What area is your expertise?
Industrial property in the Kansas City metropolitan area.
What trends do you see presently in industrial development in your area?
The emergence of large, big-box distribution centers (greater than 250,000 square feet) as well as the emergence of inland ports, which are logistic parks in close proximity to intermodal centers. Kansas City has traditionally been a market for users of smaller blocks of space, but this has changed over the past 5 years. Transactions greater than 250,000 square feet new to our market include companies such as Case New Holland, Pac Son, Kimberly Clark, and Musician’s Friend. Additionally, large industrial logistics parks are planned for the property adjacent to a new intermodal facility, which has opened in Southern Kansas City at M-150 and 71 Highway at the old Richards-Gebaur Airport, which is operated by Kansas City Southern Railroad. CenterPoint is the developer of this park. Additionally, other intermodal projects are underway in both Gardner, Kansas, and at the Kansas City Airport.
What type of industrial product is doing well in your area?
Class A distribution space greater than 50,000 square feet.
Who are the active industrial developers in your area?
Multiple local developers
Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
CenterPoint-KCS Intermodal Center. This 1,300-acre project contains a 1,000-acre logistics park currently under construction directly adjacent to a newly opened 300-acre Kansas City Southern intermodal center. This project has 4 million square feet of Class A warehouse distribution type buildings and land, and the site is currently under construction. It features excellent access to the interstate for easy distribution throughout the Kansas City metropolitan area and the Midwest.
Where is the majority of development taking place? Why is this area doing well?
In the suburbs where cost of land can still be found, as long as it still has easy access to the interstate system.
What area do you expect to be the next big industrial development market? Why?
South Kansas City, as well as the Olathe/Gardner submarket, due to inexpensive ground and proximity to newly opened railroad intermodal facilities.
Please describe the industrial leasing activity in your area.
The industrial leasing activity has been very good, greater than 50,000 square feet. Several companies have leased space in the Johnson County Industrial submarket — so far in 2008 greater than 50,000 feet, including Smart Warehousing, Comfort Products Distributing, and Diapers.com. Activity less than 50,000 square feet has been less active, though still relatively strong.
Please describe the industrial sales activity in your area.
The industrial sales activity has slowed a bit, but is still historically very strong with high sales prices achieved on a per-square-foot basis, especially for investment grade product. We are continuing to see functional obsolescence play a large role as buildings with ceiling heights greater than 21 feet and large truck courts commanding a strong price in our market. Older Class B and C properties are still selling, though not at the brisk pace of the newer, higher-quality buildings.
Please give a measure of industrial vacancy rates and a measure of available sublease space.
The industrial vacancy rate is approximately seven percent with minimal sublease space available for the Kansas City metropolitan area.
What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?
Interest rates are still historically low, though the ability to receive credit, due to the national credit crunch, has made it difficult for many developers and for the sale of large industrial portfolios.
What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
Any industry that imports containerized cargo.
Would you like to make any additional observations about the industrial market in your area?
The industrial market is strong, and people are relatively upbeat in Kansas City. Despite what many business owners and decision makers read on the national news, the industrial business in Kansas City continues to be good with many companies looking to expand. That being said, certain segments of the market are down this year, including all industries associated with the residential developments such as residential contractors, flooring suppliers, other building suppliers, etc.
Submitted by Tracey R. Mann, vice president/industrial sales and leasing with the Kansas City, Mo., office of Zimmer Real Estate Services, L.C.