Commercial building beginning to blossom
03/24/2011 12:00 AM
08/05/2014 6:20 PM
After two years of recession-induced paralysis, new commercial building is beginning to spring up around Wichita.
And more should be on the way, according to national and local analysts, who say the markets are thawing nationally and in Wichita.
The projects are varied: Cargill's $14.7 million Innovation Center in downtown Wichita; new Menards stores on the east and west sides; the new Cabela's store at K-96 and Webb Road; new hotels, downtown and in Maize; Walmart Neighborhood Markets; continued Dillons remodeling; QuikTrip remodels and growth; senior housing; new restaurants.
It's no surprise to the experts: Trillions in investment capital dollars are emerging from the sidelines in search of any kind of return. And lenders are willing to pry loose of some cash for good commercial projects.
"While real estate is always a matter of location, commercial real estate has become more of a national market where if you see something happen in Oregon, it's likely people in Kansas will experience similar things," said Mark Dotzour, a former Wichitan who heads the Real Estate Center at Texas A&M University.
"Financing is such an integral part of any kind of real estate, and it's purely in a national arena. That's why real estate behavior is looking so common from one state to another state, because of its tie to financing."
The money is there, Dotzour said: Investors have accumulated capital and lenders are ready to get back into the market for good deals.
"Money is available for good deals at a lower interest rate with a higher loan amount," he said.
Life insurance companies, traditionally a big lender in the commercial markets, are one example, Dotzour said.
"A year ago, they were requiring a 35 percent down payment, then six months ago they'd go 70 percent loan to value," he said.
"Just recently, I've heard quotes from them at 77 to 78 percent loan to value at a little over 5 percent. That's an example of the rapid strides the lending market is making."
Curtis Gibson, who analyzes commercial trends for Grubb & Ellis/Martens Commercial Group in Wichita, said national retailers like Menards are ready to jump back into an active post-recession competition for market share.
"I think the nationals have been strategic planning and looking at expanding for the last two or three years, and Wichita usually follows the national economy, which seems to be picking up," he said.
"There are good deals to be had out there and good strategic locations are available. The nationals are after market share, and they feel the economy is on the way back."
Two local commercial brokers say signs of stability in Wichita's aviation manufacturing market are driving the renewed interest in building.
"It's attitude, more than anything else," said Rod Stewart, a director with Keller Williams Signature Partners' commercial division. "First, it's springtime. Second, we saved Hawker and got the tanker contract. People are beginning to think again that there's a future in Wichita."
Marlin Penner, president of NAI John T. Arnold Associates in Wichita, said there is more confidence that the worst of the recession is in the past.
"And then, companies structured to grow are having some fatigue with the recession," he said. "They've got cash and they've not been able to do what they typically do — grow — so they're just going out and doing it."
A player in the market
Former commercial builder Pat Ayars, now a senior housing developer for Oxford Holdings, jumped into the Wichita market this month with a $12 million project at NewMarket Square.
Ayars said he made the move because there's an unfilled niche in the Wichita senior care market, because financing was available and building costs are good.
"It's a nice time from a construction standpoint," Ayars said. "The costs of materials and labor are down. The volume of work out there makes the contractor and subs aggressive, and we wanted to enjoy the fruits of that opportunity."
Lending is available for good deals, and Oxford is proof, Ayars said.
"Really, the environment has returned to the more fundamental lending done 10 or 15 years ago," he said, "where adequate equity was required with a proper debt structure.
"Five to eight years ago, you could get very aggressive 95 percent lending. Today, the number's closer to 65 to 70 percent with the balance being equity. If you can prove project merit, investor capital is going to be available."
Some of that pent-up capital is sniffing around downtown Wichita, where city officials say they've been pleasantly surprised by the level of serious interest in eight "catalyst" sites they put on the market in January.
"We really didn't know what to expect, in terms of the number of people who might respond," said Scott Knebel, the city's downtown revitalization manager.
"But I'd say it's been pretty good. We've had a dozen people or so who are asking specific questions about specific locations, with formal responses due by the end of April."
Developers are inquiring about residential and commercial builds across downtown, said Jeff Fluhr, president of the Wichita Downtown Development Corp.
"People are looking at opportunities again, and I do believe that there are financial resources people have held on to that they're now beginning to consider investing."
Again, it's about financing. Fluhr said work continues on a revolving downtown loan fund that would be operated by a consortium of local lenders.
"We have a lot of ground to cover to get back to old levels, but there are people with pent-up capital beginning to look at the opportunities we have," he said.
One of the city's biggest commercial lenders is bullish on Wichita's future.
"A year and a half ago, nobody wanted to invest in anything because we were all so uncertain about the economy," said Gary Schmitt, who oversees commercial and residential lending for Intrust Bank.
"The fact is, we haven't had any large layoffs recently, and employment is the whole thing driving our economy.
"The aircraft industry continues to employ a lot of people, and we've had some recent good news there, including the other day with the tanker. Employment is the key that will drive everything in Wichita."
Schmitt expects a broad range of commercial building to develop, slowly, across the city.
"There will be activity in good locations, activity all across the board from retail to warehouse facilities," he said. "Some owner-occupied, some investment properties.
"We're not going back soon to what we saw in the 2006 to 2008 era. It's still slower than that, but there is activity."
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