Mike Bell

SubTropolis emerges as leading logistics location for animal health industry

Hunt Midwest SubTropolis is carving out a niche in the animal health logistics space, growing its veterinary industry footprint to 250,000 square feet. Over the past 12 months, three animal health companies - French veterinary pharmaceutical company Virbac, Ceva Animal Health, and IodiTech - have announced new or expanded warehouse and distribution operations in SubTropolis, which offers commissioned facilities in a naturally cool underground environment.

“SubTropolis is the total package for animal health companies and their unique requirements for product safety and climate control, providing significant operational cost efficiencies,” said Hunt Midwest President and CEO Ora Reynolds.

Virbac is currently consolidating its North American product warehousing and distribution operations in the underground business complex. According to Virbac President and CEO Paul R. Hays, the SubTropolis location will help the 8th largest veterinary pharmaceutical company better align itself within the Kansas City Animal Health Corridor, which churns out more than half of the sales generated by the global animal health industry.

“By bringing processes and people together at this Kansas City facility, we are boosting collaboration and efficiency within our manufacturing operations," Hays said. 

In addition, Ceva Animal Health and IodiTech Inc. both announced expansions in the Energy Star rated facility over the past year. Hunt Midwest Vice President Mike Bell attributes SubTropolis' success in the animal health space to a "compelling value proposition" for companies that must adhere to industry product standards by maintaining strict temperature and humidity levels.

“The underground’s protective layer of limestone essentially offers ‘natural’ cooling that saves companies between 70 and 80 percent on utilities and equipment compared to a building on the surface,” Bell said. “There’s an ‘Aha Moment’ when companies fully realize how a SubTropolis location can substantially improve their bottom line.”

Ceva Animal Health is a case in point. CEO Craig Wallace says that consistent conditions and the ability to easily expand underground were two key reasons Ceva chose SubTropolis for a new North American warehouse and distribution center in 2015. Within a year, Ceva had outgrown its space and was able to quickly scale up to meet ongoing demand. 

“The underground location is a great solution for Ceva’s current and future warehousing needs,” Wallace said. “As we add products and expand into new categories, we require scalable space and partners like Hunt Midwest who can accommodate our growth and evolve with us.”

Kansas City-based IodiTech Inc. opened a distribution operation in SubTropolis in 2016. The company manufactures and ships a variety of iodine derivatives – including animal feed minerals – throughout North America and the world.

“The ability to ship to up to 85 percent of the U.S. within two days was of critical importance,” IodiTech President Curtis Thomas said. “Our location in SubTropolis is the perfect complement to our nearby manufacturing facility.”

The growing collection of animal health assets within SubTropolis is creating an “industry cluster within a cluster” for Kansas City’s Animal Health Corridor, which will hold its annual Animal Health Investor Forum and Animal Health Homecoming Dinner August 28-29.

“Hunt Midwest SubTropolis is a valued strategic partner as we work on behalf of the Kansas City Area Development Council to attract global animal health companies to the Greater Kansas City region,” said Kimberly Young, president of the KC Animal Health Corridor.

NorthPoint, Hunt Midwest, Karbank on KC’s industrial drivers

Phil Algrim of JLL, Paul Fogel of Karbank, Mike Bell of Hunt Midwest, and Whitney Kerr Jr. of DTZ.

NorthPoint Development has been one of the strongest players on the industrial scene, and is currently working on delivering to the market its latest industrial buildings in Logistics Park Kansas City in Edgerton. In about a week, the shell will be complete on its latest building, Inland 11 – a 657,354-square-foot building that took a whopping four months to complete.

 

“And the interesting thing is that it went up over the winter,” JLL Senior Vice President Phil Algrim said. “We started in November and in four months, it’s done. That shows you the economies of scale and the rapid deployment of capital and building out here.”

Inland 11 will soon be home to Kubota Tractor Corporation, a machinery and equipment distributor, which will take 436,000 square feet. Inland 12 is underway as well, scheduled to be completed by March or April.

Algrim says Kansas City’s biggest strength and a big driver of the activity has been its ability to hit more of a population total than other centrally located cities. Within 1,000 miles of Kansas City, 161 million people can be reached within 2 to 3 days. That’s a greater population density than what it would be in Washington D.C., Chicago, or Dallas.

Within a 1,000-mile range of Kansas City, companies can deliver their products to 161 million people within 2 to 3 days.

Hunt Midwest is seeing no shortage of activity either, and has benefitted from the expansion of the automotive and e-commerce industries here. Mike Bell, Hunt Midwest’s vice president and general manager of industrial commercial development, says the company is looking at 800 million square feet of future development of Class B buildings in the 1300-acre Subtropolis.

By locating in Kansas City, companies like Food Service Warehouse are finding faster and more cost-efficient means of distribution, contributing to staggering growth numbers. Bell says Food Service Warehouse is growing at a rate of 200 percent of year.

Hunt Midwest has aggressive plans to expand.

“They reason they chose our location – and this is important for Kansas City – that FedEx and UPS terminals in relation to airport are very important for e-commerce,” he said. “The speed for an e-commerce company to get their product to a consumer, that’s what drives revenues.”

But there’s an important segment of the industrial market that’s often overlooked: Class B industrial properties. Paul Fogel, vice president at Karbank, says that while his company does have a few smaller 100,000-square-foot Class A buildings, it’s really Class B buildings that constitute the bulk of Kansas City’s overall market. But most importantly, the asset class brings stability.

While the bulk of Karbank’s portfolio is made up of Class B warehouses, it does market a few Class A properties, like this 108,000-square-foot building in the Northland. More info here.

“The staying power of Class B industrial cannot go understated. There’s a lot of it in Kansas City and one of the reasons you’re seeing a lot of local real estate historically owned by a very limited number of families in Kansas City is because these things lease, they’re stable, and rent goes up every time you renew the lease,” Fogel said. “You don’t have the difficulty of carpet and paint every three years with brokers parachuting in and negotiating more improvements. These things are incredibly stable, and that’s why they’ve stayed as a mainstay in our portfolio.”

A huge indicator of Class B’s strength? Its vacancy rate in Kansas City hovers at about 6 percent, Fogel says.