The commercial real estate market in Wichita will see continuing improvement in 2014, but no big upswings in activity are expected.
That’s according to J.P. Weigand & Sons’ 2014 real estate forecast, which was announced at the firm’s 13th annual real estate forum Tuesday night at the Hyatt Regency Wichita.
Jerry Gray, vice president and general manager of Weigand’s commercial division, delivered the forecast to about 450 people attending the more than two-hour event.
Gray said vacancy rates declined by nearly 1 percent in the industrial sector between 2012 and 2013.
Activity, however, is muted in that sector because of a lack of quality industrial properties, because new technologies in manufacturing mean manufacturers don’t need as much space, and because manufacturers are opting to run multiple shifts before expanding their space.
The industrial market will likely be flat in 2014, Gray said. “We don’t expect to see great movement until the business jet market turns around.”
The office market saw little change in vacancy rates between 2012 and 2013, Gray said, and activity was primarily tenants “shuffling from one building to another.”
In 2014, Wichita’s east side could see some new office construction because of anticipated demand in Class A office space in that part of the city. However, he said the downtown office market will be challenged because of the departures of state agencies from the Finney State Office Building.
Retail vacancy rates tightened from 13.7 percent in 2012 to 12.3 percent in 2013, primarily because of falling vacancies at strip centers developed between 2008 and 2010.
The retail sector is expected to see gradual improvement this year, with most new construction activity occurring along Greenwich Road between 13th and K-96. Weigand also forecasts that new retail construction will be soft in 2014 because of cost and little increase in rent prices.
Of all the commercial real estate sectors, multi-family apartments saw the biggest decline in vacancies last year. Gray said apartment vacancies were 7.2 percent in 2013 compared with 9.3 percent in 2012.
Gray said that even with the number of new apartment communities recently completed in the area, and those set to begin this year, the new units will not have a long-term effect on apartment vacancy rates.
“It’s very active, and strong demand will absorb new inventory,” Gray said.
Following Gray’s presentation of the forecast – which is available online at www.commercialrealestateforecast.com – Mark Dotzour, chief economist and director of research at the Real Estate Center at Texas A&M University, offered his expectations for the national economy in 2014.
Dotzour told the audience that while the fundamentals of a strong economy are in place – such as consumer confidence, personal consumption expenditures and corporate profits – growth in jobs is being held back largely because of continued uncertainty about implementation of the Affordable Care Act and the effects of federal government sequestration.
“You combine those things together, that’s why I’m optimistic about ’12, ’13 and ’14,” Dotzour said.