2nd Quarter 2020 Industrial Trends | Kansas City

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2020 Q2 Industrial Kansas City Hero

Market Fundamentals Affected by COVID-19 and Uncertainty

A Note Regarding COVID-19

As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate.

The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.

Kansas City Industrial Overview

Following a strong first quarter in 2020, second quarter figures are the first barometer of COVID-19 related challenges and showed continued positive gains in the industrial real estate sector. The overall vacancy rate in Kansas City remained unchanged at 6.0% by the end of Q2 2020. The vacancy rate has declined by 40 basis points relative to this time one year ago. A total of 401,906 SF of net absorption occurred throughout Q2 2020, well off the pace of previous quarters, however in line with quarterly deliveries. A total of 542,000 SF was delivered during the first quarter. Stable asking rents and healthy construction pipeline on BTS and speculative development remain in focus for the Kansas City market. Several projects currently under construction are expected to be delivered in the second half of 2020, with many projects pre-leased. Expect positive absorption figures to increase significantly in the back half of 2020 as a result of anticipated industrial product being delivered throughout the metro.

The Effects of COVID-19 and the Industrial Market

As anticipated, the industrial sector continues to outperform and recover faster than other major commercial real estate sectors nationally and throughout the Kansas City metro. The continued growth in e-commerce sales across the U.S. remains a top demand driver for the industry. As of Q2 2020, e-commerce accounted for a total of 11.8% of retail sales, up from 11.3% in the previous quarter, a record for online shopping. As companies continue to make strategic decisions to keep more inventory on hand, and e-commerce growth beats expectations, the industrial sector will continue to benefit from these trends in defiance of the pandemic as the rest of the economy’s recovery is ongoing. 

The increasing reliance on e-commerce for basic goods fueled demand for industrial bulk space as supply chains continue to be right-sized, shifting away from the former “lean” inventory strategies. Despite the global pandemic slowdown, U.S. occupier activity in bulk industrial space increased significantly throughout the country showing evidence of the need for warehouse and distribution space. E-commerce only occupiers, such as Amazon, accounted for 20.9% of transactions during Q2 2020, exceeding third-party logistics and packaging companies (3PLs). However, when combined with Q1 2020 totals, e-commerce falls to 14.1% of total transactions as 3PLs accounted for 23.0% of all transactions at mid-year. 

Even as global supply chain management has matured, the global pandemic of COVID-19 has served as the latest reminder of the fragility inherent in thinly stretched global supply chains. The pandemic’s impact is sparking a new dialogue on how to source goods from a global market that minimizes both time and cost, while also being less susceptible to interruption through diversification and onshoring components. From a manufacturing standpoint, the Institute for Supply Chain Management’s PMI index registered 52.6% in June, up 9.5% from the May reading of 43.1%. This figure indicates expansion in the overall economy for the second straight month after April’s initial contraction, which ended a period of 131 consecutive months of growth. 

Recent Activity Around the Metro

The Kansas City industrial market remained active throughout Q2 2020. Online pet retailer Chewy is expected to open a new 796,000 SF fulfillment center in Belton, Missouri at the Southview Commerce Center. In Wyandotte County, Turner Logistics Park leased nearly 300,000 SF to Harte Hanks, the first announced tenant within the industrial park. In Lenexa, Thermo Fisher Scientific leased 120,000 SF. The biotech company will use the building for COVID-19 sample collection and transportation. Lenexa Logistics East announced the first tenant within their park. MAVS Volleyball has leased 70,000 SF within the first building that is currently under construction. 

Several industrial buildings are currently being built throughout the Kansas City metro, with expected deliveries in the second half of 2020. Currently there is over 5.6 million SF under construction with nearly 5 million SF of deliveries anticipated between now and the end of 2020. Deliveries will included new buildings at LPKC, Southview Commerce Center, Northland Park, Turner Logistics, KCI Logistics, Riverside Horizons, Heartland Logistics and Meritex. 


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2nd Quarter 2020 Industrial Trends | Kansas City

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Related Experts

Martin Maguire

Senior Director Research

Kansas City

Martin Maguire is the Research Services Manager for Colliers International, Kansas City. As part of this role, he coordinates and supervises the various resources and personnel in the research department. Martin is responsible for the aggregation, analysis, interpretation, and reporting of market research, including all quarterly and annual market reports for the Kansas City and Lawrence markets. He establishes procedures for acquiring, entering and verifying real estate marketing data related to properties, listings, tenants and comparable transactions for all local divisions tracked within the database, while maintaining data integrity. He works with all transaction service professionals in serving clients by providing an elevated set of skills, analysis and project management. He is in charge of producing all reports and gathering data for use in analysis, marketing and presentations to corporate clients. He develops client-oriented interpretations and market trend graphics for client understanding. 

 

Martin has been with the firm since July 2012.  Prior to his association with the firm, Martin was employed by Cohen Financial, a commercial real estate investment banking company specializing in loan servicing with the asset management team.  Prior to his move to Kansas City, Martin previously worked with Capital One N.A. as a disposition analyst within the REO Division, as well as with CoStar Group Inc. as a research associate.

 

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Ben Boyd

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Ben Boyd is a broker specializing in Industrial Brokerage and Investment Services. His proactive approach and follow-through are key to his success in finding the right tenants and buyers for projects. Ben’s collective database of industrial real estate owners, investors and tenants gives him an advantage in facilitating marketing efforts for building owners and tenants. Each of his clients benefit from systematic marketing campaigns that are executed through direct mail, e-mail marketing, social media, print ad placements, and routine involvement with the government and economic development leaders of the communities he serves.

Ben is versed in several aspects of brokerage including: Build to-Suit and New-Construction, Site Selection & Acquisition, Leasing, Commercial Investment Real Estate Sales, and Tenant & Landlord Representation in the Greater Kansas City Metro Region.

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Ed Elder

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Ed is the President of the Colliers Kansas City office and is responsible for overseeing all brokerage operations of the Kansas City, Missouri and Lawrence, Kansas offices.

Ed also remains very active in the sale and leasing of industrial properties, along with providing clients expertise on site selection and development services for new construction in the Kansas City metropolitan area.

Ed has significant experience in representing many local and national clients in their real estate assignments.

COMMUNITY INVOLVEMENT

Ed’s passion for community service includes sports and health. He is an avid supporter of Cristo Rey Corporate Workstudy Program, Morning Glory Ministries and United Way Tocqueville Society. Ed also serves as a board member for Coaches vs. Cancer | American Cancer Society, The University of Kansas - Cancer Funding Partners, and the NE Kansas Catholic Charities Foundation Board.

 

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Tom Haverty

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Tom Haverty joined the firm in 2001 specializing in the sale and leasing of office and industrial properties as well as tenant representation. He has sold and leased facilities throughout the metropolitan Kansas City area and has represented clients in both local and national multi-market transactions. Tom was promoted to Senior Vice President in 2004 and became a shareholder at that time. In 2008, Tom was promoted to Executive Vice President.
Prior to joining the firm, Tom was a Vice President of Sales, Marketing, and Trading for Koch Chemical Company, a division of Koch Industries, one of the largest privately held corporations in North America. While at Koch, Tom had a proven record of success in business leadership and management, financial analysis, contract negotiations, and sales and marketing.


Since 2001, Tom has represented numerous local and national clients with their real estate requirements.  He has extensive experience in the sale and leasing of office and industrial properties having been involved in the negotiation of over 480 sale / lease transactions totaling over 9.5 million square feet with  a total transaction volume of over $280 million dollars.

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Doug Hedrick

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Doug Hedrick joined the firm in 1997 and specializes in the marketing, sale and leasing of industrial property throughout the Kansas City regional area.  Doug was promoted to Senior Vice President in 2006 and became a shareholder at that time. 

During the past seventeen years, Doug has completed numerous commercial real estate transactions while successfully helping both local and national companies with their real estate requirements in the Kansas City regional market. Clients have included: 

• Ball Manufacturing

• Charles D. Jones Co

• RockTenn • Murphy Warehouse • DST • Toshiba • KCP&L

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Jack Higgins

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John Stafford

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John specializes in the sales and leasing of industrial properties throughout the Kansas City metropolitan area, as well as tenant and buyer representation. Since 2006, John has leased/sold more than 10 million square feet of real estate, completing over 500 transactions, with a total volume exceeding $500 million dollars.

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