HEARTLAND SNAPSHOT, APRIL 2006

Kansas City Industrial Market

Olen Monsees, President, B.A. Karbank & Co./CORFAC International

Other significant developments taking place in the area include Medline Industries’ 360,000-square-foot project in Executive Park, Kansas City; System Material Handling’s construction of a 230,000-square-foot office/distribution facility on 120 acres in Gardner, Kansas; Ameri-Source Bergen Brunswick’s 350,000-square-foot office/distribution development; and Rapid Built Development Company’s 220,000-square-foot development and Herff Jones Printing’s 128,000-square-foot project in the Mid Pointe Corporate Center in Edwardsville.

While there is little speculative development underway, the current developments include Block & Company’s 75,000- and 135,00-square-foot projects in the Johnson County market; Opus’ 65,000-square-foot office/warehouse in the Kansas City Road Business Park in Olathe, Kansas; and Wilhite Development’s (625 Adams Company) recently completed 100,000-square-foot bulk warehouse in Armourdale Industrial District in Kansas City, Kansas. “Many of the traditional developers [such as] Trammell Crow Company, Karbank Development Company and Kessinger/Hunter & Company have not developed any spec properties in the last few years,” Monsees says.

Most developers are still looking for bulk distribution tenants that require 100,000 square feet or more. Johnson County is the exception. “Tenants tend to be more high-tech or service-oriented, with a larger amount of office space [in Johnson County],” Monsees explains. A major tenant in the area is Wagner Industries, which recently leased 489,000 square feet at 5414 Front Street in Executive Park, Kansas City. DoorLink Manufacturing Company recently leased 120,000 square feet at 1501 Taney in North Kansas City, Missouri. Other transactions include TNT’s leasing of 120,000 square feet at 4700 Deramus in Kansas City, Missouri, and 100,800 square feet at 3850 North Kimball in Northland Park, Missouri. Amcor Pet Packaging recently took 120,000 square feet at 11560 West 110th Street in Lenexa, Kansas.

For Class B bulk warehouse space, rental rates range from $2.75 to $3.25 per square foot. Newer distribution buildings with 30-foot clear heights lease from $3.75 to $4.25 per square foot on a modified net basis. Service center and light industrial buildings with office space in the 10,000- to 25,000-square-foot range have rental rates ranging from $6 to $8 per square foot. The vacancy rate for the overall Kansas City market currently stands at approximately 9.5 percent.

According to Monsees, Northland Park, M210 & Kimball, Kansas City, Missouri, and the areas near the Kansas City Industrial Airport around 112th Street and North Congress should be watched for future development. “These areas will see future growth [because] they have a large amount of land available with reasonable access to utilities,” he explains.

While the Kansas City industrial market is in good shape, it does not yet appear strong enough to encourage substantial development of speculative bulk distribution buildings. Starting this year, Monsees believes there could be some development of smaller service center and office/warehouse product, particularly in Johnson County. “It is anticipated that 2006 will continue to see a net absorption of space and a very limited amount of spec development. A number of owner-occupied and build-to-suit projects [should be] completed as the year develops,” he says.

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