Kansas City Market Overview
The industrial sector continues to perform exceptionally well for the Kansas City market, with solid positive net absorption, slight rent growth, and construction activity, all fueled by the continued growth of e-commerce and a solid U.S. economy. E-commerce sales grew by 16.4% compared to this time last year, and now represents 10.5% of total non-auto retail sales. E-commerce will continue to be a driving force in industrial real estate and especially the Kansas City market for the foreseeable future.
The Kansas City industrial market recorded 901,970 SF of positive net absorption during the second quarter of 2018, bringing the first half of total absorption to 2.3 million SF. The overall metro vacancy rate remained unchanged at 6.9%, as occupancies throughout the quarter kept pace with recent construction deliveries.
While distribution and e-commerce continue to grow, the manufacturing sector continues to perform well also. The Institute of Supply Management PMI index registered at 60.2% for June as the overall economy grew for the 110th consecutive month. Of the 18 manufacturing industry types, 17 of the industries reported growth throughout June.
Recent Activity Around the Metro
Distribution and warehouse operations continued to dominate much of the activity throughout the Kansas City industrial market in the second quarter, as the region continues to benefit from e-commerce growth and a centralized geography. The Coleman Company renewed their 1.1 million SF lease for their distribution center in Gardner, which remains one of the largest industrial buildings within the Kansas City market. Lenexa Logistics Centre North landed their first tenant after the speculative building was completed in late 2016. Turn 5, Inc., an automotive aftermarket parts distributor will occupy 363,000 SF of the building. Long Motor Corporation, another parts and accessories distributor recently elected to renew and expand their operation within Lenexa Logistics Building 5. The company will expand from their current footprint of 82,000 SF into a total of 153,000 SF within the building. In Wyandotte County, two sizeable tenants leased space throughout the second quarter. Archer-Daniels-Midland Co., leased 118,000 SF at 5140 Kansas Avenue, while International Transit and Storage leased 68,000 SF at 119 Osage Avenue.
The continued shift to more localized distribution, the deployment of more warehouses in more locations to get products to consumers quickly, has increased activity in many emerging secondary markets with inland ports, such as Kansas City. Look for this trend to expand as occupiers increase their footprints and continue their supply chain modernization to better serve their customers.
From a transactional standpoint, a handful of Johnson County industrial buildings sold throughout the second quarter. Exeter Property Group acquired Lenexa Logistics Building 5 from Block Real Estate for $23.6 million BioMicrobics purchased 16002 W 110th from Himoinsa Power Systems for $5.1 Million, while Karbank purchased 14850 W 101st Terrace from the Shawnee Mission School District for $2.75 million.
Throughout the first half of 2018, 2.77 million square feet of industrial product was delivered within the Kansas City metro, with just over 600,000 SF being delivered in Q2 2018. Currently 3.5 million SF of active construction remains in the pipeline for the Kansas City metro, with more than 2.2 million SF coming from Johnson County. Construction activity has slowed relative to the past couple years, which delivered all-time highs for the Kansas City market. Speculative construction activity has also slowed, as big box inventory has risen over the past few quarters as a result of several deliveries, some of which remain unoccupied at this point. Speculative construction currently accounts for nearly 1.9 million SF within the metro, while the remaining 1.6 million SF are related to build-to-suit developments.
Recent Transactions & Major Developments
|Property||Submarket||Sale Price||Size SF||Price / SF||Buyer||Seller|
|Lenexa Logistics V||Johnson County||$23,640,000||354,055||$66.81||Exeter Property Group||Block Real Estate Services|
|16002 W 110th Street||Johnson County||$5,100,000||120,000||$42.50||110th Street Lenexa||Himoinsa Power Systems|
|14850 W 101st Terrace||Johnson County||$2,750,000||54,000||$50.93||Karbank Holdings LLC||Shawnee Mission School District|
|15670 S Keeler||Johnson County||$2,080,000||22,500||$92.44||Parkway Holdings LLC||Jerry & Jennifer Bain|
|9001 Lenexa Drive||Johnson County||$2,050,000||$37,608||$54.51||Duranotic Door||PM3 Enterprises|
|15247 S Keeler||Johnson County||$1,130,000||14,952||$75.58||Advanced Erosion Solutions||Rose Development|
|17150 Mercury*||Johnson County||Coleman Company||Gramercy Property Trust, Inc.||1,100,000|
|17700-17790 College||Johnson County||Turn5, Inc.||Block Real Estate Services||363,000|
|1491 Universal||Executive Park / Northeast||XPO Logistics||Mid-West Terminal Warehouse||203,000|
|Lenexa Logistics Bldg 5**||Johnson County||Long Motor Corporation||Block Real Estate Services||153,000|
|5140 Kansas Avenue||Johnson County||Archer-Daniels-Midland Co||NPIF2||118,000|
|119 Osage||Wyandotte County||International Transit and Storage||Prime Investments, Inc.||68,000|
|College Crossing||Johnson County||PRA International||Block Real Estate Services||47,000|
|*Lease Renewal / Expansion|
|Total||Direct||Sublease||Total||Total||Net Absorp||Completions||Under Const||Avg Rent|
|Submarket||Bldgs||Inventory SF||Vacant SF||Vacant SF||Vacant SF||Vacancy Rate||Curr Qtr SF||YTD Qtr SF||Curr Qtr SF||YTD Qtr SF||SF||Rate $|
|Executive Park / Northeast|
|Kansas City Market Grand Total|
|Quarterly Comparison and Totals|
FOR MORE INFORMATION
+1 816 556 1102
Ed Elder SIOR
President | Kansas City
Executive Vice President | Kansas City
Doug Hedrick SIOR, CCIM
Senior Vice President| Kansas City
Associate | Kansas City
John Stafford SIOR
Senior Vice President | Kansas City