Q4 2019 Market Update

Q4 2019 W I C H I T A K A N S A S

MARKET UPDATE

© Photo by Randy Tobias Photography

OF F I CE

RETA I L

I NDUSTR I AL

I NVESTMENT

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

14.7%

14.6%

14.4% OFFICE

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

Q1 ‘19 The Wichita office market ended the fourth quarter with negative absorption and a slight increase in vacancy. The office market had seen quarter-to-quarter decreases in vacancy throughout 2019 until the fourth quarter. The year ended with a vacancy rate of 14.73%; still an improvement from 17.0% at the end of 2018. Net absorption in the office market was negative 20,007 SF. The main contributor to the negative figure is new and remodeled spaces added to the market. Asking rent in Class A and B dropped from third quarter, with Class A ending the quarter at $17.74 PSF and Class B at $11.75 PSF. Q4 ‘18 Q3 ‘18 Q2 ‘18 Q1 ‘18

186,190

17.0%

16.6%

14.7%

14.6%

14.4%

45,001

27,354

14,595

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19

Q4 ‘19

(20,007)

Wichita’s office real estate market is in one of its strongest growth cycles in history. Record low interest rates and companies seeking to attract and retain a high quality workforce have been two of the driving factors for development.

186,190

Q1 ‘19

Q4 ‘18

Q1 ‘19 Q4 ‘19 Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18 16.6% Q4 ‘19 Q3 ‘19 Q2 ‘19 Q1 ‘19 Q4 ‘18

$17.74

Q3 ‘18

$18.01

Ryan Hubbard Commercial Advisor

Q2 ‘18

$18.90

Q1 ‘18

17.0%

$18.94

45,001

$19.13

27,354

One major office project was completed during the fourth quarter. The highly anticipated Spaghetti Works District mixed- use 60,000 SF development was finished. The anchor office tenant in the building is Martin Pringle Law Firm. The CBD continues to receive attention in the office market. In December, WaterWalk developer Jack DeBoer announced the construction of an 80,000 SF building at the corner of Waterman & Main. The project will feature office space with top-quality finishes which DeBoer refers to as “double-A.” Also in the CBD, construction continues on the 30,000 SF Hutton Construction headquarters building in Delano. Progress is being made on TGC Development Group’s building to be occupied by IMA Financial. The development located at the corner of Douglas & Emporia will bring an additional 74,000 SF of office and retail space to downtown. Additionally, work on Fidelity Bank’s $51-million headquarters expansion continues to move forward, with the first phase being a five-story car park with 17,000 SF of ground floor retail space and the second phase adding a ten- story office building. Twenty office buildings were sold during the fourth quarter totaling $11,899,309. Notable buildings sold included a former Via Christi office at 731 N. McLean, the building at 125 S. Washington to Youth Horizons, Inc. and Spirit AeroSystems’ purchase of the Air Capital Flight Line building at 4555 S. Oliver.

14,595

Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19 $ 1.75

Q4 ‘19

$12.04

14.7%

14.6%

(20,007)

14.4%

$11.85

$12.30

$12.23

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q2 ‘19

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

$17.74

$18.01

186,190

$18.90

$18.94

Q1 ‘19

$19.13

Q4 ‘18

Q3 ‘18

$11.75

Q2 ‘18

$12.04

Q1 ‘18

$11.85

45,001

$12.30

27,354

14,595

$12.23

Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19

Q4 ‘19

(20,007)

Q4 ‘19 Q3 ‘19 Q2 ‘19 Q1 ‘19

$17.74

$18.01

(316) 262-0000

$18.90

$18.94

11.4%

11.2%

RETAIL

10.9%

10.5%

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

The retail market had a healthy fourth quarter. Wichita retail saw 103,182 SF absorbed and the vacancy rate ended the fourth quarter at 10.51%, a 0.72% drop from third quarter. Asking rent had a slight decrease from $11.44 PSF in third quarter to $11.39 for the fourth quarter. No specific sector of the market was responsible for the large amount of absorption. A list of smaller spaces provided nearly 30,000 SF of absorption each in the CBD, northwest and southeast. Projects under construction are mostly in the northeast sector, as work continues on the new 20,200 SF Accent Lighting building at the Waterfront and REI Co-op’s Greenwich Place building nears completion. In addition, a number of under- construction or proposed office projects in the CBD include ground floor retail space, such as the IMA Financial building and Fidelity Bank’s car park.

11.9%

103,182

11.4%

76,410

11.2%

61,874

10.9%

10.5%

Q4 ‘19

Q3 ‘19 Q2 ‘19 Q3 ‘19 Q4 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

Q4 ‘18 Q1 ‘19

(21,035)

103,182

(42,186)

76,410

61,874

$11.39

Q4 ‘19

The traction that retail has been building up in the last few years in Wichita has been exciting. We’ve continued see this trend hold strong through the 4th quarter of 2019. With many retail developments nearing completion in the first quarter of 2020, we can expect to see a continuing transition of interest of new and expanding retailers.

$11.44

Q3 ‘19

11.9%

Q2 ‘19 Q3 ‘19 Q4 ‘19

$12.00

Q2 ‘19

Q4 ‘18 Q1 ‘19

11.4%

$12.08

(21,035)

Q1 ‘19

11.2%

10.9%

(42,186)

$11.93

Q4 ‘18

Marshall Johnson Commercial Advisor

10.5%

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

$11.39

Q4 ‘19

The Kwik Shop and Taco John’s 7,500 SF building at Kellogg & West was completed and is open for business. The Greenwich Place area continues to expand with the announcement of more definite plans on a golf entertainment complex. BigShots Golf plans to be open at 29th & Greenwich by early next year. Twenty-seven retail sales totaling $13,131,646 took place during the fourth quarter. A few investment purchases took place, including a number of Dollar General stores and the QuikTrip at 12825 E. 21st. Additionally, two retail strip centers sold – one at 4590 N. Maize and the other at 2523 E. Harry.

$11.44

Q3 ‘19

103,182

$12.00

Q2 ‘19

76,410

61,874

$12.08

Q1 ‘19

$11.93

Q4 ‘18

Q2 ‘19 Q3 ‘19 Q4 ‘19

Q4 ‘18 Q1 ‘19

(21,035)

(42,186)

$11.39

Q4 ‘19

$11.44

Q3 ‘19

naimartens.com

INDUSTRIAL 6.2%

6.2%

5.9%

5.7%

5.5%

Q1 ‘19 A number of various industrial projects are under construction. Work continues on two spec buildings; one 100,000 SF building at Ironhorse Industrial Park and another 138,000 SF project at Webb Business Park. Construction is almost finished on Evans Building Company’s new 50,000 SF building at Maize Industrial Park. Metal Pros is finishing up its new 48,000 SF headquarters at 3900 S. Norman. Q4 ‘18 The industrial market ended the fourth quarter with positive absorption of 42,573 SF. All of the submarkets except the southeast saw an increase in occupancy. The vacancy rate for the quarter was 6.23%, up just slightly from 6.19% during the third quarter. General industrial asking rental rates decreased, and R&D/Flex rates increased by one cent, averaging out to a rate of $4.97 PSF.

Q4 ‘19

Q3 ‘19

Q4 ‘18

Q1 ‘19

Q2 ‘19

6.2%

6.2%

5.9%

255,207

5.7%

5.5%

Q1 ‘19

124,872

Q4 ‘18

Q3 ‘18

Q3 ‘19 Q4 ‘19 42,573

Q4 ‘19 Q2 ‘18

Q4 ‘18

Q1 ‘19

Q2 ‘19

11,139

Q4 ‘18

Q2 ‘19

Q1 ‘18

Q1 ‘19

Q3 ‘19

255,207

124,872 (266,284)

Q3 ‘18

Q4 ‘19 42,573

Q2 ‘18

$4.97

Q4 ‘19

11,139

Q4 ‘18

Q2 ‘19

Q1 ‘18

6.2%

The industrial market in the Wichita area remains tight with a limited number of quality properties available. The continued 737 Max issues are also factoring into a slower deal flow. Parts manufacturing companies that support Spirit Aero and Boeing have put their real estate moves on hold, however this is expected to change later this year.

6.2%

Q1 ‘19

Q3 ‘19

$5.10

Q3 ‘19

Q2 ‘19

$4.96

5.9%

$5.06

Q1 ‘19

5.7%

5.5%

$5.00

Q4 ‘18

(266,284)

Scott Salome, SIOR VP - Industrial

Q4 ‘19

Q3 ‘19

4 ‘18

Q1 ‘19

Q2 ‘19

$4.97

Q4 ‘19

$5.06 In the aerospace industry, a couple companies are expanding their footprint. Paragon Services is adding 12,000 SF to its location at 4242 W. Walker. B&B Airparts is also expanding its facilities, adding 53,000 SF to its existing 79,000 SF at 1831 S. Hoover. Thirty-one industrial sale transactions totaling $18,677,850 were completed during the fourth quarter. Berry Material Handling sold its former facility at 3769 W. McCormick and purchased the building at 4626 S. Palisade. Another significant transaction was Carlson Hydraulics at 3414 W. 29th. $5.10 Profillment announced during the fourth quarter that the company is working on a 79,000 SF warehouse and office facility at 1948 S. Hoover.

255,207

Q3 ‘19

Q1 ‘19

Q2 ‘19

$4.96

124,872

Q4 ‘18

Q1 ‘19

Q3 ‘18

Q4 ‘19 42,573

Q2 ‘18

$5.00

11,139

Q4 ‘18

Q4 ‘18

Q2 ‘19

Q1 ‘18

Q1 ‘19

Q3 ‘19

(266,284)

$4.97

Q4 ‘19

$5.10

Q3 ‘19

(316) 262-0000

Q2 ‘19

$4.96

INVESTMENT

MULTIFAMILY

Work continues 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 is also ongoing on the 204-unit 225 Sycamore, the Delano Catalyst apartment project. Multifamily had a fairly active fourth quarter, with notable sales including the 64-unit Carter Apartments, the 26-unit Villa Oaks Townhomes, the 116-unit Elms Apartments and The Commodore.

HOSPITALITY

In hospitality news, construction was completed on the Home2 Suites near 21st & K-96, and construction began on the Delano Catalyst site hotel which will carry the same flag. The 106-room Hyatt Place on Wichita State’s Innovation Campus is also under construction and expected by this summer. The Hilton Garden Inn downtown is now open. Not many hospitality sales took place during the fourth quarter, the only notable one being the 140-room Clarion Hotel & Suites along West Kellogg, which is re-branding to a dual brand Hawthorne Suites / Baymont Inn.

MANUFACTURED HOUSING COMMUNITIES

In line with national trends, MHCs remain a sought-after investment in Wichita. One notable sale took place during the fourth quarter, the 38-space Timber Creek Estates at 1302 E. MacArthur. A couple other local communities have gone to market recently, so the following months could see a higher sales volume than this past quarter.

SELF-STORAGE

Construction is coming along on Centennial American Properties’ Extra Space Storage developments. The projects are going up at 13th & Maize, 21st & Webb, and Kellogg & Webb. Work is nearly finished on U-Haul’s new facility near Kellogg & Ridge. No notable self-storage sales took place inside Wichita, but Bel Aire Mini Storage facility on North Woodlawn sold. No notable self-storage sales took place inside Wichita, but Bel Aire Mini Storage facility on North Woodlawn sold.

NOTABLE NAI MARTENS TRANSACTIONS

For more details view our full Q4 2019 Transactions Report

SOLD

SOLD

SOLD

SOLD

LEASED

LEASED

naimartens.com

Q4 2019

© Photo by Randy Tobias Photography

naimartens.com

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