Incentives, industrial leasing strategy start paying off for Hunt Midwest
Rob Roberts – Kansas City Business Journal
Hunt Midwest officials are crediting incentives and a focus on smaller industrial tenants for strong leasing activity at the company’s Logistics I and II buildings in the Hunt Midwest Business Center, a 2,500-acre development at Interstate 435 and Parvin Road in Kansas City.
The following new HMBC tenants recently qualified for 25-year, 100 percent property tax abatements through an Enhanced Enterprise Zone that the business center is located within:
- American Tire Distributors Inc. opened a 108,860-square-foot regional warehouse and distribution center in HMBC Logistics II, a 200,000-square-foot, multitenant warehouse and distribution facility.
- Orbis Corp. opened a 40,777-square-foot service center for its Reusable Packaging Management division in HMBC Logistics II. The service center focuses on inventory management and cleaning of plastic reusable packaging used in the food, beverage and consumer goods supply chain.
- Spartan Motors Inc. expanded its cargo van and fleet upfit assembly operation in HMBC Logistics I to 63,169 square feet. The expansion comes less than a year after Spartan launched its all-new service line in HMBC Logistics I, which also is a 200,000-square-foot warehouse and distribution facility.
- A leading supplier to the e-commerce industry will launch a 37,888-square-foot manufacturing and fulfillment center in April at HMBC Logistics I, its first Midwest location.
“These leases validate Hunt Midwest’s decision to invest in multitenant facilities geared to tenants ranging from 40,000 square feet to over 100,000 square feet,” Hunt Midwest CEO Ora Reynolds said in a release. “Phase 5 of the Hunt Midwest Business Center includes a third 200,000-square-foot multitenant building along with room for additional buildings ranging from 450,000 to 1.2 million square feet. As businesses grow, we will have the inventory to meet their growing demands within HMBC.”
The abatements for qualified companies available through the Enhanced Enterprise Zone are based on investment and job creation.
“The EEZ is a game-changer for companies looking to locate in HMBC,” Mike Bell, Hunt Midwest’s vice president of commercial real estate, said in the release. “With the tax incentives offered, companies are benefiting greatly from substantial savings.”
With immediate proximity to FedEx and UPS hubs and a location that’s minutes from interstates 35, 29 and 70, HMBC also offers companies the ability to reach 85 percent of the U.S. market within two days while benefiting from one of the Midwest’s strongest labor pools.
“Hunt Midwest offers what we term the ‘three Ls’ of industrial real estate: location, logistics and labor,” Bell said in the release. “We are seeing a cluster effect of automotive, 3PL and e-commerce companies taking advantage of HMBC’s central location, strong workforce and direct access to public transportation.”
HMBC ultimately will include an additional 8 million square feet of master-planned, Class A warehouse and distribution space in future phases.
Serving as Hunt Midwest’s partner in the development is HSA Commercial Real Estate, a full-service firm specializing in office, industrial, retail and health care real estate leasing, management, marketing, development and financing. Besides developing and acquiring more than 50 million square feet of commercial real estate nationwide with a total value in excess of $2.5 billion, HSA Commercial Real Estate has represented owners and tenants in more than 10,000 transactions and manages a property portfolio in excess of 16 million square feet.
SubTropolis emerges as leading logistics location for animal health industry
Krista Klaus – MetroWire Media
Hunt Midwest SubTropolis is carving out a niche in the animal health logistics space, growing its veterinary industry footprint to 250,000 square feet. Over the past 12 months, three animal health companies – French veterinary pharmaceutical company Virbac, Ceva Animal Health, and IodiTech – have announced new or expanded warehouse and distribution operations in SubTropolis, which offers commissioned facilities in a naturally cool underground environment.
“SubTropolis is the total package for animal health companies and their unique requirements for product safety and climate control, providing significant operational cost efficiencies,” said Hunt Midwest President and CEO Ora Reynolds.
Virbac is currently consolidating its North American product warehousing and distribution operations in the underground business complex. According to Virbac President and CEO Paul R. Hays, the SubTropolis location will help the 8th largest veterinary pharmaceutical company better align itself within the Kansas City Animal Health Corridor, which churns out more than half of the sales generated by the global animal health industry.
“By bringing processes and people together at this Kansas City facility, we are boosting collaboration and efficiency within our manufacturing operations,” Hays said.
In addition, Ceva Animal Health and IodiTech Inc. both announced expansions in the Energy Star rated facility over the past year. Hunt Midwest Vice President Mike Bell attributes SubTropolis’ success in the animal health space to a “compelling value proposition” for companies that must adhere to industry product standards by maintaining strict temperature and humidity levels.
“The underground’s protective layer of limestone essentially offers ‘natural’ cooling that saves companies between 70 and 80 percent on utilities and equipment compared to a building on the surface,” Bell said. “There’s an ‘Aha Moment’ when companies fully realize how a SubTropolis location can substantially improve their bottom line.”
Ceva Animal Health is a case in point. CEO Craig Wallace says that consistent conditions and the ability to easily expand underground were two key reasons Ceva chose SubTropolis for a new North American warehouse and distribution center in 2015. Within a year, Ceva had outgrown its space and was able to quickly scale up to meet ongoing demand.
“The underground location is a great solution for Ceva’s current and future warehousing needs,” Wallace said. “As we add products and expand into new categories, we require scalable space and partners like Hunt Midwest who can accommodate our growth and evolve with us.”
Kansas City-based IodiTech Inc. opened a distribution operation in SubTropolis in 2016. The company manufactures and ships a variety of iodine derivatives – including animal feed minerals – throughout North America and the world.
“The ability to ship to up to 85 percent of the U.S. within two days was of critical importance,” IodiTech President Curtis Thomas said. “Our location in SubTropolis is the perfect complement to our nearby manufacturing facility.”
The growing collection of animal health assets within SubTropolis is creating an “industry cluster within a cluster” for Kansas City’s Animal Health Corridor, which will hold its annual Animal Health Investor Forum and Animal Health Homecoming Dinner August 28-29.
“Hunt Midwest SubTropolis is a valued strategic partner as we work on behalf of the Kansas City Area Development Council to attract global animal health companies to the Greater Kansas City region,” said Kimberly Young, president of the KC Animal Health Corridor.
Virbac Corporation Selects KC Animal Health Corridor for North American Distribution Center
Company consolidating distribution operations in Hunt Midwest SubTropolis for central location, flexibility
Ashlie Hand – Kansas City Area Development Council
Company consolidating distribution operations in Hunt Midwest SubTropolis for central location, flexibility
Virbac Corporation, one of the largest independent veterinary pharmaceutical companies in the world, announced today that it will consolidate its North American product warehousing and distribution in the KC Animal Health Corridor. The company will locate in an approximately 150,000-sq.-ft. facility in Hunt Midwest SubTropolis in Kansas City, Missouri.
“By bringing processes and people together at this Kansas City facility, we will be able to boost collaboration and efficiency within our manufacturing operations. By choosing this Midwest location, we’re better aligning ourselves within the animal health industry, and we’re excited to continue building a strong partnership with the KC Animal Health Corridor,” said Paul R. Hays, president & CEO, Virbac Corporation.
Virbac selected Hunt Midwest SubTropolis due to its central location, transportation access, and unique underground environment. SubTropolis offers operational cost savings with its constant temperatures that meets the climate-controlled requirements critical to Virbac’s business.
“The SubTropolis location presents an exciting opportunity for Virbac Corporation; it will allow us to be more responsive than ever and therefore provide better service to our customers, while also being able to accommodate the expected growth in our product lines,” said Michael Albo, vice president communications & customer service, Virbac Corporation.
The company expects to occupy its new facility in April and be fully operational before the end of the year.
“Virbac represents one of the most respected names in the global animal health industry and we are honored to grow its presence in the KC Animal Health Corridor,” said Kimberly Young, president of the KC Animal Health Corridor.
“The KC Animal Health Corridor is an important industry growth initiative of the Kansas City Area Development Council (KCADC),” said Tim Cowden, president and CEO, KCADC. “We are proud to have Kimberly Young representing our organization and our region in attracting global animal health companies to the Corridor.”
KCADC was proud to work with a number of regional partners in attracting Virbac to the region: Missouri Department of Economic Development; state of Missouri; city of Kansas City, Missouri; Clay County Economic Development Council; KCP&L; Block Real Estate Services, LLC (BRES); Hunt Midwest; and the KC Animal Health Corridor.
This will be Virbac’s second site in Missouri with its manufacturing operations located in Bridgeton. In 2016, the company announced its decision to expand the plant in the St. Louis area where it currently employs more than 250 people.
“It is great to see a company continue to grow in our state and create job opportunities for Missouri families. Missouri’s highly-educated workforce, commitment to scientific advancement, and expertise in the manufacturing sector has made us the top destination for research and production in both animal health and plant science,” said Acting Director of the Missouri Department of Economic Development Mike Downing.
About the KC Animal Health Corridor
Companies with a business location in the KC Animal Health Corridor account for more than half of the sales generated by the global animal health industry. The Corridor, anchored by Manhattan, Kansas, and Columbia, Missouri, is home to more than 300 animal health companies, representing the largest concentration in the world. For more information, visit KCanimalhealth.com.
Founded in 1968 by a French veterinarian, Virbac is an independent laboratory that has always been dedicated to animal health. Currently ranked 8th worldwide, the company is present in more than 100 countries, offering a comprehensive and practical range of products and services covering the majority of species and pathologies. Virbac innovation, based on both technological advances and listening to the customers, relies on reactive production facilities which met the highest international quality standards. For nearly fifty years, these specific features have allowed the company to build a personalized relationship with veterinarians and farmers in every country. Through this privileged partnership, in which social, health and environmental issues come together, Virbac contributes, day after day, to shape the future of animal health.
About Hunt Midwest
Hunt Midwest is a full-service real estate development company with a focus on industrial, commercial, retail, mission critical, multifamily, senior living and residential real estate. Its portfolio is anchored by SubTropolis, the world’s largest underground business complex. Hunt Midwest is a Kansas City-based, privately held company owned by the Lamar Hunt family. The Hunt family business is a diverse portfolio of entities involved in real estate, sports/media, energy/resources, private equity and investments. Marquee entities include the Kansas City Chiefs, Hunt Midwest, Hunt Southwest, FC Dallas Soccer Club, Toyota Stadium, Chicago Bulls and United Center.
About Block Real Estate Services, LLC (BRES)
BRES is a full-service commercial real estate company managing over 37.85 million square feet of retail, office, industrial property and nearly 7,500 units of multifamily property for equity partnerships and third party owners. BRES’s portfolio of services continues its role as the most comprehensive commercial real estate firm in Kansas City by providing and specializing in: real estate brokerage services, tenant representation, investment services, asset and property management, economic incentives consultation, financial services, construction and development services, and the Block Funds.
Industrial Boom Sweeps Across KC
E-commerce, auto companies drive wave of spec projects.
Christina Cannon and Matt Valley – Heartland Real Estate Business
When it comes to the Kansas City industrial market, some developers have a build-it-and-they-willcome mentality.
Kansas City’s central location is attracting a number of e-commerce companies and strengthening the heavy automotive industry presence that has been a part of the city’s fabric for some time. To deal with demand and keep Kansas City on the radar, developers are ramping up construction on speculative projects.
“Tenants often don’t have time to come to town and build,” says Daniel Jensen, principal at Kessinger Hunter. “So if they come to a market like Kansas City that doesn’t have a certain kind of product available, they just keep going to the next market.”
For many tenants, however, that shouldn’t be an issue thanks to the amount of industrial space set to come on line in the near future. According to Costar, there was 5.3 million square feet of overall industrial space under construction at the end of the second quarter this year. This is on top of 2.8 million square feet of space that has already been delivered in the first half of the year.
“In the last three to four years there has been about 4.5 to 5 million square feet of new product brought on line each year and the majority of it has been getting absorbed,” says Jensen. “Everyone has gotten a whiff of fresh cookies in the air and has decided that they ought to be baking their own fresh cookies.”
Jensen notes that Kansas City is a fastpaced market, and when tenants want to set up shop, they want to do so quickly.
“People don’t want to come to the town and say, ‘we need to be up and operational in 18 months,’” says Jensen. “They want to come to town and say, ‘I need to order racks in 60 days, and I need to be operable in six months.’ That lends itself to a larger amount of spec space versus built-to-suit opportunities.”
Logistics Park continues streak
Leading the pack in speculative construction are NorthPoint Development and BNSF Railway with their 1,700-acre intermodal Logistics Park Kansas City. The 548,333-square-foot Inland Port XV came on line during the second quarter, and the duo has two more buildings totaling 1.5 million square feet to be delivered by the end of the third quarter.
“Logistics Park Kansas City is by and far the largest producer of spec space in the market and has been for the last several years, and that has everyone’s attention,” says Jensen. “They’ve been successful thus far getting deals done and absorbed, but are they going to be able to continue that pace? We just don’t know. Time will tell.”
Experts attribute some of the industrial park’s success to a shift in how companies are shipping goods.
“It used to be if a company was going to have three distribution centers they would have one on the West Coast, one on the East Coast and one in the Midwest. If they put one in the Midwest they generally went to Chicago or Dallas, somewhere with a larger population base,” says Jensen. “Now, we’re seeing the significance of Kansas City. You can get to about 90 percent of the population of the continental United States within two days by truck.”
Logistics Park Kansas City is the largest intermodal facility in the United States in terms of tonnage that passes through via rail, and it is the third largest trucking facility in the country.
Distribution hubs are becoming more important to e-commerce than population hubs, according to Mike Bell, vice president and general manager of commercial real estate for Hunt Midwest.
“I think initially when e-commerce was taking off you were seeing a lot of the distribution centers focused on the population density centers,” says Bell. “Now people are saying, ‘we’re going to locate in an area where we can touch the most amount of the country.’”
Shipping hubs in demand
Proximity to the major hubs of shipping companies is also an important factor for many industrial tenants in the area, says Bell. For this reason, the southwest corner and the northeast corner of Kansas City are seeing the brunt of construction and lease activity.
“Part of what we see is that tenants are locating in centers where they’re near FedEx and UPS,” says Bell. “In the northeast part of Kansas City we are near both FedEx and UPS, and are within 20 minutes of the airport. If somebody needs next-day shipping, we’re the last stop. These e-commerce companies can take an order from somebody at 7 or 8 p.m. and still get it shipped out the next morning.”
According to CoStar, of the 5.3 million square feet of industrial space under construction at the end of the second quarter, 4 million of that is in South Johnson County. The North of the River submarket welcomed over 900,000 square feet of the of 2.8 million square feet that was delivered to the Kansas City industrial market by mid-year.
Ford Transit provides a boost
E-commerce companies aren’t the only ones fighting for space in the industrial landscape. Similar to how Internet giants want to be near shipping companies, automotive suppliers and upfitters want to be near Ford Motor Co. and General Motors.
Roughly five years ago, Ford made the decision to transition its Econoline van model to the Transit van model, and locate that manufacturing operation in Kansas City. The new Transit vans can be upfitted to serve as contractor vehicles, shuttle buses or even ambulances, and every one is manufactured in Kansas City.
“When Ford made that choice it was a very monumental decision in Kansas City because the state of Missouri has since passed legislation to give automotive companies and other advanced manufacturing companies significant incentives,” says Bell. “That has propelled a lot of companies to come to Kansas City.”
Companies relocating facilities in Kansas City to become part of the automotive fabric include many manufacturers, suppliers and upfitters.
“Every time Ford or GM retools, it creates a feeding frenzy,” says Jensen. “Tenants that need facilities come racing to town just to be close to GM and Ford.”
One space that these support companies love to flock to is SubTropolis, the world’s largest underground business park. Hunt Midwest developed the park, which contains 6 million square feet of leased space and the ability to expand by another 8 million square feet. A surface business park providing even more options complements SubTropolis.
“We offer a unique perspective,” says Bell. “We are developing 2,500 acres of land on the surface and then below it we are developing virtually the same footprint.”
In addition to Ford, tenants catering to automotive industry that lease space in SubTropolis include Knapheide Manufacturing Co., Adrian Steel, Ground Effects and Leggett & Platt Commercial Vehicle Products, among others. So many upfitters are occupying space in the industrial cave that SubTropolis has even coined the moniker “Automotive Alley.”
“The temperature is constant, the humidity is constant,” says Bell. “For Ford to manufacture the Transit or the Ford F150, SubTropolis allows them to maintain a high level of quality and standards.”
SubTropolis does data
With tenants occupying anywhere from 10,000 square feet to 500,000 square feet, SubTropolis doesn’t just accommodate automotive companies. A data center opened in 2014 is bringing the industrial market full circle by attracting e-commerce users.
“We found having a data center relates closely to our e-commerce customers, because our e-commerce tenants need higher speed Internet connectivity,” says Bell. “With our data center and the fiber carriers that we have, we are able to connect our tenants with that.”
Bell notes that for e-commerce companies to survive they need both the logistics of being near shipping companies like FedEx and UPS and also bandwidth and connectivity, both amenities SubTropolis can provide.
“I see the data center as the cash register of e-commerce,” says Bell. “Somewhere there is a data center that’s running all the servers to allow e-commerce to flourish.” But not only can having a data center in the same area save on delivery speeds, it also adds a layer of security.
“That’s a big advantage,” continues Bell. “From a security standpoint, we are able to control all of our entrances, and because of our government tenants, we are required to have a high level of security.”
LightEdge Solutions, a cloud service provider, colocation and consulting company, was the first tenant at the 400,000-square-foot SubTropolis Technology Center and employees 200 people in the underground, hightech labyrinth.
Professionals immersed in the Kansas City industrial market agree about one thing — the market is booming. But for how long?
“Driving around SubTropolis and our Hunt Midwest Business Center, I’m seeing all of these ‘help wanted’ and ‘now hiring’ signs,” says Bell. “That to me sends the sign that the tenants are productive, their businesses are growing and they have a need.”
Jensen believes that all of this activity may be a new baseline, though the industry should prepare for the regular ups and downs within this framework.
“There most definitely is a cycle and even the new norm is going to have its downturn and its upturn. Larger users are finding Kansas City attractive and want to be here for various reasons, but without a doubt the feeding frenzy will slow at some point, and people will call an end to that cycle.” says Jensen.
“We’re playing musical chairs, and the music is going to stop and there’s going to be a few folks without seats. But having said that, I think the industrial market — the user market — is healthy.”
SubTropolis “Logistics Cluster” helps 3PLs grow and expand
When it comes to e-commerce, SubTropolis knows how to deliver
Ryan Tompkins – Manager of Sales & Leasing
Global e-commerce sales are expected to exceed $2 trillion in 2017, and the rapid transformation of retailers into e-tailers is creating fresh demand for logistic parks that provide a range of value added services.
As these e-tailers rely on 3PLs to provide more strategic oversight and function as an extension of their enterprise, site selectors increasingly are seeking out business parks with a high concentration of companies with logistics-intensive operations. These so-called “logistics clusters” include logistics service providers (3PLs), IT service providers, distributors, light manufacturing and kitting companies, as well as the distribution operations of retailers.
Besides offering access to a reliable supply base and a well-vetted and proven labor pool, logistics clusters create opportunities for shared knowledge and industry collaboration, according to a recent white paper published by MIT.
In Kansas City, Hunt Midwest is building a thriving logistics cluster at SubTropolis — a 6 million square foot underground business center that is home to more than 50 companies and 2,000 employees. The result is a sustainable, climate controlled, plug-and-play solution for companies seeking a secured location for logistics-intensive operations.
Interest and activity from logistics-related companies, particularly 3PLs tied to eCommerce and the automotive industry, remains strong. Several 3PLs — including Menlo XPO , UPS Supply Chain, Ground Freight Expeditors, and Advanced Logistics and Fulfillment — already have chosen SubTropolis and announced plans to expand operations.
A recent article in Logistics Management reports that demand is rising sharply for “e-commerce-ready” industrial real estate property, with growing pressure on retailers to ensure on-time delivery by locating inventory close to population clusters. Hunt Midwest saw the e-commerce tide rising more than a decade ago and began investing millions into technology infrastructure. Today, leading IT provider LightEdge Solutions serves as the anchor tenant for SubTropolis Technology Center, the Midwest’s premier data center campus.
Just minutes from downtown Kansas City and situated within fast-growing suburbs in both Kansas and Missouri, SubTropolis offers direct access to the thriving Midwestern market of more than 2 million people. Immediate access to three major interstates and close proximity to nearby UPS and FedEx hubs allows companies to achieve 2-day shipping to 90 percent of the US, while offering “last mile” service seen as critical to top performing e-commerce locations.
With blockbuster growth projected for industries served by logistics-related companies and demand rapidly rising for centrally located, “locked and loaded” e-commerce space, Hunt Midwest believes its emerging “logistics cluster” at SubTropolis creates an incredible opportunity in this ever-changing, “just-in-time” world.
Hunt Midwest educates KC brokers, links two development worlds
Autumn MorningSky – MetroWire Media
For the last five years, it’s been impossible to discuss Kansas City’s development boom without mention of the powerhouse that is Hunt Midwest. The sister company of the Kansas City Chiefs has saturated local real estate news and has even graced a number of major national news outlets this year – from NPR to CNN – who are fascinated with the flourishing underground business world the company has created. Even outside of SubTropolis, Hunt Midwest has grown other segments of its business by leaps and bounds, including its surface industrial park, data center, senior housing projects and more.
But it’s been five years since the company brought in the local brokerage to educate them on the range of Hunt Midwest’s offerings. That changed last week when the company brought in more than 50 brokers and numerous officials from various economic development groups around Kansas City, including a slew of new faces Hunt Midwest CEO Ora Reynolds wanted to educate and get to know.
“Five years ago, we didn’t do as much vertical construction as we do now. We were known as someone who would sell a piece of ground that someone could build on, but now our focus is that we can provide all the options: We can sell you ground, we can sell you ground and build your facility for you, or we can do a build-to-suit and lease it for you. You’ve got a lot of different options to cover the full spectrum of users out there,” Reynolds said. “We also wanted them to understand the strategic niches we’re going after – automotive upfitters and suppliers, e-commerce, fulfillment companies, and government users and tech users – and talk about our strategy, which is the synergy between the underground and the surface.”
The Hidden Metropolis Beneath Kansas City
Great Big Story
One-hundred-fifty feet below Kansas City, in a 270-million-year-old limestone deposit, more than 1600 people work in the world’s largest business labyrinth. They basically work in the Batcave, and it’s probably more interesting than your office. As seen on CNN — Check out the video essay here.
Hunt Midwest is a full-service real estate development company with a focus on industrial, commercial, retail, mission critical, multifamily, senior living and residential real estate. The Hunt Midwest portfolio is anchored by SubTropolis, the world’s largest underground business complex.
Located in the heart of the Midwest, this Kansas City, Missouri-based company is developer of over 6,200 acres of commercial, retail, industrial and residential property, and owner/developer of SubTropolis, the world’s largest underground business complex.
SubTropolis is a subterranean, 1,150-acre industrial park in Kansas City, Missouri, with over 6 million square feet of leasable space. The complex is home to more than 55 local, national and international businesses with 1,600 employees. SubTropolis is an ENERGY STAR certified warehouse facility. Hunt Midwest’s headquarters is located within SubTropolis.
States competing for data centers extend $1.5B in tax breaks
David Lieb – Associated Press
The former limestone mine seemed perfect for a large computer data center. The air was cool. The rock walls provided a defense against natural disasters. And the tunnels bored into a Kansas City hillside had access to abundant electricity and fiber-optic cables.
But the mine lacked something important: tax breaks. Without them, several companies chose instead to locate their data centers in neighboring Kansas. At least one major project opted for North Carolina.
“There were people who wouldn’t even come and look,” said Ora Reynolds, president and chief executive of Hunt Midwest Enterprises Inc., which has been marketing its SubTropolis caves. Financial incentives, she learned, were “absolutely crucial.”
Similar competitions for business are playing out across the country as states increasingly offer lucrative tax breaks to attract the data centers that function as the brains of the Internet. An Associated Press analysis of state revenue and economic-development records shows that government officials extended nearly $1.5 billion in tax incentives to hundreds of data-center projects nationwide during the past decade.
The actual cost to taxpayers is probably much higher because some states refused to disclose the amount of taxes they waived, citing confidentiality laws. In many cases, cities and counties sweetened the incentives by forgiving millions more in local taxes.
The benefits are debatable. Although they cost hundreds of millions of dollars to build and equip, the centers employ relatively few workers. That means they produce little in the way of new income taxes but could provide a surge in property and sales taxes — if governments don’t waive those taxes, which many do.
Some officials doubt the tax breaks are worth it because they typically benefit a single community while depriving the state budget of money that might otherwise help schools, lower the cost of college tuition or pay for roads and other infrastructure. Go to AP.org for more…
Kansas City Will Benefit From the Shift to E-commerce
Dick Ringer – Assistant General Manager, Hunt Midwest
With its central U.S. location, great labor force and affordable lease rates, Kansas City offers an exciting value proposition for e-commerce companies, and the time is right for deal-making in the industrial market.
Online sales currently comprise about 7 percent of all retail sales and are growing at a rate of 15 percent a year. E-commerce is ultimately expected to account for 50 percent of all retail sales. This shift to e-commerce creates an opportunity for brokers and developers in Kansas City’s industrial market as new fulfillment centers open.
As the online sales industry has matured, so has the consumer’s demand for timely and inexpensive delivery. The fact that 85% of the U.S. is accessible via 2-day shipping by truck from Kansas City is a strong selling point for e-commerce companies scouting fulfillment and distribution sites.
It wasn’t too long ago that customers didn’t mind waiting more than a week to receive online orders, and we didn’t even mind paying for shipping. Now we’ve grown accustomed to free shipping and two-day delivery. Of course, the faster that e-commerce companies can deliver products to the doorstep, the more they sell. And retailers probably don’t need to be reminded of the cost benefits of shipping by truck compared to shipping by air.
A significant advantage for Kansas City—especially when it comes to moving goods manufactured overseas– is its presence as the largest rail hub in the nation in terms of tonnage, which means lower transportation costs. Products that are produced overseas can be transported across the ocean on a ship, taken by rail from ports on the coast to one of the rail intermodal yards in Kansas City (which is far more economical than trucking on long hauls), then the product is taken from the rail yard to an e-commerce fulfillment center where it can be shipped by truck to online buyers as it is ordered.
Since online sales volume directly correlates to the speed of delivery, proximity to hubs like FedEx and/or UPS, along with the availability of late pickups, is invaluable. Another important consideration is the access to fiber, which is plentiful in the metro area. Robust, redundant fiber is essential for e-commerce companies to process orders quickly for delivery. Troy Brown the EVP of OmniChannel & Marketing for Zumiez who cater to the younger electronic savvy demographic, said that if their customers don’t get a shipping confirmation within half an hour of placing an order, Zumiez may very well get a phone call asking “what’s up?”
Finally, Kansas City’s labor force is among its strongest selling points. E-commerce fulfillment centers tend to have more employees per 1,000 square feet than typical warehousing operations. And because orders rise during peak seasons and times, fulfillment operations need to be located where there is a good temporary workforce available.