Kansas City Industrial Summit: Key Takeaways from the MetroWire Media Panel
Sam Stahnke, Vice President of ARCO National Construction’s Kansas City division, recently joined fellow industry experts as a speaker at MetroWire Media’s Kansas City Industrial Summit. His panel discussed current trends and challenges shaping the industrial industry, locally and nationwide.
Current Market Situation
The industrial market has normalized back toward pre-pandemic levels as a backlog of space from record highs sparked by Covid hit the market and financing became more difficult. Vacancy rates in Kansas City remain relatively low, hovering around four to five percent. Although leasing activity for large spaces has slowed both nationally and locally, demand for smaller spaces and multi-tenant facilities remains strong. Many smaller tenants in the Kansas City area are actively seeking spaces between 50,000 and 100,000 square feet. Most new industrial developments, locally and nationally, are now build-to-suit projects.
Pictured: 78,664 SF Cold Storage Facility in Kansas City, Kansas, for Mies Family Foods
Construction Pricing & Material Lead Times
Construction prices are stabilizing both nationally and in Kansas City, due to subcontractor backlog not being as robust as in recent years, leading to increased competition in pricing. In the Kansas City region, construction costs have decreased in the range of approximately 3-6%, with even more significant drops in regions like the Southeast and Southwest. This shift is prompting developers and end-users to reassess and reprice their projects. Notably, prices for key materials like steel and roofing, which spiked during COVID, are now seeing the largest declines.
While many supply chain challenges have stabilized, lead times for some materials, such as electrical switchgear, remain lengthy. However, partnering with a proactive design-build general contractor can help mitigate potential scheduling issues.
Site Scarcity & Speed to Market Demands
For new construction projects, particularly those for mega-users, site scarcity and utility infrastructure continue to pose significant challenges. Many users are prioritizing speed-to-market with the goal of being operational within 12 to 18 months. While land is available in the Kansas City region, there is a limited number of sites that can meet both the necessary timeline and utility requirements. In some areas, certain cities have longer permitting and development lead times which further restrict options for users looking to meet aggressive project schedules.
While it’s impossible to completely mitigate these challenges, partnering with a design-build contractor can reduce overall project timelines.
Attracting Manufacturing Users
The shift toward onshoring and a heightened focus on supply chain resilience have significantly driven demand for manufacturing space. Incentives, such as those provided by the Inflation Reduction Act and the CHIPS and Science Act, have played a crucial role in encouraging the development of smaller-scale manufacturing projects.
For the Kansas City region, attracting these manufacturing users hinges on having robust utility infrastructure in place that can accommodate higher levels of power capacity, reliable water and wastewater systems, and natural gas lines. Developers can position themselves to meet this demand by proactively upgrading utility systems and incorporating features like reinforced floor slabs during the initial stages of construction. These incremental upgrades can greatly improve speed-to-market, reducing tenant buildout times and making properties more attractive to manufacturing users who need to get up and running quickly.
Pictured: 438,000 SF Manufacturing Facility in Olathe, Kansas, for Block Real Estate Services and end-user, Faith Technologies
Future Pipeline & Demand Drivers
Looking ahead, the industrial market in Kansas City maintains a positive outlook, driven by continued demand from users seeking smaller footprints in specialized sectors like manufacturing. As businesses increasingly focus on onshoring and supply chain resilience, Kansas City’s central location and access to key transportation routes make it an attractive destination for industrial users. The market could see further growth as declining interest rates and diminishing economic uncertainties create a more favorable environment for investment and development. Despite challenges such as site scarcity and infrastructure needs, Kansas City’s strategic advantages position it well for ongoing growth, making it a strong contender for both regional and national industrial activity in the years to come.
About ARCO National Construction | Kansas City
ARCO National Construction | Kansas City is a premier, full-service design-build general contractor with more than 30 years of experience providing clients with complete project delivery throughout the United States. As the nation’s largest builder of warehouse and distribution space, we pride ourselves in offering the best, most cost-effective, single-source, turnkey solutions and adding value to every project.
With 48 offices in major markets coast to coast, ARCO offers the strength and presence of a national general contractor with the focus, attention, and regional expertise of a local builder. ARCO’s proven design-build approach combines quality of design and construction, management of expense, and adherence to schedule into a single point of responsibility. ARCO offers preliminary design at no cost to our customers to remove the risk of substantial upfront costs.
