The Kansas City retail market was steady in 2018 and is projected to continue to remain so in 2019. The near absence of new completions combined with the redevelopment of some functionally obsolete retail properties served to limit new supply. The total inventory of retail square footage increased by less than 0.5%.
The lack of new supply is serving to counteract the ongoing headwinds facing brick and mortar retail. Despite some store closings, the key fundamentals did not deteriorate in 2018, and, in fact, most key metrics improved marginally.
Across all of the shopping center types— community, lifestyle, neighborhood, power, and strip centers—occupancy rates ended the year hardly fluctuated from Q4 2017 figures. In fact, vacancy did not increase by more than 0.1% in any one of these center type so where there were some changes in occupancy, they were generally improvements in market conditions. The same is true of rental rates, which increased in every property type except for power centers.
The dynamics of power center fundamentals are particularly interesting. These centers are primarily occupied by soft goods retailers who are are particularly vulnerable to growing competition from online sales. Since 2017, occupancy rates improved from 94.1% to 94.5% but average lease rates collapsed nearly 20%.