BREAKING DOWN THE KANSAS CITY IOS MARKET WITH FISCHER WEILER INDUSTRIAL (FWI)

Who are the largest IOS owners/buyers targeting the Kansas City market?

Kansas City has a well-balanced pool of local and institutional buyers for IOS product. Prior to 2019, the vast majority of IOS buyers were local individuals or investment groups. Since 2019, Kansas City has seen medium to large institutional players compete for IOS product. Some of the more active institutional groups in our market include Triten, Stonemont and Zenith. Large institutional investment is constrained by the average deal size in the Kansas City Market. The deal cost per transaction (due diligence, underwriting, etc.) is high for some of the larger institutional buyers, making deal size critical and the first hurdle for institutional consideration.

What are some of the key drivers of IOS in the Kansas City market?

Kansas City is served by all five of the Class 1 railroad companies in the US with extensive rail lines throughout the Kansas City Metro. IOS users that deal with heavy raw materials utilize rail to bring product into the Kansas City Market for distribution. Most of the rail IOS users demand large laydown yards for the bulk product they import. Another driver of IOS product is the auto manufacturing industry. The Kansas City Market is home to both Ford and General Motors, as well as 70+ auto industry suppliers. Almost all auto industry suppliers, as well as Ford and General Motors, require some sort of IOS product. The demand for IOS storage from the auto industry is constant and spikes as these companies experience challenges with supply chain shortages.

Which submarkets show the most IOS activity?

As municipalities continue to make new IOS product cost prohibitive, older submarkets with existing IOS product have thrived. Submarkets such as the Blue Valley Industrial District, along I-435 in Missouri, have experienced a steady increase in demand. The Blue Valley submarket benefits from the convergence of Interstate 70 and Interstate 435. The 210 Highway submarket, located on the Northeast portion of the Metro, includes one of the largest submarkets of IOS space. Located just 5 miles south of the Ford Plant, this submarket is filled with IOS users who support the auto industry. IOS vacancy in this submarket has historically been the lowest of all IOS focused markets in the Kansas City Metro.

What IOS type is most lacking (truck terminal, contractor yards, cross-dock, etc)?

In our experience, contractor yards and maintenance type facilities have been lacking compared to the other types of IOS facilities. We continue to see strong growth and demand for this type of product and feel as though it is versatile for many types of users.

Are there any particular amenities or features that IOS users are craving in your area?

Shape of the yard and access points have become important as users look for highly efficient yards as rental rates have continued to climb. Irregular shaped yards are difficult to layout and can include unusable portions due to depth or the turning radius of a truck. Multiple access points or ‘drive-thru’ capabilities on a yard greatly increases the functionality of a yard. Other amenities include electronic sliding gate rather than manual, LED lighting in the yard, and screening on fencing to help with theft.

What is the tenant mix between national users versus local SMBs? 

The Kansas City market attracts a good mix of national versus small and midsize businesses. Kansas City has seen a tremendous amount of development in the past 10+ years. Due to the continued upgrades to public infrastructure, we deal with a fair amount of large utility contractors needing yard space for equipment, supplies, overflow product, etc. The current mix is estimated to be 60% national users with the balance being small-midsize businesses.

Any notable transactions that you would like to share?

One notable transaction we completed last year was a 90 acre infill rail-served site that was the former home of a GM manufacturing plant. The site had a 1.5M square foot building that needed to be demolished. We saw the value of the rail coming onto the site as well as the existing paved outdoor storage. We ended up bringing the buyer and seller together off-market and executed a business plan that included demolishing the building while leasing out the existing outdoor storage during demolition. Once the building was demolished, we kept the slab of the building intact and signed a lease with an auto manufacturer for the entire site for overflow parking.

Another notable transaction from last year was an underutilized 40 acre drive-in movie theatre in Kansas City, MO. We brought an institutional buyer to the table and structured a sale that was beneficial for all parties. This was an off-market transaction and we secured a national credit tenant for 10 acres of the site while under contract prior to closing. One unique factor to the deal was we turned the former concession stand into a drive-in maintenance facility. The Seller removed the roof of the original concession stand, raised the roof to 20’+ and punched in two 14’ drive in doors. It turned out amazing and the new tenant was very pleased with the project. It was just cool to see a property be repurposed into a very functional IOS site with highway visibility.

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