Commercial Real Estate Spotlight: Kansas City, America’s Heartland

by Reco Real Estate Advisors

While the nation’s eyes may be on Taylor Swift and Travis Kelce, Kansas City, Missouri, is quietly making headlines of its own — not for celebrity sightings, but for commercial real estate performance that rivals the coasts. In 2025, the Heart of America is emerging as a compelling market for investors, offering real metrics, strong fundamentals, and long-term growth potential.

Photo by Xain Sheikh

Market Momentum That Speaks Volumes

Unlike coastal cities grappling with oversupply and pricing corrections, Kansas City is posting impressive results across industrial, office, multifamily, and retail sectors:

Industrial: 7.5 million SF of positive net absorption in Q1 2025, the second-highest quarterly total in market history.
Office: 432,000 SF of positive absorption in H1 2025, defying national trends.
Multifamily: 96.4% occupancy with 4% year-over-year rent growth — second-highest in the country.
Retail: 95.9% occupancy with 2.3% rent growth, outperforming regional and national benchmarks.

With a trailing 12-month transaction volume of $2.7 billion and record corporate relocations, Kansas City is proving that it’s more than a catchy slogan; it’s a legitimate investment thesis.

Corporate Migration: Who’s Betting on KC

Kansas City isn’t just moving square footage — it’s attracting global corporate investment.

Pfizer committed $175 million for a 425,000 SF facility, bringing 2,000 jobs.
Panasonic built a $4 billion EV battery plant, generating 8,000 jobs.
Google and Meta are investing $1.8 billion in new data centers.
Fiserv Inc. is establishing a regional headquarters at the Aspiria campus in Overland Park, KS, occupying 427,000 SF with plans for 2,000 employees by 2030.

“These aren’t just local plays,” says Logan Freeman, a top Midwest CRE broker. “These are billion-dollar global bets on Kansas City’s future.”

Sector Performance

Industrial: The Demand Engine

Industrial remains Kansas City’s crown jewel, driven by genuine user demand rather than speculative builds. Johnson County leads absorption with 4 million SF, and 85.8% of delivered space in 2025 is built-to-suit.

Vacancy: 6.1%
Asking rents: $5.72 PSF
YTD net absorption: 7.7M SF
Under construction: 7.4M SF

Office: Swimming Against the Current

While office markets nationwide face challenges, Kansas City posted three consecutive quarters of positive absorption, giving investors a rare opportunity.

Vacancy: 18.3% (down from 19% YoY)
Asking lease rates: $23.25 PSF
Class A rates: $25.89 PSF
Q2 net absorption: 117,375 SF

Freeman notes: “Replacement costs may be high elsewhere, but in KC, you can acquire assets at $60–$80 PSF and repurpose them over the next decade.”

Multifamily: Steady Growth

Kansas City’s multifamily market demonstrates healthy fundamentals without speculative excess. Central Kansas City leads with 938 units of net absorption.

Vacancy: 3.6%
Effective rents: $1.50 PSF
YoY rent growth: 5.0%
YTD net absorption: 3,656 units vs. 2,200 delivered

Retail: Resilient and Thriving

Retail continues to outperform regional and national benchmarks, with robust leasing activity and strong occupancy. Notable projects include:

Olathe Gateway Project: $338M mixed-use development with 67,000 SF of retail/restaurant space and a Michael’s Wonder World theme park.
Merriam Grand Station Marketplace: $102M development anchored by Trader Joe’s, bringing the first grocery store to Merriam since 2018.
Occupancy: 95.9%
Average asking rent: $14.91 PSF (+2.3% YoY)
Investment volume: $520M in the past 12 monthsLeasing exceeded deliveries by 6-to-1

Photo by Essow K

Infrastructure and Downtown Growth

Kansas City is actively completing major infrastructure investments, creating long-term value for investors:

$6.3B across eight major developments under construction
$351M streetcar extension (completion 2025)
$334M in downtown public space enhancements
$527M Samara Road improvements in West Bottoms

Downtown population has grown 88% since 2010, supported by over $3B in completed development in the past five years.

Cap Rate Environment

For investors, Kansas City offers realistic cap rates with room for appreciation:

Multifamily: 6.0%
Retail: 7.1%
Industrial: 7.6%
Office: 8.4%

Compared to coastal cities with compressed pricing, KC provides value and potential upside.

Economic Fundamentals

Kansas City’s economic resilience comes from diversification and strategic geography:

Population growth: 25,000 annually
Unemployment: 5.3% vs. 6% nationally
Historical stability: 3.8% average unemployment (2016–2024)
Higher education: 87,000+ students in four-year colleges
Logistics advantage: 80% of continental U.S. reachable within a two-day truck drive

Development Pipeline

Major projects signal measured growth:

Multifamily:

Arrive KC: 360 units (Central KC, 2026)
Oberon: 281 units (Central KC, 2026)
Alto Apartments: 280 units (Shawnee/Lenexa/Mission, 2025)

Downtown Mixed-Use:

The Helm: 232 apartments (completed 2025)
Wonderland Apartments: 215 units (2025)
Grand Place: 250,000+ SF (2026)

Retail Transactions:

Sprouts Farmers Market (Lenexa): 86,280 SF sold for $11.5M
Liberty Commons Buildings: $232–$411/SF
Chipotle (Independence): 2,330 SF sold for $3.125M

Investor Takeaways

Strengths:

Diverse economic base with recession resistance
Infrastructure projects nearing completion
Corporate commitments with long-term bets
Attractive cap rates with appreciation potential
Geographic advantages for logistics

Watch Points:

Office market stabilization
Elevated but stabilizing development costs
Occasional construction delays
Retail tariff-related cost pressures

Freeman sums it up: “I don’t think Kansas City is the next big thing. I think we’re the right thing happening right now. While other markets hope for a comeback, Kansas City never left — we’re delivering today what others promise tomorrow.”

All rights to the original material belong to The Best Ever CRE Post