2019 Q1 Industrial Kansas City Trends

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Kansas City Market Overview

The overall vacancy rate in Kansas City slightly increased by 10-basis points to 6.5% by the end of Q1 2019, as deliveries slightly outpaced net absorption totals throughout the quarter.  The vacancy rate has declined by 40-bias points relative to this time one year ago. More than 1.3 million SF of net absorption occurred during the Q1 2019, compared to 1.6 million SF of industrial product that was delivered between spec and build-to-suit developments. Construction activity around the metro continues to slow and is now well-off the pace of construction activity that reached an all-time high in 2017, but still remain well-above the historical norm for construction output within the Kansas City metro.

Growing consumer preference to purchase goods online continues to be the primary driver of industrial real estate demand. Occupiers supply chain strategies are expanding warehouse locations at near record levels to service online consumers and cut transportation costs, which is expected to keep industrial real estate demand robust throughout 2019. Demand levels for new distribution centers and last mile operations continue to fuel record leasing activity, net absorption and continued big box development both locally and nationally.

Key metrics that signal the health of the industrial sector remain strong. The Institute for Supply Management’s Purchasing Managers’ Index remained strong at 55.3% which has increased relative to the end of 2018.  Additional ISM indexes related to new orders, production, and employment also reported stronger index readings relative to year end 2018 reports.  Rail and container traffic across the United States remains robust but has slowed by 1.8% compared to this time last year.


Recent Activity Around the Metro

Industrial users continue to remain active throughout the Kansas City metro. While large users continue to garner headlines, smaller industrial users continue to account for a significant amount of industrial leasing activity.  For smaller industrial product, where new construction is not prevalent, demand remains high with a very limited amount of quality options, which has resulted in landlords successfully raising asking rates in several industrial parks.

KCI Logistics Centre III landed a tenant for their speculative development that was recently delivered. Rogers Sporting Goods will occupy the entire 202,000 SF building.  Lenexa Logistics Centre North leased 160,000 SF of space to Sportsman Cap & Bag. In Wyandotte County, two sizable tenants leased space throughout the first quarter. Wagner Logistics leased 100,000 SF of space at 845 Armourdale Parkway, while SRS Distribution leased 73,000 SF of space at 810 S. 7th Street.

On the transaction side, several sizable industrial building traded throughout the first quarter to both investors and owner/users. Schafer Richardson Inc., purchased 14100 Botts Road for $18.9 Million. The 499,000 SF building located in Grandview is 100% occupied by Winco Fireworks, Church and Dwight, and Caravan Ingredients.


Construction Activity

The Kansas City market delivered over 1.6 million SF of industrial product in Q1 2019. The majority of recent deliveries were focused within Johnson County. Excelligence Learning Corporation, a distributor of childhood education supplies, completed their 646,000 SF building within Midwest Commerce Center. SunLife delivered Building C within I-35 Logistics Park. The 567,115 SF building that was developed on a speculative basis is partially leased to KGPco, which moved into the north half of the building. Lone Elm Commerce Center completed a 210,501 SF building just north of the FedEx SmartPost. The spec building did not have a tenant upon delivery. In Riverside, Horizons IX, a 185,000 SF building was completed in Q1 as well.

Currently there is 4.4 million SF of total active construction around the Kansas City metro. Just over 2.2 million SF is still speculative construction. NorthPoint continues to develop Northland Park with buildings V and VI under construction. NorthPoint is also developing 454,500 SF within Southview Commerce Center in Cass County, which is not accounted in the following market stats. Additional  speculative construction that is nearing completion includes Hunt Midwest Business Center III, Westlink Building IV, Horizons VIII, and Widmer 140 in Lenexa. On the build-to-suit development side, Kubota is nearing completion on their two, 1-million SF industrial buildings just south of LPKC. Both buildings are expected to be delivered by the end of Q2 2019. The 250,000 SF Faurecia facility is Blue Springs remains under construction.

 

Download the Q1 2019 trends report for more information. See last quarter's trends report here.


 

 

FOR MORE INFORMATION


Martin Maguire CPRC Senior Research Director | Kansas City

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  Executive Vice President | Kansas City

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2019 Q1 Industrial Kansas City Trends

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