Distribution

Spec buildings, rail assets are bringing a new vigor to this region's distribution efforts.

A new generation of large, high-tech distribution centers—including some of the first speculative industrial buildings constructed here in years—is among the most visible trends in the region’s growing distribution market.

Kessinger/Hunter & Co. is involved with some of the largest recent spec buildings added to the local market. The first, completed in 2008, is 600,000 square feet and today houses operations for FedEx and Bushnell Outdoor Products. An even larger, 800,000-square-foot building is just the first of three additional structures in I-35 Logistics Park near 151st Street in south Johnson County.

These, and a number of owner-occupied buildings throughout the region, are the result of several business forces at work. Among those buildings is the new 1.1 million square foot, $35 million Coleman Co. facility, which opened in 2010. Nearby also in Gardner, KS is the 450,000-square-foot Kimberly-Clark building.

“Kansas City has a vacancy rate in industrial space below 6 percent,” said Dan Jensen of Kessinger/Hunter. “And when you go to the big buildings, we’re devoid of them. You really don’t have a viable product right now to offer a large, modern distributor.”

A major component of the modern buildings relates directly to the structure’s size—although it’s more a matter of height than square footage. Development experts say it’s all about the pallet positions and the number of pallets you can stack; a 36-foot ceiling is that much better than a 24-foot ceiling. And even though the costs for high-cube, state-of-the-art structures is higher, it’s cheaper to build up than to build out.

Those sizes of buildings represent a significant adjustment from the past. Developers note Kansas City’s large amount of warehouse and distribution space historically, but much of it less than 100,000 square feet, too small for the operations many of the national-level companies require.

Behind all of this are larger, more fundamental trends involving labor costs and higher-capacity transportation. And, while larger buildings offer efficiencies that are attractive in any economy, the benefits are especially appreciated in the present one.

As business-to-consumer commerce has become more important, with trucks delivering goods to businesses or homes in a competitive time, Kansas City’s distribution advantages take on new importance. Its location is unbeatable for over-the-road shipping; from here, a company can reach 80 percent of the nation’s population with two-day ground, and in three days, the entire population of the U.S. and much of Canada and Mexico. And intermodal centers coming on line will leverage the benefits of trucking with rail distribution.

“We have not one, but two large intermodal centers under way in Kansas City,” said Tom Reiderer of the Southwest Johnson County Economic Development Council. “The reason they make sense is that a train fully loaded can go one mile on a gallon of fuel, but a fully loaded train equals about 240 semis.”

C. Doniele Kane, community affairs director for Kansas City Southern, agreed. “Most of the freight traffic between the U.S. Midwest and Mexico is currently moving via truck, so KCS is targeting that market to convert a significant portion of that traffic from truck to rail,” she explained. A particular focus has been on investing in intermodal facilities along its International Intermodal Corridor. That she said, would ensure that rail service is competitive with truck traffic along the Interstate 35/NAFTA trade corridor.

Large-box distribution centers demand a significant footprint, and not every area within greater Kansas City has that kind of space available, along with other requirements such as highway and perhaps rail access. Topeka has locations that fit many of these requirements, as do portions of Wyandotte, Jackson, and Clay counties. Not surprisingly, however, much of the current growth is in southern Johnson County and the area along the border of southern Jackson and Cass counties, where the intermodal centers are gearing up.