DBIA-KC hosted panelists Austin Baier, first vice president at CBRE; Robert Ciston, AIA, vice president at BRR Architecture; Greg Dean, director of business development at Miller Stauch Construction; and Jason Sanders, division manager – mission control at Turner Construction; for a virtual discussion on Wednesday, February 17 covering the industrial, data center and distribution facility markets in Kansas City. Laura Terrebonne, business development lead at McClure and DBIA-KC president, moderated.
The Kansas City industrial market is continuing to boom with no signs of slowing down in the near future.
“We’ve seen development at a pace that hasn’t happened in Kansas City ever. You know, for 2021, we’re expecting there to be 10 to 12 million SF of new construction. And, fortunately for all the developers in our market, we’re seeing the demand for that space matching it,” said Baier.
Baier said that users from all across the country are looking at Kansas City as an important part of their distribution market, and overseas investors also are investing in the market, raising Kansas City’s profile.
According to Dean, there are three factors for a successful industrial project: the right box at the right price with the right schedule.
“It’s speed to market. How fast can we get that building up and operating,” said Dean.
With the world continuing to generate and use more and more data and the quickly evolving technologies, data centers are a growing market. Although Kansas City has not yet seen that growth, Sanders said that Kansas City is on the cusp of seeing some significant data center work.
“People are going to be smarter and make a lot of money doing cool stuff. But it’s all going to drive usage, storage and that’s going to drive data centers even more,” said Sanders.
Sanders said there are two primary criteria that drive where data centers are located. The first is incentives offered by the state. Iowa and Nebraska offered incentives years ago, and as a result, several data centers are located there. The second is the cost of power because data centers use a lot of energy.
As the demand for data centers continues to increase, Sanders is optimistic that Kansas City will land a data center project.
“There’s some interesting things that could happen in Kansas City. And from my experience, it’s typically once one or two big data centers come in. It’s kind of like a magnet, where others will join in the fun. So I like to think that a year or two from now, we’re talking about all the data centers we’ve built in Kansas City,” said Sanders.
The critical criteria for attracting distribution centers to a market is not power needs or incentives, but it is getting product to the people quickly, said Ciston. As a result, there is increased demand for facilities located in the urban core. This creates unique challenges for users that rely heavily on automation and other technologies.
“The buildings we’re going into lots of times we’re retrofitting and they’re not always recent build and so how do you plan for conveyance or automation, self-driving vehicles, electric vehicles, drones and it’s all out there and it’s all becoming pretty critical, how we get product to people,” said Ciston.
Baier said that as demand for industrial space increases, Kansas City will continue to build speculative buildings. He projects that 2021 will see approximately 10 million SF of new speculative space. Baier said that users coming into the market don’t have time to wait 12 to 18 months for their building to be built.
And, the size of the spec buildings is growing. Baier said when the spec trend started growing in Kansas City, the buildings were 150,000 to 200,000 SF. Today, many spec buildings are 400,000 to 600,000 SF, with some approaching 1 million SF.
“I feel like there’s more and more developers talking about the million SF mark. That’s partially because we’re having some larger out of town developers looking at the market,” said Baier.
Baier said the industrial market is seeing demand nationally for cold storage. He said building a speculative cold storage building is more difficult than a speculative distribution center because of the temperature requirements. And, said Dean, there’s a significant cost to operate a cold storage building. Once the building is cooled, the cooling cannot be shut off.
“With a spec building it can sit empty for just a little bit of time, but cold storage, you really have a very, very short fuse to get a tenant into that building before those costs become real and the risk is just too large to take on,” said Dean.
Baier said that speculative buildings for cold storage are being leased up very quickly in other parts of the country, and he predicts that Kansas City will see a speculative cold storage building this year.
Photo courtesy of Miller Stauch Construction.