KC Industrial Update: New spec is hot, everything else simmers

Kansas City’s industrial market is making some interesting moves this quarter. According to Newmark Grubb Zimmer, which recently released its second quarter market report, growth is slowing.

About 110,000 square feet were absorbed in the second quarter, and average quoted rents remained flat at $4.54 per square foot. Overall, vacancy increased to 6.3 percent, and deliveries totaled 1.3 million square feet.

While a handful of transactions make the market seem healthier than ever, it has actually seen a pause in leasing and sales activity over the past few quarters. Although new and spec construction is seeing a slew of positive indicators, day-to-day sales and leasing activity hasn’t been as hot for the rest of the market.

Outside of properties smaller than 10,000 square feet, 86 percent of the market consists of buildings ranging from 10,000 to 100,000 square feet. This subset is seeing a 61 percent decrease in sales volume compared to 2015 on an average quarterly basis.

Leasing in the first half of 2016 is also down 44 percent from the same time a year ago. The median number of months on the market to lease a property has also risen to 30 percent over the past six quarters.

Currently, about 5.5 million square feet are under construction currently. The biggest headline grabbing announcements during this quarter include:

  • The kickoff of a bomber 856,000-square-foot fulfillment center in Kansas City, Kan., rumored to be for Amazon. The project has received industrial revenue bonds and a 10-year tax abatement, and will be a significant boost for Wyandotte County, providing 1,500 jobs at opening and 3,500 employees at completion. The project comes on the heels of Amazon’s last quarter announcement that it will occupy 822,100 square feet in Kansas City’s largest industrial spec building at Logistics Park Kansas City.
  • A new $250 million investment is planned for Northland Park, which will encompass 4.3 million square feet across up to 10 new Class A industrial facilities and bring 2,000 new jobs to the area. Located at Missouri 210 and North Kimball Road, the first phase of the 240-acre development will include one to three 350,000-square-foot buildings and one 25,000-square-foot flex facility.
  • A new 630,000-square-foot industrial building, Lenexa Logistics Centre North 2, will be delivered to the market in 2017. It will be located in Lenexa Logistics Centre North, which now totals about 208 acres at Renner Road and College Boulevard in Lenexa.

Overall, the outlook looks bright.

“Major tenant and construction announcements will continue within key intermodal parks and along major thoroughfares offering prime accessibility,” the report reads.

For more detailed information and findings, see the full report here

Want a deeper dive into the numbers from the players in the game? Plan to attend our 2016 Industrial Summit on September 8, 2016. More speakers and sponsors will be announced soon, but in the meantime, check out more details here.