Joe Accurso, DTZ
Whitney Kerr, DTZ
E-commerce and business-to-consumer companies could overtake the automotive industry when it comes to driving growth in Kansas City’s modern bulk distribution segment of the industrial market.
Auto suppliers filled the first wave of new space in the Kansas City industrial market. But now that those needs have primarily been met, new industry sectors are needed to fill the second wave of development. E-commerce and business-to-consumer companies could be the dominant users.
These companies are capitalizing on the fact that 85 percent of the U.S. population can be reached from Kansas City in a two-day truck drive, according to KC Smart Port, a nonprofit organization that works to attract freight-based companies to the Kansas City area. Through in-house transportation studies, KC Smart Port is coming to the conclusion that it strategically makes sense for the distribution centers of e-commerce companies to be located in Kansas City.
Recommendations from UPS, FedEx and third-party consultants also help e-commerce companies — located on both the East and West coasts — make that decision. Business-to-consumer companies operating a one-, three- or five-building model find that Kansas City works well logistically as it is in the middle of the country.
Inherent Advantages
Locating in Kansas City allows e-commerce companies to reach a majority of the U.S. population, and business-to-consumer companies are better able to deliver goods on time and with short notice. Increased efficiencies and lower operating costs are appealing to both types of businesses.
The combination of no tax on personal property and an online tax that is uniform with several other states’ online tax programs is motivating companies to locate on the Kansas side of Kansas City. Another plus is Kansas City’s strong infrastructure for distribution, including a large rail center with two new intermodal facilities that increase capacity to bring products in and ship them out.
Flight to Quality
Major players, such as Amazon.com, recently entered the market. Some companies are consolidating distribution sites at one central location in Kansas City. They are moving from 50,000- to 100,000-square-foot buildings to much larger spaces with a heavy interest in modern bulk distribution centers. Of the 52 modern bulk distribution buildings totaling 23.9 million square feet in Kansas City, 46 are 100 percent occupied.
Since 2012, companies have closed several large transactions to lease new locations as well as renewed existing leases, including three buildings totaling 661,494 square feet for Amazon and a subsidiary of Amazon.
Additional leasing transactions include: Really Good Stuff, 130,000 square feet; Jet.com, 220,548 square feet; DEMDACO, 325,000 square feet; Kubota Tractor Corp., 735,000 square feet; Excel Industries, 400,000 square feet; FoodServiceWarehouse.com, 475,200 square feet; and Zumiez, 153,971 square feet.
Demand is so great that 2 million square feet of new inventory has been completed this year. Eight speculative buildings totaling 3.5 million square feet are under construction. And new speculative buildings currently are planned for industrial parks such as Logistics Park KC, CenterPoint Intermodal, Three Trails and KCI.
NorthPoint Development has announced that it will begin construction on Inland Port XIV at Logistics Park Kansas City. At 822,104 square feet, it will be the largest speculative building ever constructed in Kansas City. NorthPoint also is planning to complete a 364,000-square-foot building at Three Trails near I-435 and Highway 71 this year.
In Riverside, work continues in the Horizons development on a 491,000-square-foot building. Plans for a 450,000-square-foot building at the CenterPoint Intermodal Center have been announced. In Wyandotte County, Kansas, Vitex Inc. and Plastics Packaging Technology have each committed to 56,000 square feet in the new Kaw Point buildings being constructed near the Fairfax assembly plant.
What’s Next?
In the last two years, more than 5 million square feet of inventory has been completed and 3.5 million square feet has been absorbed in the Kansas City industrial market’s bulk warehouse distribution segment. Many of the new projects under construction are attracting serious interest, and some developers are even signing tenants at this stage. As companies continue to find strategically sound reasons to establish or relocate their distribution centers in Kansas City, additional growth can be expected.
EDITOR’S NOTE: DTZ has agreed to merge with Cushman & Wakefield. The new company will operate under the Cushman & Wakefield brand, have revenues of more than $5.5 billion and manage more than 4 billion square feet globally. The agreement is expected to close this month.
— By Whitney Kerr Jr., SIOR, CCIM, Managing Director, DTZ, and Joe Accurso, SIOR, Senior Vice President, DTZ. This article first appeared in the September 2015 issue of Heartland Real Estate Business magazine.