CRE X Missouri

Paul Licausi: Still facing challenges in Kansas City, the nation

Paul Licausi is president of LS Commercial Real Estate. He's also a real estate veteran, and knows a challenging market when he sees one. In this interview, Licausi spoke with Midwest Real Estate News about the challenges still facing Kansas City and the rest of the nation.

Paul Licausi is president of LS Commercial Real Estate. He's also a real estate veteran, and knows a challenging market when he sees one. In this interview, Licausi spoke with Midwest Real Estate News about the challenges still facing Kansas City and the rest of the nation.

A mixed market: Are we seeing more activity this year? As a general statement, I’d say, “Yes.” The activity has increased. But you are seeing different size categories that are more active than others. The larger end of the spectrum, properties that are more than 200,000 square feet, is much more active than the part of the market for buildings that are under 50,000 square feet. Factors like that are what make this recovery a little bit different than other recoveries we’ve seen.

A rare market: I have never seen a market like this. We talk about it a lot. The reason why we haven’t seen it before is that we haven’t seen some variables come together. Everyone says that this market is all about consumer demand. But that is only part of the equation. The credit market disarray is playing a much larger role. The credit impact on the local and regional company, the company that will trade in that 50,000-square-feet-or-less range, has been dramatic. Either they don’t have access to credit or their credit is restricted. In some form or fashion, they can’t get a pipeline of money. Therefore, that type of lending has stagnated to a great degree, and it has been much more severe of a stagnation in the last couple of years.

The improvements we need: You sit here and hear all these smart guys on TV. Everyone is scratching their head. Why haven’t we seen more job growth? Two things are going on. The government directly, by the way, is related to these. First, there’s the credit environment. That has to improve. There has to be credit available to companies. That is what our system is built on. In most cases, there are very few companies that self-fund their operations. The second thing we need is for the regulatory environment to change. Right now, the regulatory environment is crushing businesses. That is having a huge impact on our economy. It is impacting the local and regional guys. When I talk about the regulatory environment, that includes everything from the Labor Department to OSHA and up and down the board.

We have a lot of logistics companies here in the Kansas City area. They are heavily impacted by new driver rules. These rules are changing how they have to service their client base. It is equating to a dollar cost proposition that they are not sure how to handle. The greatest positive change for our economy today would be to give us a little bit of a break on the regulatory environment, to help open the spigot of money. Allow banks to loan again.

Central location is the key: We do have some advantages in Kansas City. From an industrial standpoint, our central location is a big help. Our infrastructure of rail and highway is a big benefit. There is also a cost structure in Kansas City that is extremely competitive relative to other national markets. These things are really helping us in this tough time.

When you have a corporation that is looking at its supply chain, when it is looking at where it should place its boxes strategically, Kansas City is on the radar. We are certainly located in the right place for these companies. We can reach the major population centers in two days. From a cost structure, Kansas City is very competitive when compared to a distribution center in Phoenix or California or in somewhere in the Northeast part of the country. When it is a very competitive market, our city has some great variables that help us win the day.