Bullishness for Class A apartments has not waned in Wichita even as the single-family housing market continues to show improvement.
Developers and real estate officials said the market for new, multifamily developments is capable of absorbing the more than 700 additional units planned or under construction in and around Wichita.
And investors are clamoring to acquire additional pieces of the apartment business, they said.
Realistically, said Jeff Englert, a commercial real estate adviser for NAI Martens who focuses on the multifamily industry, the city and its suburbs could probably absorb nearly three times the number of units expected to become available later this summer and into next year.
“What’s readily coming online, I think it (the market) can absolutely absorb that, when you’re running at 97 percent-plus occupancy in Class A,” he said.
Apartments that are Class A are generally newly built or less than 10 years old and are in well-maintained complexes that aren’t built with low-income housing tax credits.
Englert added that between projects that are firm and others that are being talked about, the total number of units in the area is somewhere between 2,500 and 3,000. If all of those projects come to fruition over the next few years, he said, “I think you could see some impact to occupancy rates, but I don’t think it would be devastating by any means.”
Englert and others in the industry said it’s been well over a decade since there was a hefty addition of Class A apartments in the area. Between 1998 and 2000, Englert said, about 2,000 apartment units were added in Wichita, the area’s last apartment boom.
That’s what convinced developer Jason Van Sickle to pursue Chisholm Lake apartments in the Ventures Business Park development north and east of K-96 and Oliver. The 216-unit complex is expected to begin welcoming residents in August. “We’ve already started signing leases,” Van Sickle said.
“We just redid our analysis for northeast Wichita. … (The) numbers showed that everything that is slightly new and in decent shape is between 98 and 100 percent occupied,” he said. “That’s what’s driving the demand.”
Paul Jackson, president of Vantage Point Properties, said his company’s original plans for the Andover MarketPlace mixed-use development south and east of Kellogg and Andover Road did not include apartments.
But in March, Vantage Point announced SunStone Apartment Homes, a 208-unit Class A apartment community just east of the MarketPlace’s retail development.
“We did not foresee multifamily when we bought the land,” Jackson said. The developer of largely office and retail projects said he’s learned over the years to be flexible with his planning.
He said the slowdown in the economy in 2008 and the retail sector coming to a “screeching halt” prompted Vantage Point to consider for the first time a multifamily component to one of its developments.
Jackson said SunStone’s proximity to MarketPlace’s retailers, including Dillons as well as the Andover YMCA to the east of SunStone, and the fact that it is within the Andover school district prompted his company to go ahead with the apartments. Construction began this month, and Jackson said he expects renters to start occupying them by late fall.
“If there’s going to be a peak in construction, I guess we’d rather be ahead of the curve,” he said.
Construction is also expected to begin on Stoney Pointe, an apartment community near 29th and Greenwich. Michigan-based Edward Rose & Sons, a regional apartment developer and operator, is developing the project on part of the 46 acres of land it owns there. The complex could eventually comprise more than 400 units, though Mark Harrison of Edward Rose said the number of units initially will be a fraction of that.
“It’s really hard to say (how many units will initially be built),” Harrison said. “We go by how they run out and not building all the units at once. We’re pretty conservative.”
In a January story in The Eagle, Tom Wheatley of Edward Rose said the company would probably start with the construction of 30 to 60 units.
“We plan on moving ground soon,” Harrison said, adding that the firm’s architectural plans for Stoney Pointe are in the final approval process.
Stephen Clark II said he’s still planning up to 300 Class A luxury apartment units at the Waterfront development at 13th and Webb, a project he announced last summer.
“We just completed our schematic design and we’re about to start our … construction documents,” Clark said this week. He said he’s hoping to get construction bids for the project out and back to him by late this summer or early fall, which would mean a 2014 opening for the first of the Waterfront apartments.
For Jackson, building an apartment community wasn’t just about believing he had a good location for such a project or going with a second-best development option for the MarketPlace.
“With the slowdown, lending has tightened, and it’s not as easy to qualify for a home loan,” he said. “That’s pushing people into rental units, and we believe there’s a need for that.”
Jackson does think it is easier for him as a developer to find financing for a multifamily project versus a speculative office or retail building.
“I think in a general sense the financing is more readily available,” he said. “And people still need homes.”
Van Sickle said he has a number of additional apartment projects in various stages of planning around the city. He said he’s also considering a 70-unit new apartment project in the downtown area.
His optimism for the market is high. Investors share that optimism.
Englert said demand for investment in well-maintained apartment complexes remains strong, though at the moment few owners want to sell because of high occupancy.
“The actual amount of transactions this year has been minimal,” he said. “Most properties are doing well and cash-flowing well, and the owners are enjoying the cash flow on these properties.”