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2020 North America Industrial Big Box Review & Outlook

Kansas City
March 22, 2021

"Kansas City is one of the fastest-growing industrial markets in the country, with developers delivering more than 70 million sq. ft. of Class A space over the past decade. Distributors are drawn to the market by its strategic interstate infrastructure, multiple intermodal facilities and aggressive state and local incentive programs.”
Mike Mitchelson – Senior Vice President

Demographics

Kansas City’s biggest draw is its ability to easily reach a large portion of the country. More than 2.4 million people live within 50 miles of the market core and close to 15 million people or 6 million households are within 250 miles.

Figure 1: Kansas City Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of just under 32,000 is expected to grow by 10.9% over the next decade. The average wage for a non-supervisory warehouse employee is $14.03 per hour, on par with the national average.

Figure 2: Kansas City Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 206 economic incentives deals totaling more than $467 million at an average of $23,923 per new job in the Kansas City metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among the top incentive programs in Kansas is the High Performance Incentive Program (HPIP), which offers a 10% tax credit for capital investment totaling more than $1 million. To qualify, for-profit manufacturing companies must pay above-average wages and make a significant investment in employee training.

Among the top incentive programs in Missouri is the Missouri Works Program, which provides payroll rebates and discretionary income tax credits for new jobs. To qualify, at least two full-time jobs must be created with wages exceeding 80% of the average county wage.

Figure 3: Kansas City Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

Kansas City’s central location gives it access to 85% of the U.S. population in two days. Numerous ground, air, water and rail transportation options make it one of the most logistics-friendly industrial markets in North America. Kansas City has five Class I rail lines intersecting the region (Kansas City Southern, Burlington Northern Santa Fe, Canadian Pacific, Norfolk Southern and Union Pacific), four of which have intermodal facilities.

Four major U.S. interstate highways (I-35, I-70, I-29 and I-49) intersect the region, which has 30% more interstate miles per capita than any other city in the nation. Kansas City also scores very low in traffic congestion.

Kansas City International Airport is one of the best locations in the U.S. for air cargo and distribution development. It moves more air cargo than any other airport in the six-state region and will add a new terminal in 2023.

Kansas City is on the Missouri River, the largest navigable inland waterway in the U.S. Port KC has more than 900 feet of shoreline that includes three load cells and docking structures for 14 barges. The port terminal has an annual capacity of 800,000 tons and provides rail and truck transfer, covered storage and product distribution.

Capital Markets


"Expectations for a record year of development in 2021 will attract new investors to the market. Other positive market fundamentals include sustained rental rate growth and compressing cap rates for both Class A and Class B assets. Cap rate compression of between 25 and 50 bps for Class A bulk is expected in 2021"
Michael Caprile – Vice Chairman

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

Robust demand for space improved all fundamentals in 2020. Transaction volume nearly doubled year-over-year to 5.5 million sq. ft., leading to a 38.7% increase in net absorption to 6.3 million sq. ft. The direct vacancy rate decreased 40 bps to 4.7% despite 5.2 million sq. ft. of construction completions. Another 6.4 million sq. ft. is currently under construction, 25% of which is preleased.

3PL providers accounted for 34.9% of total transactions last year, followed by e-commerce companies at 26.1%. Despite the increase in activity, taking rents were on par with 2019 at $3.59 per sq. ft. The large amount of under-construction product will give occupiers more options for first-generation space and keep transaction volume strong without an increase in taking rents.

Figure 5: 2020 Occupier Transaction Market Share

Note: Includes transactions signed in 2020.
Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics Leader
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist, Head of Global Research & Head of Americas Research
+1 617 912 5215
Spencer Levy
Global Chief Client Officer and Senior Economic Advisor
+1 617 912 5236