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KANSAS CITY, MO-On Jan. 15 Chicago’s HSA Commercial Real Estate announced its entry into Kansas City, buying a fully leased, 154,000-sf industrial facility at 4101-4131 N. Kentucky Ave. Though the deal is not especially large by today’s standards, the purchase is just one of several over the past 18 months that signals the arrival of the market as a location of national prominence.

Last June another Chicago area player, CenterPoint Properties Trust, completed its $10-million purchase of the shuttered Richard-Gebaur Memorial Airport, where it plans to develop a $200-million industrial, 970-acre intermodal industrial park in concert with Kansas City Southern Railroad. The Oakbrook, IL-based company intends to break ground in spring on phase one of more than five million sf of buildings. A local player, Kansas City-based Kessinger/Hunter & Co., already broke ground in October on the region’s first new-generation spec warehouse. The project, at 167th Street and Lone Elm Road in Olathe, KS, will have 653,000 sf.

Until the past few years, buildings of that size were unknown in Kansas City, but more recently companies such as Musician’s Friend, Kimberly-Clark and Case New Holland have completed build-to-suit deals for up to 700,000 sf. Kessinger/Hunter principal Dan Jensen says the time is ripe for spec options to be added.

David Hinchman, first vice president for the Kansas City industrial group of CB Richard Ellis, agrees. “We’ve seen a shift of the demand for space to be much larger increments,” he says. “In the past we didn’t have that available, so we had to build to suit anything in excess of about 200,000 sf. We lost a number of companies to other cities because of this, even though they would have preferred to be here.”

Jensen views his project as part of the city’s effort to establish itself as a relief valve for the increasingly congested ports on the West Coast. Local leaders successfully lobbied the federal government to have the city designated an official port of entry for foreign shipments destined for the US that arrive at the Port of Lazaro Cardenas in Mexico. Cargo is transported by train from Lazaro Cardenas to Kansas City.

But Hinchman says the city’s location is just as important. “Someone told me just this morning that we are within a two-day drive of 98% of the US population,” he tells GlobeSt.com. “I haven’t verified that, but I’m sure it’s close.” He says the market also provides a cheaper and less congested alternative to Chicago.

In addition to the Kessinger/Hunter and CenterPoint projects, Trammell Crow Co. is preparing to build a 500,000-sf spec building as phase one of an 800-acre development near Kansas City International Airport. The Allen Group and Burlington Northern Santa Fe Railway are planning a 700-acre intermodal park in the city’s southeast sector, but because that won’t be ready to launch till 2009, Hinchman says Allen Group is looking at a separate parcel where they could get going quickly with a 250,000 sf to 500,000 sf spec building.

According to Hinchman, improved land is selling for $1.50 to $2 a sf. He says most vacant land suffers from flooding concerns, soil composition problems or underlying geologic factors that require substantial correction to make it suitable for development. He also says many likely industrial locations lack sufficient infrastructure. He pegs annual net rents for larger distribution spaces in the upper $3 a sf to lower $4 a sf range.

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