative” during first quarter 2011. In addition,the federal debt exceeded $14.3 trillion in May,and Congress will need to raise the debt ceiling again within the next couple months or the nation will risk defaulting on our obligations.

According to the BLS,the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in March 2011,with gasoline and food prices accounting for almost three-fourths of the increase. As such,consumers are pulling back,and while U.S. retail sales rose 0.4 percent in March 2011,this was down from the 1.1-percent increase in February,according to the Commerce Department.

What Does This Mean for Commercial Real Estate?

Despite the uncertainty in the economy and investment environment,commercial real estate continues to be a reasonable investment alternative for institutional investors. However,demand for investment property in secondary or tertiary markets is generally weak in comparison to that of the top-tier markets. We are starting to see slight improvement in leasing activity in some areas,particularly among technology firms.

Lending standards started to ease in first quarter 2011,according to results of the Federal Reserve’s quarterly Senior Loan Office Opinion Survey,but demand remained weak and growth remains tentative. In addition,problem banks remain at a record high,with 884 banks,or nearly 12 percent of all U.S. banks,at risk of failure at the end of 2010,according to the Federal Deposit Insurance Corporation (FDIC). The total number of failed banks in first quarter 2011 was 26,and another 13 banks failed in April,reported Trepp,LLC.

According to the Federal Reserve,banks have already taken $80 billion in commercial real estate losses (about half of what they are expected to take as a result of the recession). But there is still much distress,and the delinquency rate on commercial mortgage-backed securities (CMBS) increased to a record 9.34 percent in fourth quarter 2010 (compared to less than 1 percent in 2007). In contrast,the volume of new CMBS issuance is expected to be about $45 billion in 2011,well above 2010 issuance of $10.9 billion,but far below the $228 billion in 2007.

Transaction Analysis

On a 12-month trailing basis,total volume increased approximately 20 percent in all property types during first quarter 2011,according to Real Estate Research Corporation (RERC). In contrast,the 12-month trailing size-weighted average price decreased slightly in all property types. On a quarter-to-quarter basis,total volume decreased from the previous quarter in all property types during first quarter 2011,while the size-weighted average price declined.

RERC’s 12-month trailing weighted-average capitalization rate for the industrial and retail sectors declined during first quarter 2011,while the cap rate for the apartment sector remained mostly unchanged. In comparison,the 12-month trailing weighted-average capitalization rate for the office sector increased from the previous quarter.

For more information about RERC’s research,please go to www.rerc.com.

Office:

• According to RERC’s investment survey results,distressed and foreclosed property sales dominated office transactions in first quarter 2011. One of the commonly reported strategies was to buy cheap,hold,and sell the property at a higher price when the economy improves and office demand increases.
• Twelve-month trailing office sector total volume increased nearly 20 percent during first quarter 2011,while the size-weighted average price per square foot remained stable. The 12-month trailing weighted-average capitalization rate increased to 6.8 percent for the office sector. The volume of office transactions of $2 million or less increased by nearly 5 percent during first quarter 2011 on a 12-month trailing basis,although the size-weighted average price for transactions of $2 million or less declined 5 percent from the previous quarter.
• According to Reis,Inc.,vacancy in the office sector declined slightly to 17.5 percent due to positive net absorption of 5.5 million square feet during first quarter 2011. This decline in the vacancy rate is the first reversal in the rate since third quarter 2007. In addition,this is the second consecutive quarter that both asking and effective rents increased.

Industrial:

• According to RERC’s investment survey respondents,the majority of industrial property transactions that took place during first quarter 2011 were for normal and distressed properties,while the sale of foreclosed industrial properties was not as predominant. The majority of respondents thought that the price of industrial properties was attractive for buyers.
• Industrial property total volume increased 20 percent on a 12-month trailing basis during first quarter 2011,while the size-weighted average price per square foot declined slightly. The 12-month trailing weighted-average capitalization rate declined to 7.6 percent during first quarter. The volume of industrial property transactions of $2 million or less increased by more than 10 percent during first quarter 2011 on a 12-month trailing basis,although the size-weighted average price for transactions of $2 million or less declined by nearly 10 percent from the previous quarter.
• According to Grubb &Ellis,the availability rate for the industrial sector fell 50 basis points to 15.9 percent during first quarter 2011 due to strong demand and few new deliveries. In addition,asking net rent grew 3.2 percent on an annual basis. Completions totaled 3 million square feet for the fifth consecutive quarter.

Retail:
• Respondents to RERC’s investment survey noted that there were about three times as many distressed or foreclosed retail properties that sold during first quarter 2011 as normal retail property sales.
• Total retail property transaction volume increased 15 percent on a 12-month trailing basis during first quarter 2011,although the size-weighted average price per square foot declined slightly from the previous quarter. The 12-month trailing weighted-average capitalization rate dropped to 7.7 percent. While retail property transactions of less than $2 million increased by more than 15 percent on a 12-month trailing basis during first quarter 2011,the size-weighted average price of this retail space declined by nearly 10 percent.
• According to Reis,Inc.,the vacancy rate for neighborhood/community retail centers remained unchanged at 10.9 percent during first quarter 2011. In contrast,vacancy for the regional retail mall sector jumped 40 basis points during first quarter 2011,after declining in late 2010. In other signs of weakness,asking and effective rents for both retail sectors further declined by 0.1 percent.

4th Quarter Commercial real estate results for Kansas City clients

Click here to view report in PDF color format

Economic Environment

The U.S. economy ended 2010 with a real GDP growth rate of 2.9 percent,slightly higher than the 2.6 percent growth in 2009,according to the Bureau of Economic Analysis (BEA). Although economic growth was more sluggish than any of us hoped for the year overall,it was positive each quarter in 2010,and thus far,we have avoided the much-feared “double-dip” recession. More importantly,the economy seems to have acquired a little more steam as we move into 2011.

The Congressional Budget Office (CBO) announced that the federal budget will reach a new record of nearly $1.5 trillion,and as a share of GDP,is expected to increase to 9.8 percent in fiscal year (FY) 2011. As a percentage of economic output,the 9.8-percent deficit would be the second-largest in 65 years,behind only the 10-percent level in 2009.

According to the Bureau of Labor Statistics (BLS),the unemployment rate declined to 9.4 percent in December 2010,the lowest it has been for nearly a year and a half,but this was primarily because a record number of people stopped looking for work. Nonfarm payroll employment increased by 103,000 during the month,and although this rate of growth does not keep up with the addition of new entrants into the workforce each month,at least it is a positive number. The economy added 1.1 million jobs during the past year.

Consumers opened their pocketbooks during the 2010 holiday season,with total retail sales from October through December 2010 up 7.8 percent from the same period a year ago,according to the U.S. Census Bureau. This topped off a year of increases,with total retail sales for the entire year up 6.6 percent from 2009 figures.

What Does This Mean for Commercial Real Estate?

Commercial real estate activity was mixed during fourth quarter 2010. Top-tier properties have been selling at record-prices in some of the major markets,although there was much less sales activity in the secondary and tertiary markets. However,leasing markets exhibited increasing signs of recovery. Construction activity remains quite limited,but the bulk of new commercial real estate construction was related to healthcare,public infrastructure,and multifamily housing/apartments.

With respect to the conditions of the banks,there were 157 failed banks in 2010,more than any year since 1992,but the level of assets associated with these banks was 45.7 percent less than the assets associated with the banks that failed in 2009. Although the Federal Deposit Insurance Corporation’s (FDIC’s) list of “troubled” banks increased to 860 as of Sept. 30,2010,the number of bank failures is expected to decline in 2011.

Credit activity was mixed across the U.S. during fourth quarter 2010,and while loan demand for commercial real estate has been stabilizing in some areas,it remained soft or has been declining in other areas.

Transaction Analysis

Real Estate Research Corporation’s (RERC’s) transaction analysis showed that total volume increased for all property types,except for the retail sector,on a 12-month trailing basis during fourth quarter 2010. However,on a quarter-to-quarter basis,total volume
increased for all property types,including retail,during fourth quarter.

The size-weighted average price per square foot/unit for the office and apartment sectors overall increased approximately 10 percent on a 12-month trailing basis,while the size-weighted average price for the retail sector decreased approximately 5 percent during fourth quarter 2010. The size-weighted average price for the industrial sector remained unchanged from the previous quarter.

RERC’s 12-month trailing weighted-average capitalization rate decreased for all property sectors during fourth quarter 2010.

Office

• The majority of RERC’s investment survey respondents stated that distressed office properties—many of them well-located,free-standing properties—were attractively priced,selling well,and even outselling other properties. Other respondents,however,stated that the office sector was risky due to oversupply.
• Volume for the office sector increased by more than 40 percent during fourth quarter 2010 on a 12-month trailing basis,although the majority of the increase was due to sales of more than $5 million. The size-weighted average price per square foot of office space rose approximately 10 percent,while the 12-month trailing weighted-average capitalization rate declined to 6.7 percent during fourth quarter. Volume and price for transactions of less than $2 million declined.
• According to Reis,Inc.,the vacancy rate for the office sector remained flat at 17.6 percent during fourth quarter 2010. In addition,net absorption increased 2.5 million square feet for the quarter,the first increase since the end of 2007. Asking and effective rents also increased during fourth quarter.

Industrial

• According to RERC’s investment survey respondents,industrial properties offered a good investment opportunity during fourth quarter 2010. Many respondents said that both normal and distressed industrial properties were selling well,depending on location.
• Total volume for the industrial sector rose 20 percent during fourth quarter 2010,while the size-weighted average price per square foot remained flat on a 12-month trailing basis. The 12-month trailing weighted-average capitalization rate for the industrial sector declined 50 basis points to 7.7 percent. According to RERC’s analysis,the volume for industrial property transactions less than $2 million,of $2 million to $5 million,and those of more than $5 million each increased on a 12-month trailing basis,although price was mixed among these groups.
• According to CBRE-EA,the national industrial availability rate fell by 30 basis points to 14.3 percent during fourth quarter 2010. Although availability remains high,low construction and an improving economy should further reduce availability going forward.

Retail

• The majority of RERC’s fourth quarter 2010 investment survey respondents stated that distressed retail properties were selling well due to reasonable pricing,and several respondents noted that the retail sector was considered an attractive investment. Furthermore,retail sales were strengthened by holiday sales,though sales slowed in December.
• Retail sector total transaction volume declined by 2 percent on a 12-month trailing basis during fourth quarter 2010,while the size-weighted average price per square foot fell nearly 5 percent. The 12-month trailing weighted-average capitalization rate decreased 20 basis points to 8.2 percent. However,the volume of retail property transactions that totaled less than $2 million increased on a 12-month trailing basis,while the volume for transactions greater than $5 million declined compared to the previous quarter.
• According to Reis,Inc.,the vacancy rate for the retail sector remained unchanged at 10.9 percent during fourth quarter 2010. In addition,the lowest number of completions was recorded since 1999,with only 594,000 square feet of neighborhood/community center space brought online during the quarter. Both asking and effective rents declined.

Apartment

• According to RERC’s investment survey respondents,the apartment sector was the most attractive property investment during fourth quarter 2010. Respondents said demand was strong,although pricing and location could be challenging.
• Apartment sector total volume increased about 30 percent from the previous quarter on a 12-month trailing basis,while the size-weighted average price per unit rose about 5 percent. The weighted- average capitalization rate decreased 10 basis points to 6.1 percent. In addition,the volume of apartment sector transactions that totaled less than $2 million increased nearly 10 percent on a 12-month trailing basis.
• According to Reis,Inc.,the national vacancy rate for the apartment sector dropped sharply to 6.6 percent in fourth quarter 2010. In addition,occupied stock increased by nearly 58,000 units for the quarter,with absorption for the year 2010 totaling over 227,000 units. Asking and effective rents continued to increase at approximately 0.5 percent.

Produced by Real Estate Research Corporation (RERC) for RE/MAX Commercial. Copyright© February 2011,Real Estate Research Corporation.

Kansas and Missouri lagging behind in new Economy

According to an article in the Kansas City Business Journal Kansas City is lagging behind in the transition to a new global economy.  This news is dissapointing as it adds nothing to the Kansas City outlook to the future.  We have been folowing the new NBAF facility coming to Manhattan Kansas for some time.  If this area does not keep up with the national scene how are we to be expected to keep the NBAF.  Much news regarding the NBAF recently has not been positive.  While we know Manhattan is a couple of hours west of Kansas City the ripple effect of jobs and sevices will surely be felt if we don’t retain the NBAF to the miswest.  Some controversy follows the NBAF,but what controvery does not follow any project that might be just a bit on the political side.  Lets make sure we decide to do the right thing,not whats best for politics.

Your thoughts and comments are welcomed…

Vineyard Real Estate Makes Twitter-Wine for Literacy Charity!

YouTube Preview ImageAccording to a Kansas City Star article;“Every one likes wine with character.” Especially when the $50. variety,both red and white,will sell for $20. with five dollars of each bottle sold going to further literacy through the Room to Read program.

Room to Read’s mission is to partner with local communities throughout the developing world to provide quality educational opportunities by establishing libraries,creating local language children’s literature,constructing schools,and providing education to girls.

All based in San Francisco,Twitter,Room to Read and Crushpad a facility that allows enthusiasts to create their own barrels of wine without owning a vineyard. Crushpad provides grapes,storage,bottling and their expertise.

What started as team building activity at Twitter may someday become “the largest social wine making project in history” according to Crushpad founder Michael Brill. A Pinot Noir and Chardonnay will be released in the summer of 2010. You may purchase the wines now by following this link and follow the progress of the wine making by following the Twitter project here.

Kansas Citians may get involved by purchasing the wines;there will be ‘Tweetups’ throughout the country and wine tastings will be announced.  Current Twitter members may follow progress @fledgling.

Step Out of Line in Kansas and You'll Save?

Johnson County Kansas DMV Kansas CityYou read it right,you may now step out of line at the Johnson County DMV’s (Department of Motor Vehicles) by reserving your place in line on the Internet. The Johnson County system,according to Qless, is the only motor vehicle office in country with an online reservation system. The only system close according to the KC Star article is one in New Hampshire but it does not text messages to users.

Here is how it works:Go to the DMV site – look for GET in LINE at DMW then click on the city link you plan to visit (782 N. Ridgeview Road in Olathe or Mission at 6000 Lamar),click on YES to agree to the terms of use,choose your language and you will be told how long the estimated wait is then enter your cell number,click Next and your place in line is secure. You may then click continue and you will be sent to a printable confirmation page.I tested the system and my wait time was initially 9 minutes at 7:30 when the Mission office opened this morning. I received my first text message almost immediately after entering my cell number then another three minutes later,then another three minutes later which suggested I should think about returning to the DMV office. The next text said,“Sorry,we still haven’t heard back from you,so we had to give your spot to someone else. You have nine hours to rejoin the front of the line – reply with “J”.The system is available during business hours which are 7:30 to 4:30 Monday through Friday excluding holidays. According to the Star article,officials from the DMV say the system will ease the pain of waits up to 2 hours when renewals are due at the end of each month.

Kudos to Johnson County!!

Connecting to Kansas City's 'Net'Generation.

In their book,Connecting to the Net.Generation,Reynol Junco and Jeanna Mastrodicasa found in a survey of 7,705 college students in the US:
97% own a computer
94% own a cell phone
76% use Instant Messaging and social networking sites.
15% of IM users are logged on 24 hours a day/7 days a week
34% use websites as their primary source of news
28% author a blog and 44% read blogs
97% have downloaded music and other media using peer-to-peer file sharing
49% regularly download music and other media using peer-to-peer file sharing
75% of college students have a Facebook account
60% own some type of portable music and/or video device such as an iPod.

The complete title of the book is Connecting to the Net.Generation:What Higher Education Professionals Need to Know About Today’s Students and was written in 2007.  All the percentages are undoubtedly higher today.

Still think Facebook and Twitter and all those other ‘darn social whatever you call them things’ are just a waste of time?  The X and Y generations (born 1965 –1985) combined make up a demographic (over 100 million) larger than the baby boomer generation (born 1946 –1964 –approx 75 million) . 

Lights out for Kansas City Deer in Shawnee Mission Park Soon

There is just something majestic about deer. Perhaps it’s memories of our youth and dreams of Donner and Bliztzen carrying their ever so important cargo. BTW what is the difference between a reindeer and a regular deer? Put away your thoughts of Comet and Rudolf for a moment if you read the rest of this post.

Beginning as early as this Friday and continuing until November 30th the killing of deer in Shawnee Mission park will commence. I had heard that the shooters/killers were to use bow and arrow but according to a Kansas City Star article,the shooters will use ‘sound’suppressed rifles. Does that mean Cupid and Vixen will not hear when Dancer and Prancer are shot?  

I don’t know about you but I really enjoyed setting out for the park a little before dusk and enjoying the docile creatures getting ready to bed down for the night. Back to reality…apparently …all shots will be taken at short range and the deer will be baited to a secluded area of the park where all shots fired will be directed toward the interior of the park.

According to the Star article,the park district wants the deer population (try not to think to think Cupid and Dasher here) to be reduced to 50 deer per square mile. Wildlife experts estimate there are currently about 200 deer per square mile in the park. The park is 3.5 square miles. Yikes do the math,that is 525 deer,right? 525 times say an average of 50 pounds per Donner,I mean reindeer,I mean deer is 26,250 pounds or over 13 tons of meat.  

What is done with all the meat? Can’t we at least feed the meat to the needy or have a huge barbeque or a free venison give away? I’ve had venison before and I do not remember it as remarkable but it is supposed to be lean (or is that Bison) and I think it tastes like chicken (or is that rattlesnake).

Owners of nearby real estate received letters from the park district this week and were assured that the work by the reindeer killers/shooters would be done safely. I am not a dog owner but if you live nearby you’d be well advised to keep your dogs inside beginning this Friday and thru November 30th.

 

 

 

 

 

 

 

Kansas City's Economic Heart May be Moving to Johnson County,Kansas

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According to the 2008 census many are moving to the suburbs and away from Kansas City’s downtown areas.  The population of Kansas City,MO.  gained approximately 2% since 2000 whereas Spring Hill,KS.  was up 92%,  Gardner,KS. was up 86%,Olathe,KS. was up 29%,Desoto,KS. was up 19%,Lenexa,KS. was up 16% and Overland Park,KS. was up 15%. 

What does all of this mean?   My guess is the prospect of a light rail system in the near term is comatose if not dead.  As much as the Sprint Center and the Power and Light district have created a reason to go downtown,apparently it is not enough to motivate people to m0ve there. 

According to a Kansas City Star article ”…employment in Johnson County exploded 70.7% from 1990 to 2008 compared to Jackson Counties’scant growth of 2.3% job growth.   In the Star article Doug Davidson,president of CERI, said  “Johnson County is a desirable place to live and raise a family.”   “It has great school systems. Its adult population is one of the most highly educated in the nation.  Employers that want highly educated workers are attracted to Johnson County.”

Why Not Profit to Help Kansas City Fight Blight?

See All Kansas City Properties

The only thing worse than an abandoned,overgrown and vacant property with foot tall grass and old newspapers littering its driveway is two abandoned,overgrown and vacant properties or three or more. The Kansas City metro area recently topped Forbes magazine’s list of America’s Abandoned Cities.

Take heart fellow Kansas Citians –according to Forbes,San Francisco is the second most most abandoned city and Tucson,Arizona is number three. If you have ever had an unkempt house in your neighborhood,you know you would do almost anything to improve its state. Abandoned and foreclosed real estate attracts vandalism,vermin and worse – they lower the value of every nearby property.

Although I am not sure how the program would work within Missouri’s statutory right of redemption – according to the Kansas City Star editorial - the proposed Kansas City ordinance would allow the city to appoint a receiver for an abandoned property. The receiver could do what they want with the property. They could tear it down,repair it or sell it if the owner refused to act.

The rub is apparently some neighborhood advocates want only non-profit CDC’s (Community Development Corporations) to be eligible for receiverships. Seems to me it only makes sense to encourage the use of private capital to fight the blight in Kansas City. Any group qualified,whether non-profit or for profit should be allowed to aggressively pursue receiverships and the sooner the better. Have an opinion on this subject?

Whether you’re thinking about buying or selling or seeking information,rely on RE/MAX Best Associates 800-391-BEST(2378) to provide accurate up to date information about the marketplace email to: info@kansascityehomes.com  or visit http://www.kansascityehomes.com