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Kansas City on pace for record commercial real estate growth in 2021

Area is expected to add more square footage than in any previous single year

The explosion of e-commerce is helping fuel record commercial warehouse and production facility building in the Kansas City region, says KC Smartport. (Photo: KC Smartport)

On Monday, Colliers International (NASDAQ, TSX: CIGI), a global commercial real estate management company, announced it would build a 167,000-square-foot cold storage facility in Liberty, Missouri.

The deal is notable because it continues a hot streak for the Kansas City region, which has seen a boom in the past year in commercial real estate, both in terms of companies building facilities and firms like Colliers constructing buildings even without tenants.

“The Kansas City region is among only a handful of markets across the U.S. proactively building cold storage spec space. This new facility will provide companies a speed-to-market solution to meet consumer demand,” said Elli Bowen, vice president of KC SmartPort, which is a regional economic development group in the region focused solely on commercial development. “Kansas City’s centralized location, low operating costs and infrastructure network, coupled with available spec space, further positions the Kansas City region as a hub for food and beverage operations.”

John Stafford, executive vice president of Colliers Kansas City, said the region represents an opportunity for cold storage, due in part to the growth in e-commerce.

“The building will be specifically designed to accommodate the unique requirements of cold storage users to capture the demand, primarily tied to the expanding food and beverage industry, due to the rise in online grocery shopping, delivery, increased consumption of frozen/prepared meals, and consumer expectations for quick services,” he said.

When groundbreaking officially occurs in July this year, Colliers will join a growing list of companies building or opening facilities in the region, including Chewy, Urban Outfitters and Amazon (NASDAQ: AMZN), which is building two facilities in the region. When completed, Amazon will have 10 facilities in the region covering more than 4 million square feet. Chewy opened its 796,000-square-foot facility designed for e-commerce fulfillment last year.

Other projects of note include NorthPort Development, which is building a 1 million-square-foot facility; Hunt Midwest, which is building a 700,000-square-foot facility; and Scannel Properties, which has separate projects planned covering more than 5.5 million square feet in total.

Chris Gutierrez, president of KC Smartport, told Modern Shipper the trend of companies looking to the region started about 10 years ago but accelerated during the COVID-19 pandemic. Bowen added that about 90% of the space being built is leased prior to construction. In 2020, more than 8 million square feet of new space was delivered and 16 million square feet, all new space, was under active construction. KC Smartport expects around 15 million square feet to come online in 2021, a single-year record for the region.

“Chris and I are always boots on the ground talking to developers and partners and pushing to [develop new space],” Bowen said, noting that more than 2.5 million square feet was delivered in Q1 and 9 million square feet entered construction.

Bowen said KC Smartport, which helps facilitate the deals between recruiting new companies and connecting them with builders and government leaders to move projects forward, brought 12 deals to market in 2020, with most of those centered around e-commerce. This year, though, there has been a shift with more food and beverage companies, including producers, looking for space in the region.

Bowen added that one of the attractions is the region’s central location – 85% of the country can be reached within a two-day drive or less – but also access to all four modes of transportation. Gutierrez noted a new air terminal opening ahead of schedule in Kansas City and Amazon just added new air cargo service to the city. Companies also have easy access to rail services and even barge movements along the Missouri River.

Read: Amazon Air begins daily service to Pittsburgh, Kansas City

Read: Logistics real estate activity breaks records in Q4

The region is also investing in its infrastructure. Kansas passed a 10-year transportation bill just prior to the start of the pandemic and Gutierrez noted that the Missouri Legislature passed a fuel tax increase to pay for transportation. That bill is awaiting the governor’s signature.

“We see this really balanced approach to how the region is growing,” Bowen said. “The region is very proactive [about] overplanning our transportation.”

As KC Smartport talks to prospective companies, Gutierrez said several requests continually come up, including higher ceiling heights to support warehouse automation and vertical builds and the speed to market. Most companies want to get facilities up and running within six months.

The other big ask, like it is in other areas of the country, is skilled labor. With so many facilities opening in the region, it raises the question as to whether there is enough labor. Bowen said there is plenty.

“I won’t say we have an abundance of workforce because no region does, but what this region has done is to be very proactive [about training workers],” she said. “That’s been happening for years in the Kansas City region. There are a lot of efforts to removing workforce barriers [such as child care and training scholarships].”

Gutierrez said that there appears to be no slowdown in activity for the region, with builders already planning new space for 2022.

“We’re not in the last [inning] of the game; there is a lot of build opportunity there,” he said.

Click for more Modern Shipper articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected].