Image courtesy of The Meritex Company.
A few weeks ago, I was reading a survey of my Colliers research colleagues about data capabilities. Most responses had to do with fairly standard information about fulfillment centers, manufacturing, and research and development. One response was entirely unexpected, which read: “This may be more of a regional issue, but Kansas City has a large amount of underground warehouse space.”
Call me ignorant for being from the mild-weathered West Coast where this product type is rare, but underground warehouses? This was something new to me so I contacted Martin Maguire, senior research director for Colliers’ Kansas City office, to get a better understanding of what turns out to be an in-demand product type.
WHAT IS AN UNDERGROUND WAREHOUSE ANYWAY?
Underground warehouses are exactly what they sound like: subterranean industrial facilities. According to Martin, the primary demand drivers for underground warehousing are the savings on utilities and the cheaper rates compared to traditional industrial space. Like many places in the U.S., Kansas City has cold winters and hot, humid summers that often require temperature-controlled warehouses and hefty utility bills. Underground warehouses significantly lower the need for utilities because they naturally keep the elements out and the weather steady year-round.
This is particularly useful for companies in the food and beverage sector or companies that utilize water in their manufacturing processes, as the natural temperature control keeps the water from evaporating quickly. The United States Postal Service also utilizes naturally temperature-controlled underground warehousing to store millions of stamps away from the humidity that can damage them prior to national distribution.
In addition, data centers are excellent candidates for underground warehouse space as they require protection from elemental threats to their servers. Servers need be housed in temperature-controlled spaces to keep the large machines at cool temperatures at all times. Data centers also hold a robust amount of intellectual capital requiring ‘round-the-clock security. Underground warehousing provides this security as most facilities only feature one way in and one way out.
One such project that has experienced robust demand is the Meritex Lenexa Executive Park in Lenexa, KS, owned by Colliers’ client The Meritex Company. The park totals more than 2.5 million square feet that can be divided into spaces as small as 10,000 square feet — perfect for light manufacturing and distribution. Demand for both product types has increased significantly in the greater Kansas City industrial market because of its central location and the plethora of logistical advantages that make Kansas City an emerging market to watch in 2017.
Meritex Lenexa Executive Park (Image Source: Meritex)
Tenants of the Meritex Lenexa Executive Park include the National Archives and Records Administration (NARA), Thermo-Fisher, Bushnell and Cavern Technologies — all examples of various organizations that prefer underground warehousing because of the cost savings, security and protection from the elements.
UNDERGROUND WAREHOUSES AROUND THE U.S.
Kansas City has the large majority of the known underground space in the U.S. (30 million square feet) because of its robust limestone deposits that make construction feasible. However, the map below shows all known locations over 50,000 square feet with underground or cave industrial space in the U.S.
There are some sectors that likely can’t take advantage of underground warehousing. For example, e-commerce giants likely won’t be using underground spaces as regional distribution hubs because of low clear heights that usually top out at 16 feet.
However, demand for last-mile distribution, data warehousing and manufacturing is expected to continue to increase in the coming year, making the underground warehouse product type even more popular.
James Breeze is National Director of Industrial Research for Colliers International in the United States. Based in the Greater Los Angeles area, he prepares quarterly and specialized industrial research reports and interprets trends and data across the country.