Kansas City's strengths prime continued success

Jill McCarthy, senior vice president, corporate attraction, for the Kansas City Area Development Council (KCADC), discussed the Kansas City region’s economy and its strengths at the virtual annual commercial real estate forecast hosted by KCRAR Commercial on Thursday, October 22.

KCADC focuses on new business and talent attraction to the region, representing both sides of the state line and covering 18 counties and more than 50 cities.

“We market out the metro’s assets, whether that is a lifestyle, whether it is industry sectors, whether it is on the available property,” said McCarthy.

According to the most recent reported figures, McCarthy said the Kansas City metropolitan area stacks up favorably to the national numbers.

The national unemployment average stands at 6.7 percent, but in the Kansas City metropolitan area, that figure is 4.4 percent.

Leisure and hospitality this year locally saw gains of 21 to 22 percent, while nationally that gain was approximately 17 percent. Local gains in professional and business services outpaced national gains (6.4% to 5.6%), McCarthy said. 

McCarthy said Kansas City added nearly 6,000 manufacturing jobs, a gain of 7.4 percent, compared to a national gain of 3.3 percent. 

“And that really goes in line with some of the projects we saw last year that came into Kansas City—Melaleuca, Boxycharm, Dot’s Pretzels and Pretzels, Inc.  So we saw a lot in the manufacturing sector looking at Kansas City,” she said.

McCarthy said the region saw a few office successes, including one in cybersecurity and one in customer service.  

She said clients are trying to determine what size office they want or need.

“Even though most of our office projects are talking about a hybrid workforce, there are very few that are looking to set up new operations that will have everybody, all hands on deck, in the office.  But, they’re very concerned about space and about the quality of workflow for the employee,” said McCarthy.

Although the region gained $123 million in new payroll and added almost 3300 new jobs and nearly $900 million in capital investments last year, McCarthy said those numbers have not been reached this year yet.   Currently, the region stands at $73 million in new payroll and $237 million in capital investment.

McCarthy said that there are a couple of large data centers in the works, and each of these projects has the opportunity to be upwards of $200 million to $2 billion for each campus.  

“So that’s an extraordinary impact that I see on the horizon for 2022 in Kansas City,” she said.

KCADC projects that approximately 15 million SF of industrial space will come online in 2021, McCarthy said.

“One of the things that we pitch often to our clients is that Kansas City has this amazing entrepreneurial spirit.  It's kind of embedded in the way we work and the way we operate . . . And I think we’re really doers and innovators, and that bodes well for a lot of our core industries,” said McCarthy.  

McCarthy cited some of the many strengths of Kansas City.  Kansas City has the largest rail center by tonnage.  It has more foreign trade zone space than anywhere else in the United States.  It has great connectivity via its interstate highways and has five class one rail lines.  

Kansas City also has more than 660 food and beverage companies, ranking it number eight in the United States for food and beverage market growth over the past three years.  And, 56 percent of global animal health companies have a presence in the Kansas City region, McCarthy said.

In late September, Missouri Governor Mike Parson and Kansas Governor Laura Kelly together announced the launch of the National Security Crossroads, a KCADC initiative in the works for three years aimed at raising awareness of and growing national security missions in Kansas and Missouri.

“It's meant to really provide agility and resiliency and cross federal collaboration,” McCarthy said.

She said the automotive industry is huge in Kansas City, and the region is seeing a lot more activity on the e-vehicle side, whether it’s component battery manufacturing or semiconductor manufacturing.

The region’s future is bright, both next year and in the future, especially with a  new airport terminal on the way.

“We’re primed for success. I think our 2022 pipeline is just fantastic,” McCarthy said.

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A MWM CRE event Recap: (Note this article represents one of two articles from this event. Stay tuned next week to read the recap from Dr. Ted C. Jones on his perspective of national developments in commercial real estate during the pandemic and his outlook for the future.)

All eyes focused on Kansas City CRE wins

Last week at CCIM Kansas City’s monthly meeting, Michael Berenbom, managing partner, LANE4 Property Group; Jon Copaken, principal, Copaken Brooks; John McGurk, vice president of development, Milhaus; and Ora Reynolds, president, and CEO, Hunt Midwest, joined moderator Tim Cowden, president and CEO of Kansas City Area Development Council (KCADC), for a discussion of the state of the Kansas City market for the four major asset classes represented by the panel.

The panelists each spoke to the Kansas City projects that have them most excited. Reynolds began with Hunt Midwest’s logistics and industrial footprint and its continuing rapid growth.

“Definitely this cycle and people have written about it, is so different.  The cycle there can be a two-year cycle from when you source a deal to when you build it and lease it, instead of what took a 5, 10, 15-year cycle.  You tend to know what you have when you start with industrial when you start with a building.  You know when the end goal is,” said Reynolds.

Berenbom said he is excited about downtown Lee’s Summit.  

“Whether it’s office or retail we’re looking at, location matters, character matters, neighborhood matters, and downtown Lee’s Summit is one of those neighborhoods that has it.  Sometimes it’s hard to articulate exactly what that is, but we all know if we go spend time down there,” he said.

Copaken spoke about residential development, especially downtown, which has seen continued growth.  But, he’s especially pumped about the renewed discussion of a downtown baseball stadium.

“That’s the catalytic project that can really push things over the edge for the whole city.   It’s good to see that there’s ownership and people actually interested in making something happen,” said Copaken.

McGurk is looking forward to the streetcar extension. He also said he’s starting to see some really healthy rent growth in the multifamily market across the entire metro area, which historically has been a cheap housing market. 

“You’re also starting to see a lot of supply fall off a cliff.  Five years ago you would hear of 12, 15 projects in downtown.  Well, there are maybe three or four that are going to be under construction and delivering in the next three years.  Supply’s really falling off which is just going to increase that rent growth . . . . It’s harder to do deals, but the juice is worth that squeeze probably,” McGurk said.

However, McGurk believes there will continue to be a demand for multifamily housing.  He noted that there is a lack of availability of single-family houses, but also many millennial tenants like the multifamily lifestyle. 

“They like having new, and they like having all the amenities. It’s just a different generation and I’m sure it will change.  Household formation is mid-30s, late-30s now. I’m not saying we’ll have an oversupply in 15 or 20 years, but I think there’s a lot of runway still for sure in multifamily,” said McGurk.

Reynolds said the pandemic accelerated every trend for industrial, with brick and mortar retail moving to warehouse.  But, the pandemic also created supply chain issues.

“It used to be all about just-in-time inventory.  That was it.  Let’s be efficient.  Now it’s just-in-case.  It’s safety stock.  We need it, and we need redundancy as opposed to just in time, which has been amazing for the industrial world,” Reynolds said.

Berenbom said LANE4’s retail product held up well during COVID because LANE4 had the right type of retail assets—the neighborhood, service, convenience-based product.

“And I think that more and more we’re realizing that retail is an integral last-mile solution for a lot of people.  There’s a lot of products where free delivery on your doorstep works, and we’re learning that there are some that don’t.  And we’re learning other ones, like haircuts, are hard to do online,” Berenbom said.

Copaken said the effects of COVID are continuing for the office market.  The uncertainty of the market makes it hard for landlords to do business, especially as tenants ponder lease renewals and change in space needs.

“I think it’s really going to be a tough year for existing landlords to keep, maintain and figure out what to do with their existing tenants.  And, it’s going to be a tough year to work on new projects. The dynamics are not in our favor right now.  They’re really in the favor of tenants,” Copaken said.

Copaken said his firm is trying to create environments that are unique, that people want to be part of and that tenants will pay up to be part of.

“So, we’re renovating, we’re spending money, we’re improving assets.  That’s kind of the only bet we can make.. We’ve decided to put in improvements that make our older buildings as if they were new, and appeal to people who are definitely going to have to pay something more but they’re going to have to pay something more for that quality they want,” he said.

Niagara Bottling to open new KCMO facility

Niagara Bottling, LLC, a family-owned beverage manufacturer headquartered in Diamond Bar, Calif., will soon open a new production facility in Kansas City, Mo.

“Niagara Bottling is excited to establish a second manufacturing facility in Kansas City, Missouri,” said Brian Hess, executive vice president for Niagara Bottling, LLC. “This new facility will allow Niagara to produce new beverage products and serve important customers in the Midwest.”

Niagara Bottling, LLC, will initially create nearly 100 jobs and invest approximately $156 million in a 634,000-SF facility at 11400 N. Airworld Drive.

Mark Long of Newmark Zimmer led the real estate search for this project.

“We want to congratulate Niagara Bottling on their expansion in the Kansas City region,” said Governor Mike Parson. “This investment and the new jobs it will create will provide even more opportunities for Missourians to support their families and advance their careers right here in our state.”

The company cited the Kansas City region’s central location, availability of skilled talent and strong community relationships as key drivers of its decision.

“We appreciate the highly competitive and attractive combination of location, infrastructure, logistics, and workforce in the Kansas City region,” said Hess. “Niagara has built a strong team and community relationships in Kansas City, and looks forward to maintaining our leadership in the areas of manufacturing, innovation, supply chain and overall environmental stewardship.”

The Kansas City region’s $226 billion food and beverage industry continues to see growth with more than 660 companies located in the area and a workforce of more than 25,000 employed in food and beverage manufacturing, warehousing and distribution.

“Niagara Bottling, LLC’s selection of Kansas City reinforces our region’s position as a growing hub for food and beverage logistics in the U.S.,” said Tim Cowden, president and CEO of the Kansas City Area Development Council. “We are pleased to welcome the new operation and are eager to watch the company expand.”