Wichita’s retail recovery, the rebound in home sales and the city’s uptick in commercial activity are on hold in the wake of Boeing’s announcement Wednesday that it’s closing its Wichita plant after more than eight decades as the city’s manufacturing icon.
Boeing’s departure means several months — at least — of slowing sales, whether the subject is clothes, televisions, cars, homes or new business starts, several analysts said.
“It’s definitely a blow,” said Jeremy Hill, the director of Wichita State University’s Center for Economic Development and Business Research. “It’s definitely going to affect our economy, but the timing of their plan to leave will determine how well the economy can absorb its real impact.”
With Boeing, the departure of about 2,160 jobs means a loss of $1.5 billion in wages over the next decade, Hill said.
It’s a setback, analysts said, after Wichita’s economy began to rebound significantly in the last two quarters of 2011:
Retailers reported surprisingly strong Christmas sales, up from 3 percent into the low double digits. Home sales were higher than expected for the fourth quarter, fueling hopes for a stronger 2012 than originally expected. Home prices were up 5.5 percent year over year as of the third quarter of 2011. New business activity was ramping up across town, with 2012 expected to be a big year for the revitalization of the city’s downtown.
But the departure of those jobs — 0.7 percent of the 288,000 jobs in the Wichita area — will tap the brakes on that growth, at least temporarily.
“I’m not sure you’ve taken a torpedo below the water line,” said Jed Smith, managing director for quantitative research for the National Association of Realtors. “But it’s nothing you ever want to hear.”
Jeff Fluhr, the president of the Wichita Downtown Development Corp., said Boeing’s announcement could temporarily slow, but not defeat, redevelopment momentum downtown.
“It is hard to predict the overall impact until you get down the road on an announcement like this,” Fluhr said. “Any time something like this happens, it creates a sense of uncertainty. People look at the market a lot harder.”
Two downtown markets that could be hit in the short-term, Fluhr said, are hotel and restaurant development.
Paul Coury, the lead developer for the 117-room boutique Ambassador Hotel downtown, said he was unaffected by Boeing’s announcement.
“I’ve never seen a room demand chart that Boeing used in the marketplace, but I’d think it would hurt more the limited-service product in their part of town,” Coury said. “If anything, with this vote coming up (on public incentives for the Ambassador) it’s all the more reason for people to make sure they preserve jobs in Wichita.”
Smith, with the Realtors group, said Wichita homeowners should expect slower price appreciation and slower buying and selling traffic.
Dawson Grimsley, president of Davis-Moore Auto Group, one of the area’s largest dealers, said it could mean fewer truck and auto sales for a while. But its effect shouldn’t be too deep or long-lasting.
“I’ve been doing this for 36 years,” he said. “We’ll be here.”
Bankers such as Tom Page said it’s hard to immediately know how much of a blow it is to local business.
“It isn’t something on a scale that we haven’t encountered before,” said Page, CEO of Emprise Bank. “We’ve had sad days, and we’ll work our way through these. But a couple of thousand very well-paid manufacturing jobs is a very challenging thing to replace.
“In the extreme short run … it will leave a hole.”
Steve Martens, president of Grubb & Ellis/Martens Commercial Group and one of the city’s largest commercial brokers, said Boeing’s departure is a hit to the short-term future of the city’s commercial real estate market.
“A lot of us had factored in the tanker work in our assessments and projections for the local economy,” Martens said, “and not having that work will have a definite adverse impact on the growth of the local economy.
“We saw over the last half of 2011 increased interest in our commercial real estate. So where this goes will purely be a function of whatever other financial news will happen in the local economy over the next 60 to 120 days.
“Is anyone else leaving? Is anyone else in trouble? Is anyone else having significant cutbacks?”
Smith agreed, saying the city’s commercial real estate sector “depends on jobs.”
“And retail is purchasing power related to jobs. Industrial warehouses are jobs. Office space is jobs where people are working,” he said.
“When you pull out jobs, it will slow your economy down. In the case of industrial, it’s decreased demand for warehouse space. To the degree these are production jobs, it will impact your warehouse market more than office.
“And when you pull well-paid people out of the area, that’s a negative impact on retail.
“It’s not good news ... but it’s not the end of your world, either.”