RESEARCH 3Q 2019 KANSAS CITY INDUSTRIAL MARKET · 2019-11-27 · The Kansas City industrial market loosened in the third quarter of 2019, as negative 400,033 square feet of net absorption

KANSAS CITYINDUSTRIAL MARKET

RESEARCH 3Q 2019

© NEWMARK KNIGHT FRANK | 2019 RESEARCH | 1

MAJOR COMMITMENTS ANNOUNCED IN SOUTH JACKSON AND SOUTH JOHNSON COUNTYThe Kansas City industrial market loosened in the third quarter of 2019, as negative 400,033 square feet of net absorption was posted. Average quoted rents decreased from $4.76/SF to $4.72/SF. A total of 251,533 square feet of space was delivered to the market during the quarter, while projects under construction increased from 1.4 million square feet to 2.3 million square feet. Overall vacancy increased 40 basis points, from 5.4% in the prior quarter to 5.8%.

NIAGARA BOTTLING COMMITS TO 420,000 SQUARE FEET AT CENTERPOINT INTERMODAL CENTERThe South Jackson County submarket received positive news in the third quarter of 2019, as Niagara Bottling, LLC announced it will invest $68 million to construct a new production facility at CenterPoint Intermodal Center in Kansas City, Missouri. Niagara Bottling, an Ontario, California-based, leading bottled water supplier in the United States, will build a 420,000-square-foot, single-story industrial center at the southwest corner of U.S. Highway 71 and Missouri Highway 150. The family-owned manufacturer was assisted by Newmark Grubb Zimmer in its real estate search. The production facility is expected to bring 50 new jobs to the metro and deliver in early 2020.

I-35 LOGISTICS PARK BECOMES FULLY OCCUPIED AS ITRENEW LEASES 315,240 SQUARE FEETI-35 Logistics Park is now fully occupied as ITRenew, a Newark, California-based, global IT lifecycle management solutions company, announced in July it will lease the remaining 315,240 square feet of available space in Building C. Located at 15251-15351 South Green Road in Olathe, the Class A processing and production space will be ITRenew’slargest North American facility. ITRenew will join KGP Logistics which currently occupies 251,870 square feet in Building C. The facility is located on 52.2 acres and offers amenities including ceiling heights of 36 feet and ESFR sprinklers. ITRenew expects to move into its new space by the end of the year.

I-35 Logistics Park, located only 2.5 miles from the new Interstate 35 and Lone Elm interchange, is a 330-acre distribution complex possessing over 1.3 million square feet of buildout with the ability to expand to 4.7 million square feet. The development offers tenants a 10-year, 50% tax abatement. Prior to ITRenew’s lease, space was being offered for $3.95/SF on a Net basis.

CURRENT CONDITIONS

Projects under construction increase from 1.4 to 2.3 million square feet during the quarter.

Niagara Bottling, LLC announces it will open a 420,000-SF production facility at CenterPoint Intermodal Center in South Jackson County.

I-35 Logistics Park and 56 Commerce Center are now fully occupied as ITRenew and T.J. Maxx sign leases during the quarter.

MARKET ANALYSIS

Asking Rent and Vacancy

Net Absorption (SF, Millions)

MARKET SUMMARYCurrent Quarter

PriorQuarter

Year AgoPeriod

12 MonthForecast

Total Inventory 284 MSF 284 MSF 280 MSF é

Vacancy Rate 5.8% 5.4% 5.4% é

Quarterly Net Absorption -400,033 250,201 2,024,771 ê

Average Asking Rent $4.72 $4.76 $4.83 çâ

Under Construction 2,252,640 1,409,533 3,948,697 çâ

Deliveries 251,533 403,620 1,766,238 ê

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

$3.5

$4.0

$4.5

$5.0

$5.5

$6.0

3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 3Q19

Average Asking Rent (Price/SF) Vacancy (%)

-1.50.01.53.04.56.0

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19


T.J. MAXX TO OPEN ITS FIFTH DISTRIBUTION CENTER IN THE U.S. AT 56 COMMERCE CENTEROlathe received another major lease commitment during the quarter, as one of the largest discount clothing chains in the United States, T.J. Maxx announced in July that it will lease 144,670 square feet at 56 Commerce Center. Located on a 19-acre site at 1202 South Lone Elm Road, Building A is a Class A industrial facility with amenities including 32-foot ceiling heights, 24 docks and two drive-ins.

The 228,000-square-foot facility delivered to the market in May 2018 and is the second structure completed at 56 Commerce Center. With the T.J. Maxx lease, Building A is now fully leased. The firm will join Lanter Delivery Systems, Inc. and Gateway Classic Cars which lease 48,530 and 34,800 square feet. The new location will be T.J. Maxx’s fifth distribution center in the country and will bring an estimated 80 to 100 new jobs to the area.

VACANCY SHOULD HOLD STEADY IN THE 5.3% TO 6.1% RANGE THROUGHOUT THE NEXT FOUR QUARTERSThe Kansas City industrial market continued to benefit from significant commitments as Niagara Bottling, LLC; ITRenew and T.J. Maxx announced new transactions totaling 879,670 square feet. Positive net absorption has occurred in 29 out of the past 31 quarters, dating back to the first quarter of 2012, and quarterly absorption averaged 1.2 million square feet during the same time period. The market delivered 3.9 million square feet during the past four quarters.

The overall marketplace continues to favor tenants, as a variety of newly constructed Class A offerings are available for lease. However, the pace of development has adjusted, with the market realizing a decrease in under construction activity of 43.0% in the past year and 61.8% over the past two years, based upon overall square footage.

Vacancy should hold steady in the 5.3% to 6.1% range throughout the next four quarters, as a portion of the 2.3 million square feet of product currently under construction delivers to the market.

LEASE/USER TRANSACTIONS

Tenant Building Submarket Type Square Feet

Niagara Bottling, LLC CenterPoint Intermodal Center South Jackson County New Construction 420,000

ITRenew 15251-15351 S Green Rd South Johnson County New 315,240

T.J. Maxx 1202 S Lone Elm Rd South Johnson County New 144,670

Murphy Warehouse Co. 1902 Warren St N Northland Renewal 101,000

SALES TRANSACTIONS

Building Submarket Sale Price Price/SF Square Feet

9700 Lackman Rd North Johnson County $13,460,000 $44 305,000

11201 NW Airworld Dr Northland $6,469,000 $59 109,630

4141 Fairbanks Ave Wyandotte County $6,300,000 $146 43,270

104 W 10th Ave Northland $1,488,500 $44 34,000

14915 W 106th St South Johnson County $2,900,000 $100 29,070

4201 NE 34th St Northland $1,625,000 $63 26,000

201 E 16th Ave Northland $4,312,500 $179 24,100

597 N Lindenwood Dr South Johnson County $1,725,000 $115 15,000

3Q 2019 KANSAS CITY INDUSTRIAL MARKET


SUBMARKET STATISTICS

Submarket Building Type

TotalInventory

(SF)

UnderConstruction

(SF)

TotalVacancy

Rate

QtrAbsorption

(SF)

YTDAbsorption

(SF)

Asking Rent Industrial Gross

(Price/SF)

Asking Rent Triple Net (Price/SF)

Total AskingRent

(Price/SF)

Downtown ALL 12,277,025 0 3.70% -152,204 -316,562 $5.68 $10.57 $9.06

Warehouse 11,778,488 0 3.30% -152,204 -247,020 $4.23 $10.57 $9.06

Flex 498,537 0 13.90% 0 -69,542 $7.33 - -

Underground 0 0 - 0 0 - - -

East Jackson Co. ALL 66,278,124 0 3.80% -136,035 -40,154 $3.94 $6.44 $4.81

Warehouse 47,541,780 0 3.80% -138,661 212,266 $3.89 $4.56 $3.94

Flex 1,716,625 0 17.20% 2,626 -27,296 $5.75 $9.98 $9.98

Underground 17,019,719 0 2.50% 0 -225,124 $2.60 - -

Midtown ALL 8,671,728 0 5.50% -25,341 -87,611 $4.79 $4.61 $4.66

Warehouse 5,735,045 0 5.60% -24,705 -145,115 $3.92 $4.33 $4.35

Flex 1,600,336 0 0.20% 10,000 28,821 - - $10.00

Underground 1,336,347 0 11.20% -10,636 28,683 $5.94 $6.24 $6.67

North Johnson Co. ALL 25,714,573 0 7.00% -103,472 -14,802 $7.33 $6.74 $5.91

Warehouse 21,007,559 0 7.00% -111,554 8,256 $6.02 $5.42 $5.39

Flex 2,207,014 0 13.10% -13,918 -53,058 $10.22 $9.49 $9.49

Underground 2,500,000 0 2.10% 22,000 30,000 - - -

Northland ALL 60,167,939 1,803,640 6.10% 108,773 764,657 $3.89 $4.41 $4.40

Warehouse 49,445,290 1,803,640 4.50% 254,210 711,801 $4.14 $4.47 $4.47

Flex 1,957,233 0 28.60% -104,937 -111,064 $7.89 $7.00 $6.63

Underground 8,765,416 0 14.00% -40,500 163,920 $2.63 $3.00 $3.00

South Jackson Co. ALL 20,483,311 434,000 4.50% 69,814 -219,489 $6.15 $5.01 $4.12

Warehouse 19,453,999 434,000 4.40% 57,007 -219,479 $6.15 $4.42 $3.94

Flex 1,029,312 0 7.10% 12,807 -10 - $8.53 $8.73


South Johnson Co. ALL 48,856,858 15,000 10.70% -227,154 644,820 $6.73 $6.37 $4.91

Warehouse 45,692,358 0 11.00% -205,985 681,854 $6.02 $4.24 $4.37

Flex 3,164,500 15,000 5.60% -21,169 -37,034 $10.50 $9.13 $11.00


Wyandotte Co. ALL 41,316,273 0 3.30% 65,586 383,668 $5.55 $3.47 $3.54

Warehouse 40,520,743 0 3.20% 48,935 395,367 $4.39 $3.47 $3.54

Flex 795,530 0 7.00% 16,651 -11,699 $6.90 - -


Kansas City Market ALL 283,765,831 2,252,640 5.80% -400,033 1,114,527 $5.11 $5.57 $4.72

Warehouse 241,175,262 2,237,640 5.60% -272,957 1,397,930 $4.61 $4.41 $4.41

Flex 12,969,087 15,000 12.20% -97,940 -280,882 $7.73 $9.02 $10.09

Underground 29,621,482 0 5.10% -29,136 -2,521 $3.53 $3.67 $3.23



SUBMARKET STATISTICS – WAREHOUSE

SubmarketTotal

Inventory (SF)

UnderConstruction

(SF)

TotalVacancy

Rate

QtrAbsorption

(SF)

YTDAbsorption

(SF)

Asking Rent Industrial

Gross (Price/SF)


Total AskingRent

(Price/SF)

Downtown 11,778,488 0 3.30% -152,204 -247,020 $4.23 $10.57 $9.06

East Jackson Co. 47,541,780 0 3.80% -138,661 212,266 $3.89 $4.56 $3.94

Midtown 5,735,045 0 5.60% -24,705 -145,115 $3.92 $4.33 $4.35

North Johnson Co. 21,007,559 0 7.00% -111,554 8,256 $6.02 $5.42 $5.39

Northland 49,445,290 1,803,640 4.50% 254,210 711,801 $4.14 $4.47 $4.47

South Jackson Co. 19,453,999 434,000 4.40% 57,007 -219,479 $6.15 $4.42 $3.94

South Johnson Co. 45,692,358 0 11.00% -205,985 681,854 $6.02 $4.24 $4.37

Wyandotte Co. 40,520,743 0 3.20% 48,935 395,367 $4.39 $3.47 $3.54

Kansas City Market 241,175,262 2,237,640 5.60% -272,957 1,397,930 $4.61 $4.41 $4.41


SUBMARKET STATISTICS – FLEX

SubmarketTotal

Inventory (SF)

UnderConstruction

(SF)

TotalVacancy

Rate

QtrAbsorption

(SF)

YTDAbsorption

(SF)

Asking Rent Industrial

Gross (Price/SF)


Total AskingRent

(Price/SF)

Downtown 498,537 0 13.90% 0 -69,542 $7.33 - -

East Jackson Co. 1,716,625 0 17.20% 2,626 -27,296 $5.75 $9.98 $9.98

Midtown 1,600,336 0 0.20% 10,000 28,821 - - $10.00

North Johnson Co. 2,207,014 0 13.10% -13,918 -53,058 $10.22 $9.49 $9.49

Northland 1,957,233 0 28.60% -104,937 -111,064 $7.89 $7.00 $6.63

South Jackson Co. 1,029,312 0 7.10% 12,807 -10 - $8.53 $8.73

South Johnson Co. 3,164,500 15,000 5.60% -21,169 -37,034 $10.50 $9.13 $11.00

Wyandotte Co. 795,530 0 7.00% 16,651 -11,699 $6.90 - -

Kansas City Market 12,969,087 15,000 12.20% -97,940 -280,882 $7.73 $9.02 $10.09


ECONOMIC CONDITIONSThe local economy continued to improve through August, with total employment growth of 1.8% and positive growth occurring in five out of ten industries, calculated on a 12-month percent change basis.

Payroll employment in Kansas City increased 60 basis points compared to the prior year registering 1.8% in August 2019. The national average decreased 40 basis points to 1.4%. Both indices have realized positive 12-month percent changes since August 2010.

The Consumer Price Index (CPI) for the United States decreased 100 basis points compared to the prior year, registering 1.7% in August 2019. The Midwest Urban CPI decreased 60 basis points to 1.5%.

Unemployment in the United States increased 10 basis points to 3.7% in August, while unemployment in Kansas City remained flat at 3.3% compared to the past quarter. Unemployment in Kansas City increased 10 basis points from a year prior.

UNEMPLOYMENT RATE

Seasonally Adjusted

CONSUMER PRICE INDEX (CPI)

All Items, 12-Month % Change, Not Seasonally Adjusted

EMPLOYMENT BY INDUSTRY

Kansas City, August 2019

PAYROLL EMPLOYMENT

Total Nonfarm, Not Seasonally Adjusted, 12-Month % Change

EMPLOYMENT GROWTH BY INDUSTRY

KC, August 2019, 12-Month % Change, Not Seasonally Adj.


19.1%

18.1%

14.7%13.4%

10.5%

7.2%

6.9%

4.9%3.8%

1.4%Trade/Transportation/Utilities

Prof/Business Svcs

Education/Health Svcs

Government

Le isure/Hospitality

Financial Activities

Manufacturing

Construction/Mining/Logging

Other Svcs

Information

Source: U.S. Bureau of Labor Statistics

TotalConstruction/M ining/Logging

ManufacturingTrade/Transportation/Utilities

InformationFinancial Activities

Prof/Business SvcsEducation/Health Svcs

Leisure/HospitalityOther Svcs

Government

-8.0% -4.0% 0.0% 4.0% 8.0%


0.0%

0.8%

1.5%

2.3%

3.0%

3.8%

Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19

Kansas City United States


3%

4%

5%

6%

7%

8%


Kansas City United States



-2%

-1%

0%

1%

2%

3%


Midwest Urban United States


Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are available at www.ngkf.com/research

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank (NKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.


MARK C. LONG, CRE, SIOR, CCIM, LEED APPresident & CEO - [email protected]

ANDREW J. GARTENDirector, [email protected]

NEWMARK KNIGHT FRANK UNITED STATES OFFICE LOCATIONS

KANSAS CITY1220 Washington Street, Suite 300Kansas City, MO 64105T. 816.474.2000

ST. LOUIS8235 Forsyth Boulevard, Suite 310Clayton, MO 63105T. 314.254.4600

LEE’S SUMMIT1485 SW Market StreetLee’s Summit, MO 64081T. 816.474.2000

http://www.ngkf.com/research

Documents

RESEARCH 3Q 2019 KANSAS CITY INDUSTRIAL MARKET · 2019-11-27 · The Kansas City industrial market loosened in the third quarter of 2019, as negative 400,033 square feet of net absorption