Q3 2019 Market Update

Q3 2019 W I C H I T A K A N S A S

MARKET UPDATE

OF F I CE

RETA I L

I NDUSTR I AL

I NVESTMENT

435 South Broadway, Wichita, KS 67202 • (316) 262-0000 • naimartens.com

14.6%

14.4%

Q1 ‘19 OFFICE Q2 ‘19

Q3 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19 The Wichita office market ended the third quarter with positive absorption and decreased vacancy. Following a decrease in the second quarter, Q3 ended with a vacancy rate of 14.39%. Net absorption in the office market was positive 14,595 SF. Asking rent in Class A dropped to $18.01 from Q2’s $18.22 PSF rate, but increased in Class B from $11.85 to $12.04 PSF. Only one office project completed construction during the third quarter. Village Tours & Charters finished their new headquarters site at K-96 & Ridge. The 48,000 SF property includes office as well as storage and repair space for the company’s buses. Q4 ‘18 Q3 ‘18 Q2 ‘18 Q1 ‘18

186,190

17.9%

17.0%

16.6%

14.6%

45,001

14.4%

31,772

27,354

Q3 ‘19 14,595 ‘

Q3 ‘18 Q4 ‘18 Q1 ‘19 Q2 ‘19

Q2 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19

Downtown continues to do well, with more positive announcements being made all the time. For the first time in 30 years tenants are willing to pay new construction rents in downtown and now we’re seeing suburban developments having to compete with downtown.

186,190

Q1 ‘19

$18.01

Q4 ‘18

Q4 ‘18 Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18 Q3 ‘18 17.0% Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18 Q3 ‘18

Q3 ‘18

$18.90

Patrick Ahern, CCIM, SIOR VP - Office

Q2 ‘18

$18.94

Q1 ‘18

17.9%

$19.13

45,001

$19.16

31,772

27,354

16.6%

No new office projects were proposed during the third quarter. A couple high profile buildings remain under construction, one of the biggest being the Spaghetti Works District mix-use development. The 60,000 SF office and retail portion of the development, which is anchored by Martin Pringle Law Firm, is basically finished and expected to open by the end of the year. Hutton Construction is working on their 30,000 SF new headquarters building in the Delano District. Work on TGCDevelopment Group’s newoffice/retail development which will be partially occupied by IMA Financial has begun. The Mead’s Corner building at Douglas & Emporia was demolished during Q3 to make room for the 74,000 SF structure. The 39,000 SF Ice House redevelopment project is expected to be finished next year. Alloy Architecture announced they will be relocating to the Icehouse from their current space in the Landmark Office Park on N Rock Rd. Also in downtown office construction, Meritrust Credit Union’s $4 million renovation of 151 N Main is expected to be done in early 2020. The building was previoulsy home to Cargill Protein; Meritrust is renovating seven of the ten floors. Nineteen office buildings with a value of $15,196,800 were sold during the third quarter. Notable buildings sold included Terra Cotta Tower at 29th & Rock, the former Parmele Law Office Building at 8623 E 32nd St, and the Chadsworth Plaza Office Building at 2552 N Maize Ct. Third quarter leases in the office market include Southwestern College Professional Studies leasing part of the former Heritage College building at 2800 S. Rock Rd. and 2,092 SF in the Farm Credit Bank Building downtown.

14,595

$12.04

Q3 ‘18 Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19

$11.85

14.6%

$12.30

14.4%

$12.23

$12.17

Q3 ‘19

Q2 ‘19

Q3 ‘18

Q1 ‘19

$18.01

Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18 Q3 ‘18 Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18 Q3 ‘18

$18.90

186,190

$18.94

$19.13

Q1 ‘19

$19.16

Q4 ‘18

Q3 ‘18

$12.04

Q2 ‘18

$11.85

Q1 ‘18

$12.30

45,001

14,595 $12.23

31,772

27,354

$12.17

Q3 ‘18 Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19

$18.01

Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18

$18.90

$18.94

(316) 262-0000

$19.13

11.4%

11.2%

RETAIL

10.9%

10.6%

Q3 ‘19

Q2 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19

The retail market had a solid third quarter. Wichita retail saw 76,410 SF absorbed and the vacancy rate ended the third quarter at 11.23%, a 0.64% drop from Q2. Asking rent had a slightly larger than normal decrease from $12.00 PSF in Q2 to $11.44 for the third quarter. The biggest changes in the market came from the northwest quadrant, with a number of smaller strip center spaces leasing up contributing to the absorption rate and a few higher rent spaces filling up leading to a lower average asking rent. No new retail projects were announced during the third quarter and only a couple projects remain under construction. Work continues on Accent Lighting’s new 20,200 SF location at the Waterfront, the Panera Bread center at Greenwich Place and the Kwik Shop and Taco John’s 7,500 SF building going in at Kellogg & West.

76,410

11.9%

61,874

11.4%

11.2%

38,999

10.9%

10.6%

Q3 ‘18

Q2 ‘19 Q3 ‘19

Q4 ‘18 Q1 ‘19

Q3 ‘19

Q2 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19

(21,035)

(42,186)

76,410

61,874

38,999

The Wichita retail market continues to perform well with numerous national retailers openeing new locations in Wichita, showing sustained demand in our market. Wichita is proving to be an attractive option for thriving brands as rental rates are more affordable than most of the country.

$11.44

Q3 ‘19

Q2 ‘19 Q3 ‘19 $12.00

Q3 ‘18

Q2 ‘19

Q4 ‘18 Q1 ‘19

$12.08

Q1 ‘19

11.9%

(21,035)

$11.93

Q4 ‘18

Drew Gannon Commercial Advisor

11.4%

(42,186)

$11.89

Q3 ‘18

11.2%

10.9%

10.6%

REI Co-op should be open in the spring at Greenwich Place. Work continues on the outdoor brand’s new building which will be on the west side of the development, close to Greenwich Road. Retail had a long list of projects completed during the third quarter totaling more than 200,000 SF of space. A number of Greenwich Place stores and restaurants were completed including Michaels, Five Below, Famous Footwear, Saltgrass Steakhouse and Dave & Busters. Additionally, in the southwest quadrant, Gander Outdoors and Gander RV were completed in the Steeple Bay development. Hobby Lobby finished its new 30,000 SF Cadillac Lake location at 37th & Maize. A few notable leases took place during the third quarter, including Eric Fisher Salon and HomeGrown at the new Spaghetti Works development, Jenny Dawn Cellar’s urban winery lease at the remodeled Union Station and cookie franchise Crumbl’s lease at 2654 N. Greenwich in the strip center west of Academy Sports & Outdoors. Twenty-nine retail sales totaling $35,898,618 took place during the third quarter. Happiness Plaza sold during the third quarter, but the biggest retail sale was Towne West Square in July. The 446,678 SF shopping mall sold to and out-of-state group which specializes in purchasing and revitalizing underperforming shopping centers.

Q3 ‘19

Q2 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19

$11.44

Q3 ‘19

$12.00

Q2 ‘19

76,410

61,874

$12.08

Q1 ‘19

$11.93

38,999

Q4 ‘18

$11.89

Q3 ‘18

Q3 ‘18

Q2 ‘19 Q3 ‘19

Q4 ‘18 Q1 ‘19

(21,035)

(42,186)

$11.44

Q3 ‘19

$12.00

naimartens.com

Q2 ‘19

INDUSTRIAL

6.4%

6.2%

5.9%

5.7%

5.5%

Third quarter was slow for the industrial market. The industrial market ended the third quarter with a negative absorption of 266,284 SF. Most of the submarkets saw increased vacancy but the largest contributor was the northeast, particularly a 201,000 SF warehouse vacated by Johnson Controls on E 35th St. Johnson Controls is moving its warehouse space to the Air Capitol industrial development in Park City. The vacancy rate for the quarter was 6.19%, up from 5.54% during the second quarter. General industrial asking rental rates increased slightly from last quarter, but R&D/Flex rates decreased slightly, averaging out to a rate of $5.10/ SF.

6.4% Q3 ‘18

Q3 ‘19

Q2 ‘19

Q4 ‘18

Q1 ‘19

6.2%

5.9%

255,207

5.7%

5.5%

Q1 ‘19

149,469

124,872

Q4 ‘18

Q3 ‘18

Q3 ‘19 Q2 ‘18

Q2 ‘19

Q3 ‘18

Q4 ‘18

Q1 ‘19

11,139

Q3 ‘18 Q4 ‘18

Q2 ‘19

Q1 ‘18

Q1 ‘19

Q3 ‘19

255,207

The industrial market remains very strong, but limited inventory continues to drive slower deal flow across the market. We expect to continue seeing a pent-up demand for space through 2020.

Q1 ‘19

149,469

124,872 (266,284)

Q4 ‘18

Q3 ‘18

6.4%

$5.10

Q2 ‘18

Q3 ‘19

6.2%

11,139

Q3 ‘18 Q4 ‘18

Q2 ‘19

Grant Glasgow, SIOR Senior Vice President

Q1 ‘18

$4.96

Q2 ‘19

Q1 ‘19

Q3 ‘19

5.9%

$5.06

Q1 ‘19

5.7%

5.5%

$5.00

Q4 ‘18

Q1 ‘19 In aviation news, Signature Flight Support signed a 30-year lease for space inside a former Beechcraft facility at Dwight D. Eisenhower Airport and agreed to make $2 million worth of improvements to the space. At Jabara Airport, Midwest Corporate Aviation is constructing a new 18,000 SF hangar which will be the first of two. Two new buildings were proposed at Webb Business Park during the third quarter. One is 136,080 SF and the other 42,000 SF. Roberts Concrete’s 13,310 SF building at 4151 S West was the only industrial building completed during the third quarter. Twenty-nine industrial sale transactions totaling $13,965,375 were completed during the third quarter. Notable sales included the former Thunderbird Tactical building at 2831 N. Greenwich and the Ferguson Bath, Kitchen & Lighting Gallery building and warehouse space to the north on East Douglas, and 7716 E Osie near Harry & Rock. Q4 ‘18 $5.06 Q3 ‘18 Q2 ‘18 Q1 ‘18 Projects under construction in the industrial market include the 35,000 SF spec building at 53rd & 119th, the Metal Pros 48,000 SF building at 3900 S Norman and another 100,000 SF warehouse at Ironhorse Industrial Park. Leasing activity was down in the third quarter. The only notable lease was of 3526 N Comotara to NEXT LED. $5.10

$4.92

Q3 ‘18

Q3 ‘19 (266,284)

Q2 ‘19

3 ‘18

Q4 ‘18

Q1 ‘19

Q3 ‘19

255,207

$4.96

Q2 ‘19

149,469

Q1 ‘19

124,872

$5.00

Q4 ‘18

11,139

$4.92

Q3 ‘18 Q4 ‘18 Q3 ‘18

Q2 ‘19

Q1 ‘19

Q3 ‘19

(266,284)

$5.10

Q3 ‘19

(316) 262-0000

$4.96

Q2 ‘19

INVESTMENT

MULTIFAMILY Construction has started on two apartment projects near Wichita State University. One project will bring 84 units to Bluff & 17th and the other 150 units near 21st & Oliver. Construction has started on the Delano Catalyst apartment project, 225 Sycamore, which will be a 204-unit complex next to the Advanced Learning Library. Notable sales in the multifamily market for the third quarter include the 240-unit Westlink Village Apartments near Central & Tyler and the 288-unit Southlake Village Apartments near Seneca & MacArthur. HOSPITALITY

For a more detailed look at the investment view our latest Multifamily Market Update!

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Work is about to begin on the $12.5 million Delano Catalyst hotel project, which will be branded a Home2 Suites by Hilton. The Hyatt Place on Wichita State’s Innovation Campus broke ground in August and is expected to be ready by summer. The WSU Hyatt Place will be 106 rooms. The downtown Hilton Garden Inn, which now holds the first downtown Starbucks on its first floor, set an estimated opening for April 2020 after months of delays. Only one hospitality sale took place during the third quarter, the 47-room Days Inn in Park City which sold in July. MANUFACTURED HOUSING COMMUNITIES Manufactured housing communitiy sales were slim during the third quarter in the Wichita market. Pine Ridge Estates in Towanda sold, as well as Augusta Mobile Home Park. Despite the number of closings during Q3, the manufactured housing market remains strong both locally and nationally. SELF-STORAGE Three new projects all by development group Centennial American Properties. The three projects, to be branded Extra Space Storage, are going up at 13th & Maize, 21st & Webb, and Kellogg & Webb. The Extra Space Storage buildings will resemble retail developments and will be three stories tall. Wichita Self Storage is now open, a new set of units built on the site of the former Johnson’s Garden Center near Ridge & Central. Work continues on the new U-Haul facility near Kellogg & Ridge, west of the WoodSpring Suites.

NOTABLE NAI MARTENS TRANSACTIONS

For more details view our full Q3 2019 Transactions Report

SOLD

SOLD

SOLD

SOLD

LEASED

LEASED

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Q3 2019

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