HEARTLAND SNAPSHOT, SEPTEMBER 2005

Kansas City Industrial Market

There is a lack of quality industrial development sites in the Kansas City metropolitan area, according to Mark Long, senior vice president of Kansas City, Mo.-based Zimmer Real Estate Companies. “Development sites and industrial park properties are moving farther and farther away from the city,” he says. Speculative building has started again for the first time in many years, and the next generation of buildings in Kansas City will be completely flexible, accommodating users with a high level of office or general warehousing requirements. “These new buildings also will focus on sustainable design and lower operating expenses,” Long says.

In Johnson County, College Crossing currently is under development with two speculative buildings. “These buildings will get rented and spark development, as there is a lack of high quality industrial buildings on the market,” he says. “The older buildings will continue to struggle, but speculative buildings and modern buildings will have success.”

Johnson County continues to draw the majority of the region’s industrial development due to a large number of existing businesses and several small developments that serve as incubators for companies to grow into larger buildings. Lenexa and Olathe, as well as Shawnee, are the primary benefactors of this development.

Most institutional developers have begun to pull out of the area, as Kansas City is predominately a locally controlled market with strong local active developers. “ProLogis recently put its portfolio on the market, and it is under contract to be sold to a local group,” he says. “This is indicative of the trend in Kansas City.”

The push for high-tech and manufacturing users in Kansas City has slowed. Developers are focusing on generic buildings to accommodate more typical office service showroom users as well as distribution users.

No major tenant is absorbing the majority of space; local companies are driving the market. There are no new tenants moving into Kansas City creating a large demand for space. Public warehouse companies have started to lease space again.

Rental rates are beginning to rise. Flex space in Kansas City’s market is offered in the range of $5.50 to $8.50 per square foot, and warehouse distribution space is offered at $2.75 to $4.25 per square foot, all gross industrial. “With a steady increase in demand and several industrial buildings being rented in the last 6 months, rental rates are beginning to level off and stabilize,” he says. “Vacancy rates in Kansas City are surprisingly low at 8.3 percent.”

The next emerging Kansas City submarket is Wyandotte County and Edwardsville on the Kansas side and Eastern Jackson County on the Missouri side. “The Wyandotte County and Edwardsville submarkets will thrive as a result of being relatively close to the city’s core and having easy and efficient highway access,” Long says. “There is ample ground in these submarkets, as well as a pro-business government.”

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