Commercial Spotlight: Great Plains Region

This region has a population of about 20 million people and is responsible for much of the nation’s food supply. Iowa, Nebraska and Kansas each ranked among the top five states in 2020 for the value of their farm products while Missouri and South Dakota ranked 12th and 13th, respectively, according to the U.S. Department of Agriculture.

Population growth across these seven states was generally slow from 2010 to 2020, according to census figures, although the Dakotas were the exceptions. North Dakota’s population jumped by 15.8% during the decade and South Dakota’s rose by 8.9%, exceeding the U.S. growth rate of 7.4%. During the 12 months ending in July 2021, population growth was further muted across the region. Only South Dakota had significant growth of more than 0.5% while Kansas and North Dakota experienced population declines, the census bureau reported.

From an economic perspective, the Great Plains Region also is trailing other portions of the nation. U.S. gross domestic product (GDP) grew at an annual rate of 2.3% in the third quarter of last year. Missouri was tops among Great Plains states with 1.6% growth during this time. Kansas and South Dakota saw their economic outputs contract slightly while North Dakota tied for the nation’s sharpest GDP decline at 3.3%.

While this region includes some well-known secondary and tertiary markets, it remains a relatively small portion of the nation’s economy. As of 2020, Missouri was the only one of these seven states that ranked in the top half of the nation for GDP size, according to the U.S. Bureau of Economic Analysis. The Great Plains states combined to produce about $1.1 trillion in goods and services. In comparison, California, Texas and New York each eclipsed $1.7 trillion on their own.

There are many major corporations that have planted stakes in this region. Last year’s Fortune 500 lists 21 companies with headquarters in the Great Plains. They include Principal Financial and Casey’s General Stores in Iowa; Kansas-based agribusiness Seaboard; O’Reilly Automotive and health insurer Centene in Missouri; the Warren Buffett-owned Berkshire Hathaway in Nebraska; and energy giants NGL and Oneok in Oklahoma.

Five Great Plains cities (St. Louis; Oklahoma City; Kansas City, Missouri; Omaha, Nebraska; and Des Moines, Iowa) were mentioned among the 80 U.S. markets to watch in PwC’s 2022 Emerging Trends in Real Estate report. Kansas City rated above average in terms of investor demand and development opportunities. Omaha and Des Moines were labeled as “boutique” markets with less-than-favorable conditions for economic growth due to their relatively older populations. ●

Like much of the country, the market for industrial real estate in Kansas City has stayed remarkably stable even under the pressures of the COVID-19 pandemic. Cushman & Wakefield reported that from first-quarter 2020 to third-quarter 2021, average asking rents in the metro area rose by 8.8% to reach $4.59 per square foot. The vacancy rate rose by 20 basis points during the first nine months of last year to hit 5.1%, but this figure was only one percentage point higher than the national average.

In a 2021 report, CBRE noted that some 43 million square feet of new industrial space had been delivered across the Kansas City metro area since 2012. The company called the Logistics Park Kansas City (LPKC) facility the “most successful new industrial park in the nation.” With a focus on tenants in the distribution, warehousing and manufacturing sectors, LPKC has a capacity of 17 million square feet spread across 3,000 acres and is served by the Burlington Northern Santa Fe railway. The facility has reportedly created 12,500 jobs since 2012.

Manufacturing is the largest industry by dollar volume in Iowa, Kansas and Nebraska, and it is the second-largest industry in Missouri. Across these four states, manufacturing companies produced about $114 billion in goods in 2019.

In Iowa and Kansas, this sector supplied a respective 14.9% and 11.5% of all jobs in 2019. Iowa produced roughly $8 billion in food, beverage and tobacco products that year, led by such companies as Tyson Fresh Meats, JBS Live Pork and Seaboard Triumph Foods. At $7.6 billion in value, aerospace and transportation equipment is the No. 1 manufacturing subsector in Kansas. Much of this activity takes place in Wichita, where Spirit AeroSystems and Textron Aviation combine to employ 15,000 workers.

Other key companies that impact the region’s commercial real estate market and broader economy include Smithfield Foods and 3M Co. in South Dakota, Doosan Bobcat in North Dakota, and Goodyear Tire and Rubber Co. in Oklahoma.

“People have been moving to Sioux Falls for a variety of reasons. We’re kind of at the intersection of two interstate (highways). There is no state income tax in the state of South Dakota. And I believe we’re No. 1 or No. 2 in the United States in terms of banking assets. We have a very large medical hub, a finance hub, and then there’s just a tremendous amount of vibrant midsize and small businesses in the region. … We are breaking records in terms of new construction. We topped over a billion dollars of new construction, commercial and residential, last year in Sioux Falls.”

Principal, investment and commercial sales

Bender Commercial Real Estate Services

Founded in 1854 by Utah-bound Mormons, modern-day Omaha has blossomed into a city of 486,000 people. An economic index created by Colliers International showed that Nebraska’s largest city was performing historically well in Q2 2021 for the value of existing-home sales, average wages and sales tax revenues. Colliers noted that the value of new commercial real estate permits topped $1 billion during the quarter, fueled by the addition of two Facebook data centers and a food-processing plant.

A local venture capitalist called 2021 “the year of validation” for St. Louis entrepreneurship. Two St. Louis startups — online education company Nerdy and food-system innovator Benson Hill — went public with valuations of more than $1 billion. Local startups reportedly raised $375 million in venture capital during the first three quarters of last year. This past May, civic leaders released the STL 2030 Jobs Plan, which aims to grow employment equality and prosperity across a variety of underserved demographics.

Straddling the Arkansas River in northeastern Oklahoma, Tulsa’s metro area encompasses seven counties with a total population of about 1 million. A Q3 2021 report from the National Association of Realtors determined that Tulsa’s office and industrial sectors were performing better than the U.S. as a whole. About $86 million in office transactions were closed in the past third quarter (compared to $13 million in Q3 2020) with an average capitalization rate of 7%.