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.


Construction Activity

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

Sales Activity
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

Leasing Activity
Property Submarket Tenant Landlord Size SF
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
*Lease Renewal / Expansion

Industrial Overview

Existing Properties Absorption Construction Rents
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
Flex 18 639,812 64,779 64,779 10.1% 1,000 7,702 $7.20
Industrial 358 35,0521,436 1,605,108 181,063 1,786,171 5.1% 128,110 325,182 413,332 617,387 $4.11
Total 376 35,661,248 1,669,887 181,063 1,850,950 5.2% 129,110 332,884 413,332 617,387 $4.17
Jackson County
Flex 94 4,523,549 253,312 253,312 5.6% (55,266) (14,269) $8.12
Industrial 1,411 82,756,959 5,150,597 5,202 5,155,799 6.2% (103,731) 279,527 200,000 $4.47
Total 1,505 87,280,508 5,403,909 5,202 5,409,111 6.2% (158,997) 265,258 200,000 $4.66
Johnson County
Flex 174 5,399,024 388,098 10,080 398,178 7.4% (19,789) (60,780) $9.62
Industrial 899 67,134,427 7,184,539 44,545 7,229,084 10.8% 825,511 1,430,439 300,122 2,057,054 2,486,219 $4.74
Total 1,073 72,533,451 7,572,637 54,625 7,627,262 10.5% 805,722 1,369,659 300,122 2,057,054 2,486,219 $5.10
Platte County
Flex 18 695,727 47,689 47,689 6.9% 1,764 3,868 $9.74
Industrial 435 29,015,836 1,183,387 35,000 1,218,387 4.2% 87,312 304,475 301,567 301,567 198,424 $4.34
Total 453 29,711,563 1,231,076 35,000 1,266,076 4.3% 89,076 308,343 301,567 301,567 198,424 $4.47
Wyandotte County
Flex 21 794,940 37,345 37,345 4.7% 11,606 30,738 $8.21
Industrial 549 33,885,854 1,653,403 40,000 1,693,403 5.0% 25,453 18,396 $4.07
Total 570 34,680,794 1,690,748 40,000 1,730,748 5.0% 37,059 49,134 $4.16
Kansas City Market Grand Total
Flex 325 12,053,052 791,223 10,080 801,303 6.6% (60,685) (32,741) $8.84
Industrial 3,652 247,814,512 16,777,034 305,810 17,082,844 6.9% 962,655 2,358,019 601,689 2,771,953 3,502,030 $4.42
Total 3,977 259,867,564 17,568,257 315,890 17,884,147 6.9% 901,970 2,325,278 601,689 2,771,953 3,502,030 $4.63
Quarterly Comparison and Totals
Current Quarter 3,977 259,867,564 17,568,257 315,890 17,884,147 6.9% 901,970 2,325,278 601,689 2,771,953 3,502,030 $4.63
Q1 2018 3,973 258,995,590 17,660,841 253,302 17,914,143 6.9% 1,423,308 1,423,308 2,170,264 2,170,264 4,491,719 $4.65
Q4 2017 3,968 256,825,326 16,910,004 257,183 17,167,187 6.7% 1,197,853 7,463,247 1,901,297 8,252,187 5,080,718 $4.67
Q3 2017 3,965 254,924,029 16,200,084 263,659 16,463,743 6.5% 2,756,654 6,265,394 2,652,222 6,350,890 5,987,934 $4.64
Q2 2017 3,965 252,271,807 16,417,505 150,670 16,568,175 6.6% 1,655,367 3,508,740 1,767,100 3,698,668 7,796,702 $4.63


FOR MORE INFORMATION


Martin Maguire CPRC
Senior Research Director | Kansas City
+1 816 556 1102
martin.maguire@colliers.com


CONTRIBUTORS


Ed Elder SIOR

President | Kansas City


Tom Haverty

Executive Vice President | Kansas City


Doug Hedrick SIOR, CCIM

Senior Vice President| Kansas City


Tom Kennedy

Associate | Kansas City


John Stafford SIOR

Senior Vice President | Kansas City