Industrial development and new construction in Kansas City is at, or near, a standstill. “A major shortage in the Kansas City industrial market is the lack of finished available land sites from 5 acres to 50 acres,” says Patrick McGannon, director of industrial brokerage with Kansas City-based Kessinger/ Hunter & Co.-Cushman & Wakefield. “Very few developers are speculating on land sites because of the difficulty in making money with the slow absorption of land in Kansas City.”

There are significant industrial developments beginning to take place in the area such as the 30-acre expansion of Pine Ridge West Business Park in Lenexa, Kansas, primarily used by flex and tech users. The 80-acre Midpoint Business Park in Edwardsville, Kansas, along the Interstate 435 corridor with sites in the $2.75 per square foot range, is experiencing development for distribution.

Also, work is being completed on a levee in Riverside, Missouri, which will transform a flood plain into a minimum of 500 developable acres for future industrial sites. “The land is centrally located in the metropolitan area and should be strong competition for the Johnson County submarket,” says Michael Mitchelson of CB Richard Ellis’ Kansas City office.

Most of the new construction for owner occupied buildings continues in major suburbs of Kansas City, such as South Johnson County on the Kansas side. On the Missouri side, Lee’s Summit and Northland Park, north of downtown Kansas City, have seen new construction.

“Most of our steady growth has come from local companies in smaller increments,” McGannon says.

Major leases in 2002 include a Sprint North Supply lease of 202,000 square feet in Lenexa. Carlisle Systems leased 180,000 square feet in Edwardsville, Kansas. Newell Rubbermaid has taken their 498,000-square-foot building off of the market to re-use the space. “This helped the Executive Park submarket of Kansas City considerably,” McGannon says.

Other major leases include Demdaco’s lease of 149,000 square feet in North Kansas City’s Paseo Industrial Park. AZ Automotive leased 67,200 square feet at 16945 W. 116th Street in Lenexa.

Kessinger/Hunter reports a range in rental rates for distribution buildings in Kansas City at $2.60 per square foot net for second-generation buildings, and approximately $4.50 per square foot net for units of 50,000 square feet and above. Office/warehouse spaces in the 10,000 to 50,000-square-foot range can lease for $5 net to $7 net per square foot.

According to CB Richard Ellis, rental rates for office/warehouse space are $4 to $5.25 per square foot for 20,000 to 50,000 square feet, $2.75 to $3.75 per square foot for 50,000 to 100,000 square feet and $1.75 to $2.25 per square foot for 100,000-square-foot spaces and above.

Vacancy rates for the Kansas City metropolitan area are hovering at about 8.5 percent. The majority of vacancies exist in larger second-generation spaces of 30,000 to 100,000 square feet. Speculative construction totaled approximately 989,240 square feet in 2002.

There are multiple submarkets over the next few years that should see a lot of activity including the K-7 corridor in Shawnee, Kansas, the I-435 corridor in Edwardsville, along Interstate 635 in Riverside, Missouri, along Highway 169 into Spring Hill, Kansas, and Interstate 470 along Lee’s Summit. “Most of these sites are suburban areas of Kansas City following major interstates since very few sites remain available within the I-435 Beltway,” McGannon says.

“This has recently shifted due to the fact outlying areas within 10 miles of the interstates are offering substantial economic incentives for businesses to locate in their communities,” says Brian Staton of CB Richard Ellis’ Kansas City office.

“There will be limited speculative development over the next 18 months and developers will continue to look to the build-to-suit market to spur any development happening in the Kansas City area,” Mitchelson says. “As many tenants still prefer functional second generation space at lower rates than new construction.”

Patrick McGannon is director of industrial brokerage with Kansas City-based Kessinger/ Hunter & Co.-Cushman & Wakefield.


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