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2020 Kansas City Industrial Market Outlook

by Mary Rooney | Mar 03, 2020

By Charlie King, KC SmartPort Intern, Northland CAPS Student

The Kansas City region continues to experience rapid growth in the industrial space. Major companies are moving their manufacturing and distribution operations to Kansas City because of the region’s central location, transportation infrastructure and skilled workforce. As demand increases from e-commerce, third-party logistics and automotive manufacturing, more industrial speculative space is being built. According to the CBRE 2020 KC Market Overview, between the years of 2015 and 2019, Kansas City developed 29.7 million sq.-ft. of industrial space, one of the highest in the Midwest.  

The Colliers 2020 Forecast Report said currently more than 4.70 million sq.-ft. of speculative inventory remains under active construction within the Kansas City market, with additional developments in the pipeline. An additional 1.43 million sq.-ft. remains under construction within build-to-suit projects. Industrial real estate demand levels continue to be a direct result of distribution growth, coupled with occupiers desire to modernize and expand existing supply chains in order to keep pace with their growing eCommerce traffic. This has led to many companies consolidating multiple existing warehouses into a centralized and well-positioned larger state-of-the-art facility in Kansas City. 

The Kansas City market remains a benefactor because of its ideal geography, infrastructure, and steady supply of speculative product, which caters to the needs and timing requirement of 3PL and eCommerce growth. Reverse logistics is one of the fastest growing demand drivers for industrial real estate. According to consumer surveys, nearly 30% of online orders are returned. While retailers look for alternative options, such as free in store returns or even having consumers keep items they don’t want for free, online returns will be a demand driver and growing opportunity for industrial real estate going into 2020 and beyond .

The Cushman & Wakefield Kansas City Industrial Report predicts the Kansas City industrial market will continue to expand in 2020. Preleasing activity at Northland Park and scheduled expansions in other buildings are providing a strong base for 2020. Logistics Park Kansas City (LPKC) continues to expand and should offer an ample base for tenants in search of 600,000 sq.-ft. or more, but for the Kansas City market to continue its impressive growth it will take more than larger-sized tenants. It appears there will be even more demand for last-mile logistics and modern spaces that can be demised to between 50,000 sq.-ft. and 200,000 sq.-ft. for tenants that want to be located closer to the regions urban core. The Riverside submarket, Three Trails Industrial Park and Northland Park have all shown how well-located, new construction remains in extremely high demand. The challenge for developers and the market will be to continue to find sites close to the major residential areas that are suitable for modern distribution development.

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