Q1-2018 Multifamily Market Update

WICHITA Multifamily

NAI Martens Multifamily Market Update

First Quarter 2018 Trends and Statistics | May 7, 2018

MULTIFAMILY OCCUPANCY TRENDS The Wichita market has experienced an increase in multifamily occupancy since 2012 when occupancy was at 92%. Since that time it has hovered around 93.5%-94.5% with a high in late 2015. Over the last 6-12 months multifamily occupancy has been decreasing. In mid-2017 the Class B submarket (largest segment of the market) the occupancy rate was 94.5%. In March 2018, updated occupancy information from a sampling of the market (40 Class B properties with 100 or more units) showed an average occupancy of 92%. This sample consists of approximately 8,000 units, which is a quarter of a market. This decline of 2%-3% is expected to be market wide, not just the Class B market, which is typically the most stable. According to Trepp data, the national average occupancy for multifamily CMBS loans has been trending downward over the past two years. Average occupancy was measured at a recent low of 93.1% in March, which is 60 basis points lower year over year. According to the National Real Estate Investor, “The continued competition from new construction may finally make a small dent in occupancy levels in 2018,” (http://www.nreionline.com/ multifamily/apartment-sector-boom-set-continue-2018). New construction ramped up in 2013 after over a decade of minimal new development leading to built-up demand. From 2013- 2016 there were steadily 600 units added to the market per year. In 2017, over 1,000 units were added to the market. New construction has slowed absorption and decreased occupancy in Class A. “Developers have so far concentrated their efforts on building luxury apartments, charging high rents to offset the high cost of development. That often means that new class-A apartments face a lot of competition.” (http://www.nreionline.com/ multifamily/apartment-sector-boom-set-continue-2018). Class B and C properties have felt the trickle-down effect from this. Slow job/population growth may be another reason for the decrease in occupancies. According to the Center for Economic Development and Business Research, the forecasted job growth for the Wichita metro area is at .4 percent. Even with a slight increase in growth, the Wichita job market still lags behind the U.S. as a whole. This is the kind of growth rate the city has seen for a while now largely due to a struggling aerospace manufacturing sector. Statewide, the forecast says overall job growth looks to be weak in 2018 as well. Initial new development was fueled by pent up demand and the slower housing market. Wichita area home sales slowed in 2017 due to tight inventories. Demand remains strong though, with sales forecasted to rise 1.5 percent in 2018. The stagnant employment and population growth has also hindered new home construction. The competition for homes priced below $250,000 is strong due to the limited inventory. In 2017, 36.7 percent of [continued on back page]

OCCUPANCY TRENDS

97.0%

96.0%

95.0%

94.0%

93.0%

92.0%

91.0%

90.0%

NUMBER OF HOME SALES

12,000

10,000

8,000

6,000

4,000

2,000

0

2012

2013

2014

2015

2016

2017

NUMBER OF EMPLOYED

2017

2016

2015

2014

2013

2012

282,000 284,000 286,000 288,000 290,000 292,000 294,000 296,000 298,000 300,000

*Numbers reflect Wichita market area statistics. Data supplied by NAI Martens Research and the WSU Center for Real Estate.

435 S Broadway St, Wichita, KS 67202 | Main 316 262 0000 | www.naimartens.com

homes sold in 10 days or less. According to the Wichita State University Real Estate Center’s Housing Market Report, home prices were forecasted to rise 4.1 percent in 2017 and another 3.7 percent in 2018. Looking forward, fewer units will be added in 2018 giving the market time to stabilize. Owners are remodeling existing units with more modern finishes. An average cost of $2,500-$3,500 per unit to renovate allows owners to increase the monthly rent by $50 - $100. This provides a nice return and helps with leasing as well. An increase in interest rates may slow housing

sales leading to more renting instead. Big announcements and developments in Wichita may also help the multifamily market. In late 2017, Spirit AeroSystems announced 1,000 new job in a major expansion, with the probability of another 3,000 in the company’s massive local supply chain. In downtown Wichita, a proposed multi-million multi-use new Lawrence Dumont Stadium is hopeful as well as the Cargill Protein Headquarters currently under construction on Douglas. Wichita officials have been planning recruitment trips to try and get back some of the workers who left during the economic collapse in 2008.

$35 MILLION OF MULTIFAMILY SOLD OR UNDER CONTRACT IN 1Q18

Sold

Sold

Sold

Stratford East Apartments 7826 E Douglas Ave | Wichita, KS

Stratford West Apartments 1440 N. Clarence Ave | Wichita, KS

Westport Apartments 2526 W 31st St S | Wichita, KS

Under Contract

Under Contract

Under Contract

Quinton Point Apartments 2316 Wildcat Ln | Junction City, KS

Northtown Square 333 W 21st St | Wichita, KS

South Park Apartments 1501 Old Main St | Newton, KS

Under Contract

Under Contract

Available

Ridgefield Twin Homes 940 N Redbud Ct | Valley Center, KS

Mission Apartments 912 S Mission Rd | Wichita, KS

Kellogg & Woodlawn Multifamily Kellogg & Woodlawn | Wichita, KS

NAI MARTENS MULTIFAMILY TEAM

Nathan Farha, CCIM Title Senior Vice President Direct 316-263-9669 E-mail nfarha@naimartens.com

Jeff Englert Title Senior Vice President Direct 316-847-4924 E-mail

jenglert@naimartens.com

Page 1 Page 2

Made with FlippingBook Online newsletter