By Michael T. Mayer, Managing Principal
In today’s world, it’s easy to get caught up in all the noise and flashing lights about what drives business and what creates growth. Commercial real estate is no different, but the sector has an advantage in that there really is one key metric you can focus on to anticipate what direction the market will move: jobs. Really, that’s it: jobs.
It’s pretty basic. Commercial real estate expands when jobs are being created and struggles when not as many people are working. If you want a sense of how the commercial real estate sector is doing in any market, just track the total number of jobs and job creation. Simple logic tells you there will be a correlation. More jobs mean companies need more space for their employees to work.
With that in mind, Kansas City should be thrilled about what the last several months have brought in regarding announcements on new jobs. The big headline happened in mid-June when Warren Buffett came to town and announced that Geico would set up a new service center in Lenexa. The Oracle of Omaha said the goal was to have 100 employees working there by the end of 2018, and then they would hopefully add 50 a quarter going forward.
Since Mr. Buffett confirmed that the Geico Gecko would be setting up shop in Kansas City, there has been a steady stream of companies announcing new hiring initiatives that will benefit both the industrial and office sectors. Netsmart Technologies expects to add 400 positions in the health information technology field over the next five years, while insurance company SelectQuote plans to add about the same number over a two-year time span. Companies that have chosen Kansas City as the location for new offices include OptumRx (135 new jobs), EXL Service (250 new jobs), and TrialCard (100-150 new jobs).
It’s also not just office users that are piling up big job numbers. Online retailer Overstock.com selected Kansas City for a new distribution center that will employ 100. Another online retailer, Turn5, chose Kansas City to serve as its newest distribution center and has plans to employ at least 100 within the next three years. In Northland, CVS has opened its newest retail distribution facility (One that actually sends products to real brick-and-mortar stores!) with over 350 jobs and projected plans to create another 75 or so associated positions for local businesses.
Finally, if you really want big numbers, two local companies announced long-term plans this summer that could lead to thousands of new jobs. Engineering firm Burns & McDonnell and diversified logistics and shipping conglomerate Shamrock Trading Corp. announced plans to build new office facilities for future growth. Shamrock Trading Corp. expects to eventually add 1,000 jobs, although they offered no timeline for that growth. Burns & McDonnell said it would add 1,200 employees globally in 2018 and envisioned hiring an additional 1,000 per year for the foreseeable future. If just one-third of those positions are in the headquarters in Kansas City, that would mean over 300 jobs per year.
It’s fair to point out that perhaps not all of these projections will come to fruition. But there’s no denying that local companies are growing office, and industrial users are choosing Kansas City as a spot for expansion. One of the few constants in the world of business is that with new jobs comes demand for commercial real estate.
Michael T. Mayer is the Managing Principal of the Kansas City Cushman & Wakefield office. He brings over 30 years of experience in providing in-depth market knowledge, trends and expertise in all aspects of commercial real estate both regionally and locally.