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Wichita developers slow to use incentives for spec buildings

  • The Wichita Eagle
  • Published Thursday, Nov. 22, 2012, at 12 a.m.

Spec buildings, particularly those for industrial and warehouse use, have gotten a lot of attention lately.

Economic development officials say those kinds of buildings – speculative because they don’t have a waiting tenant – are key to luring large employers from outside the area.

Wichita’s problem is, they say, a lack of new industrial and warehouse buildings with lots of square footage and high ceilings, surrounding acreage and rail access.

They argue that a lack of such buildings and features is enough to get the city quickly booted from a site selector’s consideration as a place for a company to relocate.

“They’re not looking for a reason to keep you (on their list),” Dave Bossemeyer, managing director of business development for the Greater Wichita Economic Development Coalition, said of site selectors. “They are looking for a reason to get rid of you.”

To address the issue, the City Council in August approved tax breaks intended to spur development of speculative industrial and warehouse buildings.

So far, only one developer has taken advantage of the tax break, a city official said.

But in the meantime two other developers have built their own spec buildings without a hand from the city, and one of the developers expects to build another next year — again without the aid of a tax break.

Building activity

The incentive the council approved on Aug. 14 provides for industrial revenue bonds with a 100 percent property tax exemption for five years to be issued for speculative industrial buildings, according to city documents. But the buildings have to be 50,0000 square feet or larger to qualify for the exemption.

Allen Bell, the city’s director of urban development, said in an e-mail to The Eagle that only one developer, David Shannon, had applied for the exemption.

Shannon said Tuesday that he didn’t have time to talk in detail about the project. According to city documents, Shannon’s project is a 90,000-square-foot speculative warehouse/distribution facility in the 2100 block of south West Street.

Earlier this year, developer Dean DeWitt of DeWitt Land Co. built a speculative industrial/warehouse building at K-42 and West Street that he said is a little more than 20,000 square feet with 24-foot-high ceilings.

“We built it; now we hope we rent it,” he said. “It’s been sitting three months, and it hasn’t rented yet.”

DeWitt said he didn’t seek any incentives to construct his building.

Across town, Ross Way, a partner in Anderson Management Co., built a 16,000-square-foot “flex” spec building earlier this year in Northrock Business Park near Rock Road and K-96. A flex building is a building designed to be used either as office or warehouse space. He said that building has since been leased.

“We were 95 percent occupied here in Northrock Business Park,” Way said. “With the 16 buildings we have, if anybody needed anything over 400 square feet we didn’t have it. It’s why we built the 16,000-square-footer.”

Way said he didn’t use any incentives to build that building and won’t with an 18,000-square-foot building he plans to construct at Northrock next spring.

“We think by then we’ll probably be up to 95 percent occupancy in all the buildings,” he said of the plans for the 18,000-square-foot building, which will be the last one built at Northrock because the park will then be full.

Way’s company also has an 80,000-square-foot building under construction in Greenwich Business Park. That warehouse building is not spec. It is a build-to-suit for B/E Aerospace, he said.

GWEDC’s Bossemeyer said that even with the newer spec properties that have been built or are planned, the area could use additional new properties. The reason, he said, is that companies have differing needs. Some want new buildings with 24-foot ceilings with tens of thousands of square feet, access to a rail line, lots of parking and lots of surrounding acreage. Others might be OK with an older, used building but one that has been impeccably maintained.

“We really have a fairly limited inventory,” Bossemeyer said. “We do have buildings, just not the buildings the market is asking for.”

Marlin Penner, president and supervising broker of NAI John T. Arnold Associates, said the absence of new construction in industrial and warehouse buildings locally is a reflection of the lack of confidence most developers have had in the market in the past few years, born largely from the recession and the sluggish recovery.

“People around here will do spec if they believe they can lease it quickly,” Penner said. “This market hasn’t had quite that level of confidence.”

But Penner and other real estate officials said there may be some interest returning to the spec industrial market.

Scott Salome, an industrial specialist with Grubb & Ellis Martens Commercial, said the activity in spec industrial building could increase next year, partly the result of the city incentives for new industrial property.

“I have talked to a couple of people that may look to take advantage of that as well,” Salome said.

Reach Jerry Siebenmark at 316-268-6576 or jsiebenmark@wichitaeagle.com.

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