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Kansas City Industrial Sector Continues to Hit New Records

by Mary Rooney | Nov 09, 2021

The Kansas City industrial market continues to shine with record construction, increased demand and overall growth projections. According to the most recent Cushman & Wakefield U.S. Industrial Marketbeat report, the Kansas City market has 12,355,549 sq. ft. of industrial space under construction, with 8,432,564 sq. ft. being speculative construction. 

The Newmark Zimmer Q3 report revealed the Kansas City industrial sector continues to eclipse new records for development, pushing overall market inventory past the 300-million-sq.-ft. milestone. Kansas City is now one of 16 industrial markets in the U.S. with at least 300 million sq. ft. of industrial product. 

Kansas City is one of the most active markets in the U.S., ranking sixth in percent of under construction to market size, eighth in percent of deliveries to market size and 13th in percent of absorption to market size. 

The CBRE Q3 Marketview Report shared that the Kansas City industrial market posted more than 1.2 million sq. ft. of positive net absorption in Q3 2021 and over 5.1 million sq. ft. year-to-date. Five buildings were completed in Q3 2021 with a total of 1.9 million sq. ft. of space. Build-to-suit completions totaled 1.2 million sq. ft. year-to-date and speculative completions totaled 5.5 million sq. ft. year-to-date. An additional 2.6 million sq. ft. of space broke ground in Q3 2021, and an additional 3.3 million sq. ft. of speculative space is expected to break ground in the first half of 2022. 

The JLL Q3 Industrial Insight report said construction continues to advance at a steady pace, primarily in the Northland, Wyandotte County and Johnson County submarkets, each exceeding 2.3 million sq. ft. under construction. Market-wide net absorption and deliveries are both on pace to reach five-year highs.

Cost increases and delivery delays, along with rising demand and steady pre-leasing of new construction are the primary factors behind the pressure on market supply. The industrial real estate market in Kansas City remains dynamic and competition for space appears to be one of its defining features.

The Colliers 3rd Quarter 2021 report provided insight on local and national industrial trends. The outlook for the industrial sector remains robust, especially in the near-term, thanks to a recovering economy and strong eCommerce trends. Essential indicators for industrial real estate, including loaded inbound container volumes and intermodal rail volumes, continue to rise. Rail traffic has grown consistently, with total annual volumes up more than 12% through the latest reported figures. Suppliers are increasingly gravitating towards rail for inland transportation as it is more cost-effective relative to trucking, especially as fuel costs continue to rise. Recently, the Cass Freight Index showed volumes of goods being shipped by road and rail in North America returning to pre-pandemic levels. As rail and truck traffic continue to increase, Kansas City remains well positioned for future growth.

Growth in investor demand for industrial properties continues to surpass all other property types. From a national standpoint, core markets will continue to prosper. Look for the largest increases in emerging markets near logistics hubs and infill markets with large population centers, as investors look to increase their last-mile industrial portfolios. 

The CBRE report mentioned that the modern bulk distribution market has increased in size from 14.4 million sq. ft. to 58.0 million sq. ft. since 2012 (303% increase). The continued dramatic increase in the modern, state-of-the-art warehouse market is necessary to meet demand as Kansas City has transitioned into a national strategic industrial market.

Learn more about available real estate in the Kansas City region.

 

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