Market Reports

The Kansas City industrial real estate market recorded very healthy maturation in 2019. When surveying the strength of our market, we typically consider how many new tenants or users entered the market with major investments and how many development deals were announced. Diving into the analytics, it is exciting to see some disciplined characteristics of a solid industrial market, including a slight slowdown in the pace of market expansion, a diverse group of business types demanding space, and the swift adjustment to appropriately balance supply and demand. Users entering the market The highlight reel of industrial deals in 2019 was impressive. Notable transactions include a new 420,000-square-foot water bottling plant for Niagara in South Kansas City, a 2 million-square-foot logistics hub expansion for Kubota Tractor Corp., and a 765,000-square-foot food distribution center for Hostess Brands. Additionally, Walmart just announced plans for a 1.8 million-square-foot distribution center to add to its existing three distribution centers in the area. A variety of new auto suppliers have absorbed over 1 million square feet of space to serve the Ford and General Motors automotive plants. I’m often asked what industries are moving to Kansas City and my response is all of them. The type …

The St. Louis industrial market continues to rally after posting 22 straight quarters of positive absorption. Record leasing activity and historically low vacancy have put the region on pace to deliver another 6.5 million square feet of Class A industrial space in 2019. This is in a market that averages deliveries of approximately 2.5 million square feet annually. Current drivers engendering this industrial activity include the following. Discipline Developers in St. Louis have long been known for their disciplined approach to building. Vacancy in a stable market hovers near 7 percent for the region. The vacancy rate for industrial space leading into the third quarter was 5 percent, up slightly from the previous quarter, according to CoStar. Continued speculative development, particularly in the Metro East, added to the increase. This, coupled with a large vacancy left in Lakeview Commerce Center by World Wide Technologies as it shuffles into a new 2 million-square-foot facility in Gateway Commerce Center East, were the most evident culprits. Expect vacancy to uptick slightly again in the third quarter as speculative deliveries by NorthPoint Development at Gateway Tradeport along with Exeter in Gateway Commerce Center come online. E-commerce No discussion surrounding the industrial market would be …

The St. Louis industrial market is in the middle of a significant construction boom. Total square footage under construction is at a record-high 6.3 million square feet, with 2.8 million square feet of activity completed in 2018. The last two years have experienced historically high levels of overall net absorption with 4 million square feet in 2017 and 5.6 million square feet in 2016. These absorption levels are significantly higher than pre-recession market numbers.   The expected 3 million square feet of positive absorption in 2018 is 1 million square feet higher than what had ever been recorded prior to 2014. A significant portion of this absorption is due to several large transactions in newly constructed, and often tax-abated, parks. Whether or not this level of construction and sizable deals is sustainable remains to be determined, but many trends within the economy indicate that this can continue.   The vacancy rate for the St. Louis industrial market dropped to 6.21 percent in the third quarter of 2018, the lowest rate since 2006. This drop in available space bumped average direct asking rates up to $4.58 per square foot, the highest level since before the recession.    Earth City and North …

It has been a banner year thus far for the St. Louis industrial market with yet another milestone achieved. Mid-year absorption totaled 2.5 million square feet of space, a number more closely suited for the entire year versus the halfway point. Fueled by continued absorption, the market has more than 5 million square feet of space under construction with vacancy of approximately 4.9 percent. The continued success is no surprise. But economic incentives, often overlooked and underappreciated, are the unsung heroes behind each industrial development around town. Gaining knowledge  Economic incentives have been a prerequisite in attracting or retaining businesses like Amazon, World Wide Technologies and Best Buy. But they do not just benefit large corporations; local and regional users are able to enjoy new Class A real estate in these developments as well. Why? Incentives help bridge the gap for the developer and the user to account for being in a low-rent, high-construction cost market, which is not a great recipe for new development. Yes, St. Louis boasts some of the lowest asking rents in the Midwest, currently averaging $4.70 per square foot for available industrial space. One would think that businesses would flock here because of the low …

“If you build it, he will come.” Yes, you’ve heard the Field of Dreams reference before, but never has it rang truer than with the Kansas City industrial market. The construction of 500,000-square-foot buildings suddenly ignited tenants’ interest in that space size, so much so that in the past two years Kansas City has experienced a tremendous surge in growth. In fact, Kansas City is now ranked No. 6 on the list of the top 10 U.S. industrial markets for speculative construction deliveries, according to Cushman & Wakefield. Coming off a record 5.5 million square feet of positive net absorption in 2016, the market exceeded that number by 65.7 percent in 2017 with a staggering year-end total of 9.2 million square feet of absorption. Putting that kind of tenant demand into perspective is challenging. The consensus is that while Kansas City has enjoyed a boom period for the past few years, 2018 will prove to be the best year yet. For the past six years, the vacancy rate held steady, never going above 8.3 percent and never dropping below 7.1 percent. To better understand just how fast this market is growing, let’s examine some of the largest industrial markets in …

With what appears to be a never-ending stream of construction, the biggest source for excitement coming into 2018 for the St. Louis industrial market is new, speculative development. According to research from Colliers International, construction completions exceeded 4 million square feet in 2017. This is the second-highest year of recorded construction volume for the market due to last year’s Goliath delivery of 6 million square feet. Currently, over 2 million square feet is under construction, with more slated for groundbreaking in 2018. One of the larger projects recently announced is NorthPoint Development’s proposed 300-acre industrial park in Hazelwood, situated in North St. Louis County. According to the St. Louis Post-Dispatch, NorthPoint plans to develop over 3 million square feet focused on logistics and light industrial warehouse space. The big question, it seems, is how long can developers continue to find new tenants for their large, modern bulk developments in St. Louis? Even with high, positive absorption in both 2016 and 2017, expectations for continued growth may be tempered as we move forward in 2018. Looking back at 2017, we see the industrial vacancy rate for metro St. Louis dropped to 6.7 percent at the end of the year. This rate …