America’s Heavy Lifting Is Done Here

Fifty years ago, the Kansas City region was one of the nation’s Top 10 markets for logistics facilities, ranked ninth nationally with 95.65 million square feet of system capacity. 

A lot has changed in the decades since to reshuffle the rankings; Charlotte, N.C., bumped this region from the Top 10 in 1988. The trends that allowed other markets to move ahead in distribution and warehousing emerged as the nation’s population surged from 216 million then to 330 million today—up more than 50 percent—but considerably faster on the coasts than here.

But that’s the nice thing about change: It keeps changing. The factors that once made this region one of the nation’s freight centers have tilted back in Kansas City’s favor. Over the past decade-plus, this has been among the nation’s very hottest markets for industrial property growth. We still haven’t recovered Top 10 status—but the signs say we’re well on the way.

Since the 2020 pandemic rewrote the rules of the national supply chain—and saw unprecedented consumer demand for items once consigned to the aisles of retailers—the growth here has been historical. No other word describes the increase of more than 40 million square feet of inventory added in that time frame. That burst of activity has catapulted Kansas City back up the rankings; it’s now No. 15 by square footage in logistics capacity despite an MSA population that ranks No. 31.

Multiple factors have driven that growth, but two in particular stand out: We’re close to the dead center of the nation and its dispersed population, and our region isn’t constrained by either mountains or oceans. 

The list of contributing characteristics has been robust. Centrality itself means little without access, and the Kansas City region has megatons of it, starting with strategic highway infrastructure. That includes Interstates 35 (Mexican border Great Lakes), 70 (connections from California to the East Coast), 49 (south to the Gulf Coast), and 29 (north to Canada). 

Rail? How about four Class I railroads running through the region, highlighted by the western hemisphere’s first network completely traversing Canada, the U.S. and Mexico, all the way to ports on either the Gulf of Mexico or the Pacific Ocean. That was made possible by the late 2021 agreement to merge Kansas City Southern Railway into Canadian Pacific, creating Canadian Pacific Kansas City.

That will only enhance this region’s status as the nation’s most active rail center, measured by tonnage of freight moving in, out and through.

Bulk land sites abound, again, uninhibited by geological barriers. That has allowed the explosive growth of spec-built warehouses on a previously unfathomable scale over the past two decades. That movement started with a single 600,000-square-foot facility built on a speculative basis back in 2008, and continues today with million-square-foot (and up) sites attracting the attention of national retailers.

For most of the 21st century, industrial development here has benefitted from outside influences, as well—low interest rates foremost among them. Access to comparatively cheap capital helped drive a monstrous 13 million square feet of new capacity in this market in 2022 alone. But that was the year interest rates began to rise, almost in tandem with inflation. That produced a double whammy, reining in new construction to something closer to historical norms—about 3 million square feet a year prior to the boom.

Increasing Demand

The demand curve reflected that trend. Net absorption dropped to 4.1 million square feet through the third quarter of 2023, compared to the previous year’s 15.6 million square feet. Still, last year’s figure more than doubled the pre-pandemic mark of 1.2 million square feet in 2019. Commercial realty professionals say active inquiries suggest another 14 million square feet could be in play this year. 

Dashing headlong into that frothy market have been companies like Ace Hardware, Chick-fil-A, Cnano Technology USA, Nuuly, Standard Motor Products, U.S. Motor Works and Community Wholesale Tire. Combined, they represent the breadth of the emerging logistics ecosystem here, hailing from disparate sectors that include the automotive supply chain, e-commerce, manufacturing, and food and beverage.

The current market mover for this region is Panasonic Energy’s $4 billion plant for production of electric-vehicle batteries, now just a year away from full operation. The site on the western side of the metro area, in the Kansas suburb of De Soto, is an absolute reflection of the post-pandemic world: Supply chains being strengthened domestically in the wake of the 2020 meltdown.

This sector has a “Wow!” element attached to its breadth.

While Panasonic Energy has tilted the playing field a bit, a few miles to its south sits the Gardner-Edgerton corridor, once the sleepiest enclave in the hotbed of economic growth that has been Johnson County since the 1950s. In 2012, a fledgling concern dubbed NorthPoint Development stepped in to salvage a logistics project that had been languishing in that corner of the county. The results of that agreement alone would prove transformative for the regional logistics scene.

NorthPoint’s Logistics Park Kansas City began humbly enough: a single spec building dubbed Inland Port I, covering 500,000 square feet. A little more than a decade later, the 3,000-acre master-planned distribution and warehouse development boasts more than 14.4 million square feet of operating space. And next door, BNSF Railway’s intermodal rail facility can handle 750,000 cargo containers a year, connecting LPKC tenants to a nationwide distribution network.

That’s just one of four intermodal facilities in the region: Long before it became part of CPKC, KC Southern was pushing freight through the I-49 Logistics Center, a 1,340-acre intermodal facility in south Kansas City. And Northland Park, served by Norfolk Southern, is a $250 million project a few minutes southeast of the Ford assembly plant in Claycomo. 

To the north, the region near Kansas City International Airport is also undergoing a logistics metamorphosis. No other air center within a six-state region moves more air cargo each year than KCI, and that critical mass most recently has attracted a development that redefines the phrase “game-changing.” Hunt Midwest plans to create a massive, 3,300-acre distribution hub called KCI 29 Logistics Park, the largest of its kind in Missouri. Infrastructure work has already begun on a site that eventually will offer more than 20 million square feet of Class A Industrial space, with direct access to I-29 and I-435, as well as air freight via FedEx, UPS, Amazon Prime Air, and the U.S. Postal Service. 

In neighboring Clay County, to the east, the city of Liberty has also been busy attracting development, especially with manufacturing firms that are feeding components to Ford Motor Co.’s Claycomo plant. The gravitational pull from one of the region’s biggest private-sector employers—more than 7,100 people work the assembly site—has attracted national and global parts manufacturers to NorthPoint’s North Liberty Logistics Center, as well as Scannell’s Compass 70 Logistics Park and 435 Logistics Park.

In addition to that embarrassment of riches with rail, road and aerial routes, the region also has waterway options, as Kansas City is the western shipping terminus of the Missouri River. That gives shippers access to the nation’s largest navigable inland waterway as it links up with the Mississippi River in St. Louis on its way to the Gulf of Mexico.