Q3 2018 Industrial Trends Report

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Kansas City Market Overview

The Kansas City industrial market recorded 1.78 million SF of positive net absorption throughout the third quarter, bringing the year-to-date total absorption to 4.1 million SF. The overall metro vacancy rate declined to 6.7% as recent absorption totals began to out-pace speculative construction deliveries. Average asking rents around the metro rose to $4.68/SF, a slight increase relative to previous quarters.

Distribution and e-commerce related activity continues to account for the majority of industrial activity and metrics within the Kansas City metro. The manufacturing industry also remains in expansion territory, another positive for the industrial market as a whole.  The Institute of Supply Management PMI index registered at 59.8% for September, as the manufacturing measurement has been in growth territory for the 25th consecutive month. Rail traffic across the United States also shows strong fundamentals, as total rail traffic is up 5.4% year-to-date relative to the previous year, which is a positive sign for our local intermodal and manufacturing operations.

 

 
 
 
 
 
 
 
 

 


Recent Activity Around the Metro

Occupier activity across the United States continues to be robust, particularly in bulk industrial space 100,000 square feet and larger. Third-party logistics and packaging companies (3PLs) continue to seek large chunks of space across the country based on an increasing need for both regional and final-mile bulk distribution centers. Kansas City remains a benefactor as a result of our geography, infrastructure and speculative development pipeline. Overstock.com elected to enter the Kansas City market as a result of the ability for the company to reach 99% of its U.S. customer base with two-day shipping. The company signed a 517,000 SF lease at 5300 Kansas Avenue in Kansas City, Kansas. 

There is still room for significant e-commerce related growth. U.S. Online sales finished Q2 2018 at $120 Billion, a 15.4% increase relative to Q2 2017, but still e-commerce sales represent only 10.8% of non-auto related retail sales, leaving plenty of room for future expansion in the Kansas City market and across the nation.
Several Northland industrial parks had strong leasing activity throughout the third quarter. Riverside Horizons continues to grow their tenant base as E-Shipping leased 198,000 SF within Horizons VII, while Horizons VIII and IX are currently under construction. XPO Logistics leased 203,000 SF at 1491 Universal Avenue. Vanguard & Great Plains Packaging leased a total of 111,000 SF within HMBC Logistics I. Hunt Midwest’s Subtropolis also renewed 310,000 SF for Advanced Logistics & Fulfillment and an existing 248,000 SF space for Vanguard Packaging.


Construction Activity

Throughout the first three quarters of 2018, 4.23 million square feet of industrial product was delivered within the Kansas City metro, with just under 1.5 million SF being delivered in Q2 2018.  Currently, 3.2 million SF of active construction remains in the pipeline for the Kansas City Metro. Speculative construction activity currently accounts for nearly 2.3 million SF within the metro, while the remaining 900,000 SF are related to build-to-suit developments.

Garmin recently completed their initial phase of the company’s facility expansion in Olathe. The 750,000 SF manufacturing and distribution center more than doubles the company’s aviation product manufacturing and distribution capacity. In Belton, NorthPoint Development recently announced plans to develop Southview Commerce Center, a $105 million industrial park with up to 5 buildings totaling more than 2 million square feet at the former Southview Golf Course. The industrial park will be located just east of I-49, and at full buildout is expected to create an estimated 1,400 jobs.



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


Jack Higgins

Associate | Kansas City


Tom Kennedy

Associate | Kansas City


John Stafford SIOR

Senior Vice President | Kansas City



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Q3 2018 Industrial Trends Report

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