Q4 2018 Industrial Trends Report

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Kansas City Market Overview

In 2018, the Kansas City metro recorded 5,693,592 million SF of positive absorption, which is a slight decline from last year’s record amount of absorption total for the market. However, the 2018 total amount of absorption ranks as the third best year in terms of overall net absorption for the metro.  During Q4 2018, more than 1.58 million SF of positive net absorption was driven by growth primarily in Johnson County and the Executive Park/Northeast submarkets.  Construction activity and deliveries also declined slightly relative to the construction totals that were produced in 2017, but still remain well-above the historical norm for construction output for the metro, with a positive outlook for future opportunities in the development pipeline for 2019.

The overall vacancy rate in Kansas City slightly declined to 6.4% by year-end 2018, which is a 30-basis point decrease relative to year-end 2017. Industrial real estate demand continues to be driven by a strong domestic economy and the need to modernize and expand supply chains to keep up with growing e-commerce retail sales. On a national level, key indicators related to the industrial sector continue to fire on all cylinders, including metrics related to job growth, rail and container traffic across the United States, and a manufacturing sector that remains in expansion growth territory. The Institute for Supply Management’s Purchasing Managers’ Index remained strong at 54.1% by the end of the year. The index has been in expansionary territory for 28 consecutive months.

 

 
 
 
 
 
 
 
 

 


Recent Activity Around the Metro

Retailers, wholesalers, and third-party logistics companies continue to consolidate multiple warehouses into larger state-of-the-art facilities. This allows them the ability to streamline their supply chain operations, which in turn cuts costs, and more importantly, delivers goods in a faster and more efficient way. Kansas City continues to emerge as a key national industrial market, driven by the explosion of growth related to distribution, e-commerce activity, and supply chain developments.

The Executive Park/Northeast submarket remains active. In Q4, Northland Park Building IV was completed. Ford elected to occupy the entire 303,000 SF building to support their Claycomo plant operations.  National Fleet Systems leased 56,000 SF in Northland Park III The Executive Park Interstate Center Building, located near I-435 and Front Street, also traded in late 2018. SR Realty Trust, Inc. purchased the multi-tenant property from Welsh Property Trust for $11.25 million. The 173,129 SF building is fully leased to Sara Lee, Goodwill, and Safelite AutoGlass.

In Johnson County, Meritex completed two sizable deals in Q4. Remel renewed their 164,000 SF lease, while Harte Hanks leased 80,000 SF within the underground facility in Lenexa. Sportsman Cap & Bag leased 160,000 within Lenexa Logistics Centre North, which landed their first tenant earlier this year in Turn5 Inc. Heart to Heart International purchased the former Silpada warehouse and distribution facility located at 11550 Renner Boulevard for $9.3 million for their new operations location.


Construction Activity

The Kansas City industrial market ended 2018 with the delivery of 5.1 million SF of total industrial product, including 3.9 million SF of speculative construction. Industrial construction remains strong, but has slowed relative to the past two years of construction activity that previously recorded record amounts of construction. Currently, a healthy 3.78 million SF of speculative inventory remains under active construction within the Kansas City market, with additional developments on the horizon. An additional 2.86 million SF remains under construction within build-to-suit products bringing the total active construction figure to 6.1 million SF. Kubota is currently constructing 2 million SF of distribution buildings near LPKC. Kubota’s first building is expected to be complete in Q1 2019, while the second building is expected to be open by mid-2019.

NorthPoint officially broke ground on the first 454,000 SF building within Southview Commerce Center in Belton, Missouri. The 148-acre industrial park will feature five buildings totaling 2 million SF upon full build-out. Construction completions in Q4 2018 include Northland Park IV, a 303,000 SF building that is fully occupied by Ford, Riverside Horizons IX, a 185,000 SF building and a nearly 100,000 SF within Perimeter Park in Johnson County.



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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Q4 2018 Industrial Trends Report

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