Q1 2018 Market Update Non-Public

Q1

MARKET UPDATE W I C H I T A K A N S A S

INSIDE STATISTICS...

POSITIVE NET ABSORPTION IN OFFICE, RETAIL AND INDUSTRIAL MARKETS

OFFICE

RETAIL

INDUSTRIAL

435 S Broadway St | Wichita, KS 67202 | 316.262.0000 www.NAIMartens.com

OFFICE

Q1 2018 ACTIVITY COMPARED TO Q4 2017 =

VACANCY RATE NET ABSORPTION CONSTRUCTION ASKING RENT SALES ACTIVITY

VACANCY*

TRENDS

23.0%

• Net absorption in Wichita’s office market was positive for Q1 2018 with a total of 75,916 SF absorbed. 37% of the positive absorption was in the CBD. • CBD – King of Freight expanded again, signing a lease for 32,865 SF in the Ruffin Building at Douglas and Broadway during Q1. King of Freight also occupies the entire Sterling Building at 123 S Market and has space at the High Touch building at 110 S Main St. • NE – Positive 2,477 SF of absorption. Both Class A and Class B space had a small amount of positive absorption. • NW – Remained fairly steady from the previous quarter, reporting only a small amount of positive absorption. • SE – 39,162 SF of positive absorption for Q1. Mostly coming from the 35,000 SF lease of the Shocker Studios at the Wichita Mall. • SW – 5,921 SF of positive absorption. • The overall office market vacancy rate for Q1 2018 is 18.71%. Class A space had a vacancy rate of 16% with Class B space at 20%. All slightly lower than Q4 2017 vacancy rates (Overall: 19.61%, Class A: 16.8%, Class B: 20.9%). • No office buildings were completed in Q1 2018. • Current office buildings under construction: Cargill Office Headquarters at 825 E Douglas (188,000 SF), Wichita Alliance Advisory Group at 21st & Greenwich (7,000 SF), Lubrication Engineers Headquarters at the Eberly Farm Office Park-13207 W 21st (7,000 SF), and an office building in the West Lakes development near 119th St & Maple (13,000 SF) for a total of 214,000 SF. • The weighted average rents for available office space, all classes, was $14.34/SF per year at the end of the first quarter 2018. Class A space had weighted average asking rents of $19.39/SF with Class B space at $12.32/SF. End of the year 2017 asking rents were $14.33/SF overall, $19.27/SF for Class A space and $12.28/SF for Class B space. • Class A CBD asking rents were in the range of $14-18/SF full service. Class A space in the northeast, which has been the most active for new office construction, is asking rents in the range of $19/SF up to $29/SF for new construction. • Office sales activity in Q1 totaled $3,070,250 with an average price per square foot of $23.41. The market posted 7 transactions with a total of 131,158 SF. Notable office sales in the Wichita market for the first quarter 2018 include the former Big Dog Building at 1520 E Douglas, The Orpheum 2nd Floor (200 N Broadway), and the Primeline Building (154 N Topeka).

22.0%

21.0%

20.0%

19.0%

18.0%

17.0%

16.0%

15.0%

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

Vacancy Class A

Vacancy Class B

Overall Vacancy Rate

NET ABSORPTION*

2018 Q1

2017 Q1

2017 Q3

2017 Q2

2017 Q1

(40,000) (20,000)

-

20,000 40,000 60,000 80,000 100,000

ASKING RENT* (Full Service)

$25.00

$20.00

$15.00

$10.00

$5.00

$-

2017 Q1 2017 Q2 2017 Q3 2017 Q1 2018 Q1

Class A Weighted Average Rent/Sq. Ft. Class B Weighted Average Rent/Sq. Ft.

*Source: NAI Martens Research

SIGNIFICANT LEASE TRANSACTIONS:

TENANT

BUILDING

ADDRESS

SIZE

SUBMARKET

King of Freight

Ruffin Building

100 N Broadway 619 E Williams St 4020 S Meridian

32,865 SF 27,500 SF 7,943 SF

Central Business District Central Business District

Martin Pringle Law Firm Spaghetti Works New Development

Midwest Hearing Aids

Former QuikTrip

Northwest

RETAIL

=

Q1 2018 ACTIVITY COMPARED TO Q4 2017

VACANCY RATE NET ABSORPTION CONSTRUCTION ASKING RENT SALES ACTIVITY

TRENDS

VACANCY*

• Net absorption in Wichita’s retail market was a positive 80,978 SF for Q1 2018. • CBD – Negative 5,278 SF – A few retail spots opening up in the core area. Not much change from previous quarter. • NE – Positive 28,038 SF – Towne East Square had 19,261 SF with Street Skinz taking part of the former Wright Career College space along with a few other small leases in the mall. Neighborhood centers had almost 12,000 SF of positive absorption for Q1. • NW – Negative 34,875 SF – NewMarket Square had almost 15,000 SF of positive absorption with Kansas Sampler, Freezing Moo, and BurgerFi all taking space. There was approximately negative 19,000 SF of absorption in neighborhood centers and negative 11,000 SF of absorption in strip centers. There was negative 18,774 SF of absorption in Towne West Square during the first quarter; although Bosley’s Tire & Wheel occupied the former Sears Automotive Department space, Spirit Halloween’s temporary store, Rue 21 and Express Women are among the retailers vacated from Towne West Square. • SE – Positive 81,949 SF – Largely due to the VASA Fitness Wichita sale and the remainder coming from activity in older strip centers. • SW – Positive 8,225 SF – Resulting from a couple of small leases in strip centers and neighborhood centers. • The retail market vacancy rate ended Q1 2018 at 11.1%. Down slightly from the year end 2017 vacancy rate of 11.2%. • Four buildings totaling 57,150 SF were completed for Q1 2018. Opti-Life Fitness Center (34,841 SF), Texas Roadhouse (7,400 SF), Retail Strip Center at Central & Vassar (6,400 SF), and the Family Dollar on South Meridian (8,509 SF). • Retail buildings that started construction in the Q1 2018 include the Family Dollar at Second & Seneca and the Harbor Freight retail center at K-96 & Woodlawn. On the restaurant side, began on a new Chick-fil-A near Kellogg & Ridge. Texas Roadhouse completed construction in Q1 at K-96 & Greenwich, while 6S Steakhouse finished their remodel on 21st near Ridge Rd. Construction is starting on the site for the new Camping World and Gander Outdoors stores, which will be part of the new Steeple Bay mixed-use development at I-235 & Seneca. • The weighted average asking rents for all available retail space was $12.19/SF for the first quarter. New construction along Greenwich & K-96 are asking rents at an average of $21.59/SF NNN. In the northwest sector, mainly along Maize Rd, new construction asking rents average $22.60/SF NNN. • Retail sales activity in Q1 totaled $18,255,706 with an average price per square foot of $78.92. The market posted 12 transactions with a total of 198,768 SF. Notable sales for the first quarter 2018 include the Chisolm Creek Center (3876 N Woodlawn), former Wal-Mart (601 N West), Legends Car Wash (700 N Webb), The Cotillion (11120 W Kellogg), Regency Retail Strip Center & Hobby Lobby (2413 & 2425 N Greenwich), and VASA Fitness Wichita (1607 S Georgetown).

12.50%

12.00%

11.50%

11.00%

10.50%

10.00%

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

NET ABSORPTION*

2018 Q1

2017 Q4

2017 Q3

2017 Q2

2017 Q1

(150,000) (100,000) (50,000)

-

50,000 100,000 150,000 200,000

ASKING RENT* (NNN)

$12.40

$12.20

$12.00

$11.80

$11.60

$11.40

$11.20

$11.00

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

*Source: NAI Martens Research

SIGNIFICANT LEASE TRANSACTIONS: TENANT

BUILDING Sweetbriar

ADDRESS

SIZE

SUBMARKET

Aldi (Renewal)

2323 N Amidon 4729 E Central 8147 E Kellogg Dr

19,867 SF 11,000 SF 10,000 SF

Northwest

Central Market Wine & Spirits

Former Three Pea Consignment

East

Half Price Books

Eastgate Plaza

Northeast

INDUSTRIAL

Q1 2018 ACTIVITY COMPARED TO Q4 2017

VACANCY RATE NET ABSORPTION CONSTRUCTION ASKING RENT SALES ACTIVITY

TRENDS

VACANCY*

• Net absorption in Wichita’s industrial market was a positive 195,428 SF for 2018 Q1. • Hyper Pet announced it will be moving to the newly constructed 103,500 SF building in the Ironhorse Manufacturing Park located near the southwest corner of MacArthur & Seneca. • The overall industrial market vacancy rate for 2018 Q1 was 6.6%, which is down from the year-end 2017 vacancy rate of 7.3%. • Three buildings totaling 220,230 SF were completed in the Wichita market during the first quarter. The Moeder Spec Development at 1646 E 2nd St (6,650 SF), Epic Sports Headquarters in the Sunflower Commerce Park (180,000 SF), and the Raptor Manufacturing building on South Hoover (33,580 SF). • Developers are showing more willingness to construct industrial spec space. Two large spec warehouses at 3144 N Ohio that total over 250,000 SF are now fully occupied. The developers are planning two more large spec warehouses at the Webb Industrial Park in northeast Wichita that will be over 350,000 SF. • Moeder & Associates are planning another spec flex warehouse at 335 N Hydraulic following the success of their first spec building. • Industrial buildings under construction at the end of the first quarter 2018 include: Empire Wall Systems at the Sunflower Commerce Park - 53rd & Webb (31,600 SF), Coleman Co. - 77th & I-135 (500,000 SF), Kyodo Yushi Manufacturing - 53rd St W & 119th (80,000 SF), and Globe Engineering - 3505 S Maize (79,868 SF). • The weighted average asking rents for General Industrial buildings were $4.78/SF industrial gross for the first quarter 2018. For R&D/Flex buildings, the average asking rents were $10.26/SF NNN. • Industrial sales activity in Q1 totaled $61,767,695 with an average price per square foot of $33.01. The market posted 85 transactions with a total of 1,880,735 SF. Notable industrial sales for the first quarter 2018 include: Ashley’s Furniture Distribution Center - 1400 N Terrace Dr (39,170), Former Epic Sports - 3001 E Harry (155,934 SF), Henry Industries - 3843 N Cypress (24,829 SF).

8.5%

8.0%

7.5%

7.0%

6.5%

6.0%

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

NET ABSORPTION*

2018 Q1

2017 Q4

2017 Q3

2017 Q2

2017 Q1

(50,000)

-

50,000 100,000 150,000 200,000 250,000

ASKING RENT* (Industrial Gross & NNN)

$4.50 $4.55 $4.60 $4.65 $4.70 $4.75 $4.80 $4.85 $4.90 $4.95 $5.00

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

*Source: NAI Martens Research

SIGNIFICANT LEASE TRANSACTIONS: TENANT

ADDRESS

SIZE

SUBMARKET

Hyper Pet

4001 S Seneca (Ironhorse Mfg Park)

103,500 SF 14,000 SF

Southwest Southwest Southeast

JT Wood LLC

2559 S Sheridan 719 E Zimmerly

Affordable Mobility Solutions

7,943 SF

ABOUT NAI MARTENS RESEARCH

The Martens Companies provide trends and forecasts of rent, vacancy and inventory for Apartment, Office, Medical Office, Retail, Warehouse/Distribution, Flex/R&D, General Industrial, and the major Aircraft Campuses. Because overall metro averages often conceal significant variations from neighborhood to neighborhood, we report on submarkets across the Wichita metro and Derby. We develop trends and forecasts from property-level data collected by our team of real estate analysts, advisors and appraisers during telephone interviews with building owners and managers as well as property tours and personal inspections. Our team monitors the local business press and cross-checks our research against the perspectives of local brokers, developers and other commercial real estate professionals. This complete view of the market, including differing perspectives, provides our clients with valuable decision-making information.

Q1 2018 NAI Martens Notable Transactions

Investment

Office

Land

Former Big Dog Building 1520 E. Douglas Ave. Sold: February 2, 2018 Brokers: Kris Wessel, Ryan Hubbard SF: 60,116

Stratford East & West Apts. 7826 E Douglas & 1440 N Clarence Sold: January 16, 2018 Brokers: Jeff Englert, Nathan Farha Units: 182

Waterfront Land East 13th Street Sold: January 9, 2018 Brokers: Grant Glasgow, Tom Johnson Acres: 20

Industrial

Office

Retail

Wilson Estates Office Building 8535 E. 21st St. North Leased: March 19, 2018 Broker: Wanda Whitworth SF: 8,158

2559 S. Sheridan Leased: March 28, 2018 Brokers: Trent Garman, Jeff Englert SF: 14,000

ALDI - Sweetbriar Shopping Center 2263 N. Amidon Leased: January 19, 2018 Brokers: Nathan Farha, John O’Rourke SF: 19,867

THANK YOU FOR 70 YEARS IN BUSINESS On behalf of the brokerage team and myself I would like to thank the Wichita Business Journal for the recognitions given to us at the 2018 Real Estate Awards. Our NAI Martens team is constantly working to put together quality deals which we hope not only serve our clients but benefit the Wichita community as a whole. We have been a part of the Wichita community for 70 years now and are honored to have the opportunity to witness and, at times, be a part of the exciting changes happening here. Being awarded Top Commercial Firm is a testament to the great team we have assembled, not only at NAI Martens but across the Martens Companies--all of whom do great work in each of their areas of expertise and are willing to contribute to others whenever necessary. We were also excited to see Grant Glasgow and Kris Wessel be recognized as Top Commercial Agents. I have been working alongside these two for years and have seen each of them grow into excellent advisors who have become experts within the markets they each operate in. Thank you Wichita for allowing our business to call this city home for seven decades and thank you to all who have allowed us to be a part of their business. We value your partnership and trust and we look forward being a part of this community for many years to come!

Steven J. Martens, CCIM, CPM, SIOR President - The Martens Companies

Top Commercial Firm

2018 REAL ESTATE AWARDS Wichita Business Journal’s

Top Commercial Agents

Grant Glasgow Senior Vice President

Kris Wessel Senior Vice President

Deals of the Year

Farm Credit Bank Building

Patrick Ahern Grant Glasgow Tom Johnson Kris Wessel

Northrock Suites & Wichita Inn North

Troy Farha

Valassis Manufacturing Facility

Grant Glasgow Kris Wessel

2018 Q1

MARKET UPDATE W I C H I T A K A N S A S

435 S Broadway St | Wichita, KS 67202 | 316.262.0000 | www.NAIMartens.com

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