Market reportKansas city Metro area

www.colliers.com/markets/kansas_city

MarKet overview

the most significant news occurring in the office market in the third quarter was the announcement that aMC entertainment, Inc. would be leaving their downtown location in favor of a new build-to-suit building at park place, in Leawood, kansas. aMC, the second largest movie theater chain in North america, presently occupies approximately 98,000 square feet at 10 Main Center, which equates to approximately one-third of the building. their new headquarters will be a 127,000-square-foot, four-story building, with them occupying 115,000 square feet. Since this property is yet to be built, the move will not take place until the second quarter of 2013.

aMC wasn’t the only company to reveal their intentions to relocate to Leawood this quarter. ascend Learning will be consolidating their local offices into approximately 83,000 square feet at two Hallbrook place in the second quarter of 2012. two Hallbrook place, located in Leawood, kansas, is a 110,000-square-foot, Class a building that was completed in 2009, early on in the recession. after a two-year stretch of inactivity, this is the second tenant that they’ve been able to land.

In addition to the noteworthy lease transactions that took place in the South Johnson County submarket this quarter, the market leading sale was located in this submarket as well. the U.S. Bank building, located at 12800 Foster in overland park, kansas, sold to Whiterock reIt for $38,000,000. the $205 per square foot price tag was the result of a credit tenant with a long-term lease in place. the capitalization rate was reported as 7.5%.

the second Class a office sale that occurred was also located in the South Johnson County submarket, but the circumstances were much different than the first. the Midwest trust Company, the buyer of 5901 College, overland park, kansas is also the largest tenant. they purchased the building off market for a reported $14,500,000, or $128.94 per square foot.

Kansas city Msa eMployMentseasonally adjusted - nonfarm employment in thousands

MarKet indicators

suMMary statistics

Kansas city office vacancy

Q3 2011 | office

Q3 2011 Q4 2011 (p)

vacancy

net absorption

construction

rental rate

*relative to prior period

Q3 2010 Q3 2011

Vacancy rate: 13.7% 13.3%

absorption YtD: (387,967 SF) 361,642 SF

Deliveries YtD: 0 SF 95,726 SF

Under Construction: 0 SF 263,510 SF

asking rents/SF: $18.32 $17.42

13.0%

13.2%

13.4%

13.6%

13.8%

14.0%

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Sources: CoStar and Colliers Research

Seasonally Adjusted - Nonfarm EmploymentIn Thousands

900

920

940

960

980

1,000

1,020

1,040

Q1 200

7

Q2 200

7

Q3 200

7

Q4 200

7

Q1 200

8

Q2 200

8

Q3 200

8

Q4 200

8

Q1 200

9

Q2 200

9

Q3 200

9

Q4 200

9

Q1 201

0

Q2 201

0

Q3 201

0

Q4 201

0

Q1 201

1

Q2 201

1

Sources: CoStar and Colliers research

Source: Bureau of Labor Statistics

Num

ber

of e

mpl

oyee

s

absorptionWith 144,000 square feet of positive absorption this quarter, it marks the third time out of the most recent four quarters where positive absorption occurred. that pushed the year-to-date total to more than 360,000 square feet.

vacancythe positive absorption from the third quarter resulted in a 20 basis point reduction in the vacancy rate, bringing it down to 13.3%. the current vacancy rate is as low as it has been since the first quarter of 2010, but is still about 140 basis points higher than what the vacancy rate was when the economy crashed. Based upon the existing market size, approximately 1,270,000 square feet would have to be absorbed to once again achieve the 11.9% vacancy rate that was in place in the third quarter of 2008. If the market could continue to absorb office space at the rate that occurred in the third quarter, the vacancy rate would approach 11.9% in the fourth quarter of 2013.

deliveries & constructionthere were not any deliveries of new product to the market in the third quarter. Building F in park place is nearing completion and is expected to be completed in the fourth quarter. Construction of the aMC headquarters building is anticipated to commence soon, so that will add 127,000 square feet to the construction figures next quarter.

the West edge property, located on the Country Club plaza, was removed from the construction figures as that property is currently being disassembled. once construction of the future home of polsinelli Shughart pC commences, it will be added back into the statistics.

rental ratesthe overall average asking rent fell by $0.05 psf to $17.42 over the past quarter. Since there is nearly twice as much vacant Class B office space than Class a, the overall rate tends to track the movement of the Class B space, which fell by $0.07 psf. the Class a properties fared better than the other classes this quarter, pushing average asking rent up by $.08 psf, an increase of 40 basis points.

With 38% of the Class a vacant space located in the Central Business District, the Downtown submarket had the largest impact on the Class a asking rent increase. the average asking rent moved from $18.44 psf in the second quarter to $18.58 psf in the third quarter, a 76 basis point increase.

recent transactions & Major developMents

sales activity

property subMarKet sale price size sf price / sf buyer seller

12800 Foster South Johnson County $38,000,000 185,000 $205.41 Whiterock reIt the opus Group

5901 College South Johnson County $14,500,000 112,452 $128.94 the Midwest trust Company Mept/New tower trust Company

6201 Johnson North Johnson County $1,550,000 45,000 $34.44 Waddell & reed, Inc Great american Financial resources, Inc

500 W 5th Downtown $1,000,000 29,200 $34.25 ttB real estate, LLC Free State real estate, LLC

rental rates

absorption

deliveries

$19.86

$16.93

$12.80

$0

$5

$10

$15

$20

$25

Class A Class B Class C

$ Pe

r Sq

uare

Foo

t

Sources: CoStar and Colliers Research

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Squa

re F

eet

Sources: CoStar and Colliers Research

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Squa

re F

eet

Sources: CoStar and Colliers Research

SqUa

re F

eet

$ pe

r Sq

Uare

Foo

tSq

Uare

Fee

t

Sources: CoStar and Colliers research

Sources: CoStar and Colliers research

Sources: CoStar and Colliers research

leasing activity

property subMarKet leased sf building class coMpany

park place South Johnson County 115,000 a aMC entertainment

two Hallbrook South Johnson County 83,037 a ascend Learning

7101 tower South Johnson County 44,877 a General electric Company

1010 Walnut Downtown 42,000 B US Department of education

1201 Walnut Downtown 39,877 a aXIS reinsurance Company

903 e 104th South kansas City 34,446 a North american Savings Bank, FSB

p. 2 | colliers international

Market report | Q3 2011 | Office | Kansas city MetrO

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011

Squa

re F

eet

Sources: CoStar and Colliers Research

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011

Squa

re F

eet

Sources: CoStar and Colliers Research

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011

Squa

re F

eet

Sources: CoStar and Colliers Research

office overview

existing prOperties vacancy absOrptiOn cOnstructiOn rents

total Vacancy Vacancy Net absorp Deliveries Under Const. ave rent

Class Bldgs SF SF % Curr SF YtD SF Curr SF YtD SF SF rate $

urbandowntowna 24 8,025,940 1,407,243 17.5% 38,056 188,819 0 0 0 $18.58

B 164 15,053,553 2,022,878 13.4% 12,704 -132,216 0 0 0 $15.85

C 105 4,365,609 377,564 8.6% -7,461 67,758 0 0 0 $12.68

total 293 27,445,102 3,807,685 13.9% 43,299 124,361 0 0 0 $16.54plaza / Midtowna 12 2,362,733 355,017 15.0% 17,065 49,624 0 0 0 $23.34

B 72 3,519,034 308,399 8.8% -6,249 -40,470 0 0 0 $17.90

C 58 1,735,171 150,620 8.7% -9,020 -48,363 0 0 0 $12.55

total 142 7,616,938 814,036 10.7% 1,796 -39,209 0 0 0 $19.28urban totala 36 10,388,673 1,762,260 17.0% 55,121 238,443 0 0 0 $19.54

B 236 18,572,587 2,331,277 12.6% 6,455 -172,686 0 0 0 $16.12

C 163 6,100,780 528,184 8.7% -16,481 19,395 0 0 0 $12.64

total 435 35,062,040 4,621,721 13.2% 45,095 85,152 0 0 0 $17.03suburbaneast Kansas citya 2 207,516 96,504 46.5% 6,845 -61,474 0 0 0 $21.00

B 122 4,998,552 540,998 10.8% 24,444 -28,108 0 0 0 $15.90

C 107 2,303,787 212,554 9.2% 5,822 42,756 0 0 0 $10.85

total 231 7,509,855 850,056 11.3% 37,111 -46,826 0 0 0 $15.22Kansas city northa 6 947,284 69,692 7.4% -4,806 1,308 0 0 0 $15.68

B 112 4,689,779 1,007,957 21.5% 502 17,253 0 0 12,500 $15.88

C 61 1,391,687 148,218 10.7% -2,796 -15,178 0 0 0 $15.32

total 179 7,028,750 1,225,867 17.4% -7,100 3,383 0 0 12,500 $15.80north johnson countya 12 1,551,767 375,122 24.2% 2,652 -184,302 0 0 0 $18.05

B 156 6,611,786 660,281 10.0% 26,709 18,900 0 0 0 $16.39

C 71 1,350,556 234,535 17.4% 15,722 -10,087 0 0 0 $13.16

total 239 9,514,109 1,269,938 13.3% 45,083 -175,489 0 0 0 $16.28south johnson countya 64 9,999,687 1,340,532 13.4% -84,274 282,025 0 65,726 59,000 $21.20

B 290 12,796,920 1,948,986 15.2% -23,398 56,361 0 30,000 0 $18.90

C 37 675,086 52,162 7.7% 521 23,246 0 0 0 $16.38

total 391 23,471,693 3,341,680 14.2% -107,151 361,632 0 95,726 59,000 $19.78south Kansas citya 14 1,949,742 216,590 11.1% 101,918 97,578 0 0 0 $18.63

B 58 2,726,902 303,409 11.1% 8,794 5,298 0 0 0 $17.23

C 23 536,736 44,162 8.2% -1,807 25,813 0 0 0 $10.48

total 95 5,213,380 564,161 10.8% 108,905 128,689 0 0 0 $17.24wyandotte countya 2 275,454 0 0.0% 0 0 0 0 0

B 32 1,552,765 112,379 7.2% 5,824 -10,225 0 0 0 $15.25

C 38 1,027,899 91,934 8.9% 16,250 15,326 0 0 0 $12.35

total 72 2,856,118 204,313 7.2% 22,074 5,101 0 0 0 $13.95suburban totala 100 14,931,450 2,098,440 14.1% 22,335 135,135 0 65,726 59,000 $20.18

B 770 33,376,704 4,574,010 13.7% 42,875 59,479 0 30,000 12,500 $17.32

C 337 7,285,751 783,565 10.8% 33,712 81,876 0 0 0 $12.91

total 1,207 55,593,905 7,456,015 13.4% 98,922 276,490 0 95,726 71,500 $17.66all Kansas city totala 136 25,320,123 3,860,700 15.2% 77,456 373,578 0 65,726 59,000 $19.89

B 1,006 51,949,291 6,905,287 13.3% 49,330 -113,207 0 30,000 12,500 $16.91

C 500 13,386,531 1,311,749 9.8% 17,231 101,271 0 0 0 $12.80

total 1,642 90,655,945 12,077,736 13.3% 144,017 361,642 0 95,726 71,500 $17.42

Note: Inventory includes office properties 10,000 SF and up. It excludes office properties that were built with the intent to house only medical users and those properties where the government is both 100% owner and occupier.

colliers international | p. 3

definitionsDeliveries:Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property.

existing Inventory:the square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, currently under construction or under renovation.

Net absorption:the net change in occupied space over a given period of time. Unless otherwise noted, Net absorption includes direct and sublease space.

Weighted average asking rental rates:Weighted by the total square feet available for direct lease. Data is based on Full Service Gross

rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. reported on an annual pSF basis.

Vacant Space:Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space.

Inventory:Includes all existing multi- or single-tenant leased and owner-occupied office properties greater than or equal to 20,000 SF (net rentable area). Does not include medical or government buildings.

Note:SF = Square Feet

pSF = per Square Foot

CBD = Central Business District

p = projected

colliers internationalKansas city office

4520 Main Street, Suite 1000kansas City, Mo 64111tel +1 816 531 5303faX +1 816 531 5409www.colliers.com/markets/kansas_city

researcher:

Brent Hansenresearch Services Manager4520 Main Street, Suite 1000kansas City, Mo 64111tel +1 816 556 1102faX +1 816 531 5409

512 offices in 61 countries on 6 continentsUnited States: 125Canada: 38asia: 32aNZ: 182LataM: 18eMea: 117

• $1,531.1 million in annual revenue

• 978.6 million square feet under management

• Over 15,000 professionals and staff

Colliers International is continuously refining its database. the data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database.

this report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from.

this report and other research materials may be found on our website at www.colliers.com.

www.colliers.com/markets/kansas_city

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Market report | Q3 2011 | Office | Kansas city MetrO

WYANDOTTE

SOUTHJOHNSONCOUNTY

DOWN-TOWN

PLAZA/MIDTOWN

SOUTHKANSAS

CITY

EASTKANSAS

CITY

NORTHLAND

COUNTY

NORTHJOHNSON COUNTY

Sherman Army Air�eld Clay

CountyRegional Air�eld

RichardsGebaurAirport

Kansas CityInternational

Airport

DowntownAirport

KANSAS CITY, KANSAS

SHAWNEE

OVERLANDPARK

STANLEYGRANDVIEW

BELTON

PECULIAR

RAYMORE

LEE’S SUMMIT

RAYTOWN

BLUE SPRINGS

INDEPENDENCE

LIBERTY

CLAYCOMO

GLADSTONE

KANSAS CITY

PLATTE CITY

KEARNEY

EXCELSIORSPRINGS

NORTHKANSAS CITY

KANSAS CITY

GREENWOOD

LENEXA

OLATHE

Kansas City MetroO�ce Submarkets

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