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Kansas City Industrial Market Set for Historic 2016

KANSAS CITY—Developers should easily surpass the amount of speculative construction that was completed last year.

By Brian J. Rogal | brianjrogal | | Updated on April 27, 2016

 

kc-logistics-park-kansas-city Logistics Park Kansas City in Edgerton, KS
KANSAS CITY—Since the end of the recession, the nation’s supply chain has been reconfigured, and the changes have helped this metro area experience a building boom that shows no sign of subsiding. In the first quarter of this year, developers completed 1.9 million square feet of new construction, about 1.8 million of it on a speculative basis, according to officials from CBRE Group, Inc. Developers completed about 3.0 million square feet of spec space in all of 2015, meaning they will easily surpass the 2015 mark and make 2016 one of the most significant years in Kansas City history for speculative industrial construction. “Momentum does seem to be building up,” David Hinchman , first vice president at CBRE, tells GlobeSt.com. “It’s what we’ve been predicting for so long. Developers are responding to the growing demand for Kansas City’s logistical advantages that users have identified.” Back in the 1990s, Kansas City did not typically see large scale spec construction. But when regulations were changed on the hours truckers could drive, among other adjustments, says Hinchman, many companies decided that the dead center of the country looked like a great place to establish new facilities. “We were selling the centrality of Kansas City,” but in the midst of these efforts, the recession hit, “and everything tumbled to a halt.” Therefore, when the economy started gearing up again, there was a tremendous pent-up need for space in Kansas City. “We are one of the only metro areas in the country that has four true interstates, and in two days you can hit 60% of the country from here. That’s putting a lot of attention on Kansas City.” In addition, as reported in GlobeSt.com, rail companies have built huge intermodal facilities like BNSF’s at Logistics Park Kansas City. Further boosting the region was GM and Ford’s decision a few years ago to pour about $2 billion into their auto plants here, fueling a big local expansion among their suppliers . Currently, Kansas City developers have a total of about 5.2 million square feet of space under construction, spread out among 13 projects. As to why so many of the new construction projects now and in the recent past have been done on spec, Hinchman says developers are under pressure to make decisions. “’We need a building now, or at least in three months,’” Hinchman says users have started to tell him. And “If you don’t have that product, they will go somewhere else.”    Also as reported in GlobeSt.com, e-commerce has started to play a key role here. Recently, Amazon agreed to entirely occupy an 822,000 square foot facility developed by NorthPoint Development , the largest spec building ever completed in Kansas City. In the wake of that deal, NorthPoint announced plans for a 927,000 square foot spec. “This is the greatest amount of construction that we have ever seen here,” Hinchman says. “There will probably be a pause sometime this summer to see where we are.”

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