The Kansas City industrial market is healthier than most, largely because the market was not overbuilt during the last expansion phase. So, the overall vacancy never topped 10 percent. Currently, we are seeing major shortages in spaces ranging from 100,000 square feet and above, with only a 2.5 percent to 3 percent vacancy rate in that segment. That’s particularly true among buildings with 24-foot clear height ceilings.
Because vacancies are on a steady decline in building sizes of about 75,000 square feet — specifically in quality, high-cube warehouse space — the need for speculative construction is overdue. Few developers have had the fortitude or the financing to undertake speculative development in recent years.
A Sun Life Financial-owned facility, which spans 600,000 square feet in Olathe, Kansas, is now fully leased to Bushnell and FedEx. The facility was built in 2008.
Kessinger/Hunter & Co. is developing a second building for Sun Life at I-35 Logistics Park. The state-of-the-art, 800,000-square-foot facility will be the largest building ever built on a speculative basis in the Kansas City area.
On the northern side of the market, Horizons Business Park in Riverside, Missouri, has broken ground on a 155,000-square-foot distribution center and is contemplating additional speculative construction. Blount International is under construction on its new 350,000-square-foot distribution center at KCI Intermodal Park in Kansas City, Missouri.
Among industrial blocks of space under 15,000 square feet, the vacancy rate is more than 12 percent. The lack of demand from small business prospects signals the persistence of a soft market. Most small business owners still lack business confidence.
However, large-scale users are becoming aware that, because of its central location, Kansas City can be an ideal distribution hub. With fuel costs becoming a major concern during the last several years, companies are increasingly looking for ways to minimize their distribution costs.
Recent changes in the commercial trucking industry, including an aging driver pool and a reduction in fleet size, have also made transportation a key consideration for many companies. Kansas City is one of only a few U.S. cities in which four interstates connect. The market is within an eight- to 10-hour drive of many major cities such as Dallas, Denver, Chicago, Minneapolis and Indianapolis, giving the metro area a competitive edge.
Additionally, Kansas City is a perfect business-to-consumer bulk warehouse location because of its adjacency to I-70 and I-35. Some business-to-consumer groups — including PacSun, Zumiez.com, Musician’s Friend, Pure Fishing and Coleman Industries — have
located to Kansas City because of the ability to reach 80 percent of the U.S. population within a two-day drive.
Kansas City also enjoys a comprehensive infrastructure of railroad systems, with both BNSF and Kansas City Southern underway with new intermodal projects, which can only serve to improve the efficiency of transporting goods around the country.
As we enter the second half of the year, the Kansas City industrial market is poised to continue gaining traction as job growth accelerates. The Greater Kansas City Chamber of Commerce is calling for regional economic growth of 3.4 percent in 2012.
The stronger employment market should dovetail nicely with the increased construction in the area, solidifying our local recovery.
— Joseph S. Accurso, SIOR, is a principal with Kansas City, Mo.-based Kessinger/Hunter & Co., a Cushman & Wakefield Alliance member.