Kansas City Retailers
Push Big Projects
"Ev'rythin's up to date in Kansas City. They've gone about as fur as they c'n go!"
Not everyone agrees with the Rodgers and Hammerstein tune from the musical "Oklahoma!" Retail developers, especially, think Kansas City has room for a lot more shopping centers, boxy discount stores and glitzy restaurants, even as others warn their plans could test shoppers' spending limits.
While it is only the country's 27th-largest metropolitan area, with a population of about two million, the region -- including both Kansas City, Kan., and Kansas City, Mo. -- has the country's second-highest amount of total retail space in the planning, bidding or postbidding phases, according to a third-quarter ranking of 54 large metro areas surveyed by Property & Portfolio Research Inc.
Kansas City's planned 17.6 million square feet is exceeded only by fast-growing Phoenix, which with a population of about four million has 23.4 million square feet in retail space planned. The Chicago region, home to the Magnificent Mile and about 8.8 million residents, ranks third, PPR says. Kansas City already has an above-average ratio of 48 square feet of stores per capita, compared with 38.3 square feet in Phoenix and 34.1 square feet in Chicago.
"That's Kansas City. They're not afraid to build new stuff," says Aaron Jodka, a real-estate economist with PPR, who notes that two large casino projects help push up Kansas City's planned totals and that some proposed projects won't be built. "But there's really only so much the market can handle."
Why are developers so bullish on the 15-county metropolitan area? Many note its diversified economy, with corporate headquarters including H&R Block Inc. and Hallmark Cards Inc. The region's median household income of $49,288 in the second quarter was 4.3% above the national level and its cost of living is 11% below, according to Moody's Economy.com. Some developers also say new projects are needed to replace or at least redevelop some of the region's outdated stores and malls. In addition, others say some of the development is following the rooftops, as the population pushes farther from the urban core.
At the same time, a growing downtown residential community is drawing retailers. Since late 1999, the downtown population in Kansas City, Mo., has risen to about 15,000 from 10,000 and an estimated 7,000 new residential units have been completed or are under construction. The apartment market overall is improving as vacancies are falling and below-average rents are rising slightly.
Developers add that the region is a weekend destination for visitors from such cities as Des Moines, Iowa, and Lincoln, Neb. Boosters say its popularity will grow with new amenities such as the $276 million Sprint Center, under construction for concerts, conventions and sporting events.
"Kansas City is a big city for a lot of little cities," says Blake Cordish, vice president of Baltimore-based Cordish Co. His company is developing an $850 million mixed-use center with 550,000 square feet of retail space in downtown Kansas City, Mo. He says Cordish has preleased 90% of the retail space in the so-called Power & Light District -- a nine-city-block area inspired by the local power company's building -- that is expected to include downtown's first full-service grocery in many years, a movie theater, restaurants and galleries when it opens next fall.
Other retail projects are pegged to meet regional demand in growing suburban areas such as RED Development LLC's Summit Fair lifestyle center, a pedestrian-friendly outdoor shopping area in Lee's Summit, Mo., a wealthy suburb about 20 miles from downtown Kansas City, Mo. In all, Lee's Summit has about two million square feet of retail space planned, valued at around $410 million. Like some other cities in the region, Lee's Summit is offering tax incentives to lure shops and their sales-tax revenue.
Still, the plans for new supply are worrisome to some. The retail sector already is posting below-average rents and above-average, rising vacancy rates, while vacancies nationally fell in the third quarter from a year earlier, PPR says. The area's roughly average population growth likely will mean that new retail, much of it in outlying suburban locations, will succeed only at the expense of older centers that could go dark, PPR's Mr. Jodka says.
So far, many retailers are optimistic. Springfield, Mo., outdoor retailer Bass Pro Shops plans next year to open a new location in Olathe, Kan., and a second in Independence, Mo., according to spokesman Larry Whiteley. "It's a big trade market for the outdoor enthusiast," Mr. Whiteley says. "We feel like it'll work for us, or we wouldn't be doing it."
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