That’s especially true for national distribution interests, who have infused a boom into the spec building scene here.
By Joe Orscheln
Kansas City has long been known for its centrality and excellent transportation infrastructure. According to KC SmartPort, Kansas City is the largest rail center in United States by tonnage, has more Foreign Trade Zone space than any other city, our airport moves more air cargo each year than any air center in a six-state region, we have the most freeway miles per capita and we are at the heart of a rail corridor spanning coast-to-coast across the United States and extending from Canada to Mexico. All of these factors have played into Kansas City being on the radar of outside companies for potential distribution and manufacturing relocation.
An abundance of companies have been looking at Kansas City for potential distribution-center relocation over the past couple of years. According to many site-selection consultants, industrial real-estate brokers and economic-development professionals, Kansas City has been overlooked in the past, not because of limitations of our overall community, but simply because we lacked available industrial space for these companies to occupy. Our city was losing these prospects to competing cities such as Dallas, Indianapolis, Chicago and Memphis, where existing buildings were ready for occupancy.
Kansas City developers have been taking advantage of this momentum and capitalizing on demand for new Class A industrial space. The buzz in the industrial real-estate world is about all of the speculative development that our market has generated. All of the major developers are in the game and racing to construct buildings to capture the next deal.
With all of these new Class A industrial options, how does a tenant determine which is the best fit? The immediate answer that most companies give is overall rent costs. It all comes down to price, which is obviously an important element in any major business decision. Most companies look at rental cost as what the actual rental payments will be throughout their lease. However, there are many other elements that must be analyzed that weigh into the overall occupancy cost.
The first is transportation costs. If I am getting any of my product via air or rail, then my overall analysis has to include drayage (transport of goods over a short distance, often as part of a longer, overall move) costs. Is my overall drayage expense significant enough that it makes more sense to relocate to one of the intermodal facilities (KCI Intermodal BusinessCentre, Logistics Park Kansas City/BNSF or CenterPoint/KC Southern Intermodal Center)?
Another factor is work force. If I am currently located in North Kansas City, what happens to my work force when I move to Lenexa, for example? Can I rebuild my work force in a timely and efficient manner from my new location, and at what cost? And the most important element, where are my customer deliveries going? This ties back into transportation costs, but certainly contributes to overall costs.
With new trucking “hours-of-service” regulations, companies are limited to what marketplaces can be reached in a day’s haul. One of these regulations is that a professional truck driver is limited to 11 hours of drive time, which gives Kansas City a huge advantage. With our centrality, even with the new regulations, we can service more than 60 percent of the country in a day, and most of the remaining parts of the country in two days. If your distribution starts from outside a central location, you might not be able to service your client’s delivery needs in such a timely manner.
Timing is everything. If you had the choice between Kansas City and another market, why would you not choose the market where you can deliver product more quickly to your client? All of these elements, among others, need to be considered before making the overall leap to your new facility.
Kansas City has shown positive annual net absorption since 2011 in the industrial sector and the market continues to show very positive activity. The overall activity in our marketplace has been very strong, and shows no signs of slowing down. As our overall economy continues to surge, the industrial real-estate market will continue to thrive. It will only be a matter of time before these newest buildings are occupied and our development community continues to expand our marketplace. Keep ’em comin’!