Kansas City Faces $262 Million Loss as Office Vacancy Rates Soar to 45-Year High

Kansas City Joins the $1 Billion Office Space Club

Hey there, Kansas City! Have you noticed more “For Lease” signs popping up around town? Well, you’re not alone. As it turns out, several cities across the U.S. are grappling with a growing problem: a staggering amount of vacant office space. With office vacancy rates hitting their highest levels in 45 years, many are wondering what this means for our local commercial real estate scene.

Where Do We Stand?

According to a recent report from Switch On Business, a firm that keeps an eye on economic trends, more than 11.6 million square feet of office space in Kansas City is currently sitting empty. That’s a whopping loss in rent value exceeding $262 million. And guess what? Kansas City is right in the middle of the pack when it comes to lost rent values compared with other major metro areas.

So, what does it look like nationally? Well, 11 major cities are facing over a billion dollars worth of vacant office space. You might think that big cities like New York or San Francisco would dominate that list, and you’d be right! New York City alone has around 105.8 million square feet of empty office space leading to an incredible estimated loss of $7.61 billion in rent per year. Ouch!

A Changing Workplace Landscape

Now, you may be asking, why is this happening? Well, following the pandemic, we saw a huge shift in how companies operate. Many Fortune 500 companies have started calling employees back full-time, but a good chunk—about 28.6 million workers or 20% of the workforce—are sticking to hybrid or remote schedules. This transformation in how and where we work is contributing greatly to these rising vacancy rates.

Some experts liken this situation to peaks in office vacancies back in the 1970s and 1980s. Overbuilding is also suspected to play a role. Stijn Van Nieuwerburgh, a professor from Columbia Business School, suggests that NYC could seriously transform if they repurpose just 30% to 40% of its office stock into living spaces. “New York City is a wonderful place where young people want to live, regardless of where they work,” he stated, hinting that the city can take action to reshape its future.

Bracing for Impact on the West Coast

The situation isn’t much brighter for the West Coast either. Big names like Los Angeles and San Francisco are hosting some of the highest rent losses due to lack of occupancy. The numbers are staggering: $2.1 billion for Los Angeles, $2.02 billion for San Francisco, and $2 billion for San Jose. Chicago isn’t too far behind with a loss of $2.05 billion from 58.1 million square feet of vacant space.

A Texas Twist

Interesting enough, when it comes to sheer volume, Texas metros also see significant vacancy rates. Dallas-Fort Worth has a shocking 52.8 million square feet of empty office space valued at $1.62 billion, and Houston hovers close behind with 50 million square feet worth about $1.56 billion. Developers in these regions are still investing in flashy new buildings, hoping that shiny new amenities will draw people back into office life.

The Future of Office Spaces

Thomas LaSalvia from Business Journals shared insights on what the future holds for offices. He suggests the concept of “location, location, location” is becoming even more vital. It seems like employees want to work in lively neighborhoods filled with amenities rather than isolated office buildings. This shift might lead to some older buildings falling into disrepair as companies seek newer options in prime locations.

Final Thoughts

Kansas City and many other metros are undeniably in uncharted waters right now. While the challenges of rising vacancy rates and overlooked office spaces loom large, there’s also an opportunity for innovation and transformation. How will these spaces change in coming years? Only time will tell, but one thing’s for sure—the future of work and workers’ preferences is evolving.