Commercial Construction Surges to Recovery in KC

Name just about any part of the sector, and you can find a major project under way.


Practically everywhere you turn in Kansas City, construction crews are rolling onto job sites, ready to undertake a wave of new commercial projects—a welcome change from a few years ago.

“For the building market, there’s an uptrend,” said Don Greenwell, president of The Builders’ Association. “It is the most diverse, broad-based recovery since our recession started.”

As it did for a lot of industries, commercial construction in Kansas City slowed in January 2009, kicking off a 36-month decline. The drought finally broke when new multifamily and industrial projects started in early 2012, Greenwell said. It was “a bit of a recovery” that didn’t really catch fire long-term because construction related to manufacturing leveled off.

Kansas Firms Optimistic About Construction Hiring

About 95 percent of Kansas construction firms plan to increase their employee headcount this year, more than any other state, the Associated General Contractors of America reported. Among Missouri firms, 72 percent plan to add workers.

Locating good people could be tough. Nationally, 70 percent of firms say they’ve had difficulty finding either salaried or craft professionals.

Today, there are few corners of Kansas City’s commercial construction industry that aren’t doing well. Multifamily, driven by a growth in renters, is still strong, and it’s been joined by major projects in hospitals and medical buildings, higher education, retail, office and hospitality.

“Looking forward over the next two to three years, we have a huge upswing in lodging and hotels, especially in the downtown area,” said Justin Apprill, chief project development officer for mechanical contractor U.S. Engineering Holdings.

Kansas City also has landed on Site Selection Group’s top 20 list for warehouse construction, with more than 3.7 million square feet of warehouse and distribution space under construction.

“I would describe it as very healthy and very active, certainly compared to last year,” said Dirk Schafer, president of JE Dunn Construction’s Midwest region. “We had really nice growth in ’15, and we’re experiencing nice growth, big growth again in ’16.”

Here are just a few of the most prominent construction projects right now in the metro.

» Last month, Cerner held a topping-out ceremony for the first two buildings on its new Trails Campus in south Kansas City. The two towers, which together encompass more than 800,000 square feet, should be completely finished by the end of this year. Two more buildings have broken ground at the Trails property.

» The University of Kansas Hospital is building its new 300,000-square-foot Cambridge North patient tower at 39th and Cambridge in Kansas City, Kan.

» Work has started on the $105 million Two Light luxury apartment tower in downtown Kansas City, Mo. Its sister project, One Light, opened late last year.

» Dairy Farmers of America is building a 100,000-square-foot global headquarters in Village West in Kansas City, Kan., with a completion date of later this year.

While these are big projects, they also represent opportunities for smaller businesses to share in the work as subcontractors.

“We don’t build the projects ourselves,” JE Dunn’s Schafer said. “We need our trade partners and tradespeople to make it happen.”

What’s Driving the Growth in Commercial Construction?

“It’s generally been an issue of pent-up demand,” Greenwell said. Commercial construction also has started attracting investors who are looking for better places to put their money. “There’s been a lot of cash sitting on the sidelines, and it’s been earning very low rates of return.”

Schafer echoed that, pointing to growth in hotel and hospitality construction. “That’s really private money coming into the market.”

It doesn’t hurt that Kansas City is enjoying a higher profile, thanks to the development of the Crossroads Arts District, the growth in entrepreneurship and even the Royals’ World Series win.

“It’s really starting to attract the attention of folks who in the past maybe went to markets like Seattle that are more popular with younger people,” said Greenwell.

Because of the low cost of capital and increased demand, 2015 was a “very robust” year for Turner Construction Co., vice president and general manager Mark Iammarino said. He expects business will be about the same for this year, with an uptick ahead in 2017.

“We’re waiting to see what’ll happen with STAR bonds and other tax-incentive financing in 2016 and going forward,” he said.

What Makes KC a Great Place to Build?

Generally speaking, we’re not a market with explosive growth. Development here tends to be steadier, U.S. Engineering’s Apprill said. But when the economy tanks, he noted, “we also do not see the same level of downswing.”

That may be one of the reasons why Kansas City is home to so many national construction and design firms, Apprill said. More than a few companies are either more than 100 years old (U.S. Engineering, for example, was founded in 1893) or are quickly approaching the century mark.

That depth extends down to the workforce, too. Compared to other markets, Kansas City has strong labor-management relationships.

“There’s a strong sense of community, and everybody seems to care about the work they do,” said Turner Construction’s Iammarino.

But over the next several years, construction companies are bracing for a shortage of people who do field work. That end of the business tends to be more physically demanding, so Baby Boomers typically enter retirement sooner, Greenwell said.

About 55,000 people work in Kansas City’s construction sector right now, according to the Mid-America Regional Council’s KCeconomy blog. Over the next 10 years, about 11,000 existing positions will need to be filled, and another 6,300 new jobs will be created.

“If the growth continues,” Schafer said, “there could be some capacity issues, particularly on the labor side.”