Kansas City’s Freight Fortune

 Kansas City already bears the most tonnage of freight in the U.S. as a waypoint from here to there for all manner of consumer goods and commodities, and …

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 Kansas City already bears the most tonnage of freight in the U.S. as a waypoint from here to there for all manner of consumer goods and commodities, and the city is gearing up for big investments that will further increase its dominance as an intermodal hub. A new intermodal center and millions of square feet of industrial and storage space are planned to open and Ford is reviving the city’s presence in the auto industry with a new assembly plant. One of the new industrial parks, which is replacing a former Air Force base, symbolizes a shift in the city’s economic plan for distribution dominance. For more on this continue reading the following article from National Real Estate Investor.  

This year is expected to be a turning point in the already tight Kansas City industrial market, as massive intermodals double in size, leases are signed at speculative distribution centers (built to handle increased loads) and the reborn auto industry fuels manufacturer expansion and supplier leases.

Already carrying the most railway tonnage in the United States, the Kansas City region has been slowly building its mid-country distribution hub status. Poised to explode just before the recession, the resilient industrial market’s return has pushed the region to increased occupancies and growth. The Kansas City market has almost 200 million sq. ft. of industrial space, saw 1.9 million sq. ft. of absorption in 2012 and ended the year with a 7.7 percent vacancy rate, according to a recent Cassidy Turley report. Both figures are above decade-long norms.

Early this month, railway BNSF held a sneak peek for business leaders at its new $250-million intermodal center in Edgerton, Kan. The project adds to the railway’s current Argentine Yard in Kansas City, Kan., which is operating at over capacity, handling more than 330,000 containers in 2012. The new intermodal, which will handle 500,000 containers, had some stumbles in the recession and through legal challenges over environmental impact, but is now poised to open by the third quarter to connect the ports of Los Angeles and Long Beach to Chicago.

In preparation for the opening, there’s been a flurry of activity. The Allen Group, based in San Diego, has brought on partner NorthPoint Development to start work on a 500,000-sq.-ft. spec building at Logistics Park Kansas City, the distribution side of the BNSF intermodal center. In addition, a venture by Kessinger/Hunter & Co. and SunLife Financial recently completed construction on an 821,663-sq.-ft. speculative building in the I-35 Logistics Park in Olathe, Kan., close to the new BNSF property.

Dan Jensen, a principal at Kessinger/Hunter, says the venture has secured a tenant for 24 percent of the I-35 park building. The venture also is planning two more centers totaling about two million sq. ft. at the park. He says big-box development is somewhat new to the region, where 75,000 sq. ft. used to be large, but the amount of properties larger than 200,000 sq. ft. has grown 50 percent to almost 20 million sq. ft. in the past 10 years.

“It costs about the same for these large companies to staff a one-million-sq.-ft. box as a small one,” Jensen says. “Everybody’s trying to drive costs down, and going intermodal through large distribution centers is cheaper than long-haul trucking. Also, you can hit 80 percent in the continental United States within two days truck travel, which is a good fit for the booming ecommerce demand.”

Chris Gutierrez, president of the logistics economic development agency KC SmartPort, says that the Centerpoint KCS Intermodal Center is finally picking up tenant interest in the distribution side. The 370-acre intermodal serves Kansas City Southern rail lines, and is joined by a new 970-acre industrial park. The new park, which replaced the former Richards-Gebaur Air Force Base, also saw a slowdown during the recession, Gutierrez says. “But they’ve put about $30 million of infrastructure to get that park ready, and everything is done there,” he says.

The resurgence of the auto industry has boosted the region’s manufacturing attractiveness. Ford is expanding its three-million-sq.-ft. assembly plant in Northland with a new 420,000-sq.-ft. stamping plant, and General Motors is adding to its 3.6-million-sq.-ft. plant in Wyandotte County with a new 450,000-sq.-ft. paint shop.

Suppliers have flocked to the new investment. Ford supplier Magna International is opening a 180,000-sq.-ft. facility, and Adrian Steel is leasing 11 acres for a new logistics center to build interiors for the new Ford Transit van. Adrian announced its lease April 9, and plans to locate at the 2,500-acre Hunt Midwest Business Center in Kansas City, Mo, where Ford also recently leased a 25-acre staging location for its North American Vehicle Logistics Outboard Shipping Center.

Jensen says he’s very bullish on the Kansas City market, and figures the big box centers will just keep growing. “I think realistically we could see another 20 million sq. ft. of new product over the next 10 years,” he says.

This article was republished with permission from National Real Estate Investor.

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