KC SmartPort Blog

<< Return to Blog List

Industrial Growth Continues

by Mary Rooney | May 04, 2020

At the end of 2019, a record 309 million sq. ft. of industrial space was under construction in the U.S., including roughly 6.5 million sq. ft. in the Kansas City region. While COVID-19 impacts have reduced leasing activity in select markets, a recent CBRE report found that 16 of the top 20 markets with space under construction have workers active and on site. KC is one of those top 20 markets. 

While challenges remain, the fact that industrial construction is continuing at such a robust level is an indicator of the continued overall strength of the sector. One example of this in the KC region is Heartland Logistics Park in Shawnee, Kansas, which will be developing two million sq. ft. of industrial space for manufacturing, distribution and warehousing. Buildings will range from 192,000 to 940,000 sq.-ft. Liberty Logistics Park in Liberty, Missouri is another example of new industrial construction in the region. The 68-acre spec development is expected to deliver the first of the three buildings in late 2020.

Kessinger Hunter shared that based on current market conditions, three things are going to drive industrial real estate in the near-term: eCommerce, increases in inventory on-hand and different sourcing strategies.

eCommerce
eCommerce order volumes have increased nearly 47% in the last 30 days. Real estate economists project every $1 billion of new eCommerce business created will drive an estimated need for 1.25 million sq. ft. of new industrial space. This growth alone is expected to create another 900 million sq. ft. of demand. 

With its central location and transportation infrastructure, the Kansas City region has always been an ideal location for eCommerce, food and distribution operations. In the past five years, KC has successfully attracted eCommerce and distribution companies pledging to create more than 7,000 jobs and invest $1.3 billion. In addition, Kansas City has a $9.4 billion food manufacturing industry with more than 200 food-based companies in the region. The region is seeing continued interest from eCommerce and food companies looking to expand or relocate their operations in the KC market. Right now, the KC region attraction pipeline includes 2.6 million sq. ft. of active eCommerce prospects and 1.75 million sq. ft. of active food-related prospects.

Inventory
With such a surge in orders, shipping delays are also increasing. Approximately 75 percent of companies report supply chain disruptions due to coronavirus-related transportation restrictions. Many of these companies are re-evaluating their supply chain with inventory on-hand, sourcing locations, customer needs, and other emerging trends. 

According to the Wall Street Journal, “warehouse developers now helping some retail and logistics customers secure additional storage space as lockdowns trigger an upheaval in consumer buying patterns believe the rapid adjustments will give way to longer-term changes in how companies manage their supply chains. That will likely include more robust eCommerce operations and more ‘safety stock’ positioned around the country as businesses soften their lean-inventory strategies.”

Industry executives say consumer habits formed during this period will likely stick and lead to growing demand as companies reset their distribution strategies. Demand could be particularly strong for temperature-controlled warehouse space to store food if consumers continue to order groceries online, a market that has been booming as more people stay at home under social distancing guidelines. 

Sourcing
As companies consider options for safety stock or other sourcing options, Foreign-Trade Zones (FTZ) may provide a solution. FTZs are secured, designated locations around the United States where foreign and domestic merchandise is generally considered to be in international commerce and outside of U.S. Customs territory. As a result, activated businesses in an FTZ can reduce or eliminate duty on imports and take advantage of other benefits to encourage foreign commerce within the United States.

Additionally, third party logistics companies locally and nationally provide an option for safety stock with flexible warehousing and other services. The emergence of flexible warehousing is a response to the growing supply chain challenges faced by industrial occupiers. The current economic and geopolitical climate has created supply chain uncertainties, especially for inventory procurement.

Leave a comment

Share

Search

Archive

E-news

Media Coverage

Blog

Contact