KANSAS CITY—Ever since Ford and GM decided to double down on their commitments to this metro region, the industrial real estate market has shown tremendous strength. In the third quarter companies absorbed space at a pace not seen in years, and the vacancy rates continued to fall, according to a new study published by Cassidy Turley.
The data show that the industrial market's net absorption was 1.83-million-square-feet. The last time it exceeded 1.5-million-square-feet was in the third quarter of 2008, when tenants absorbed 2.36-million-square-feet of space. And the strong demand has caught the attention of developers.
“So far this year, a total of 3.01-million-square-feet of bulk and modern space has been added to the industrial market, and 77% of that has been speculative,” said Michael Mayer, managing principal in Cassidy Turley's Kansas City office. “By the end of the third quarter, 84% of that newly constructed space already had been leased or sold.”
As reported in GlobeSt.com, in the second quarter the vacancy rate actually increased, from 7.7% to nearly 8.0%. However, this was the result of developers delivering 945,000-square-feet of industrial space, including three speculative buildings that added 729,000-square-feet to the market. But during the third quarter, “space taken outpaced construction completed, and overall vacancy fell from 7.9% to 7.6% -- very close to the historical average of 7.7%,” Cassidy Turley found.
Net absorption for new bulk and modern distribution facilities totaled 1.66-million-square-feet during the quarter. Alphabroder, for example, moved into a 370,000-square-foot building completed early in the year, while Amazon.com and Smart Warehousing took just-completed buildings of 261,000-square-feet and 574,000-square-feet, respectively. Flexsteel Industries also purchased a 500,000-square-foot building.
“With so much activity taking place, the outlook is positive for Kansas City's industrial market – it should remain healthy for the remainder of 2014 and most or all of 2015,” the firm said.
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