Coming off a strong 2015, this year is expected to bring more of the same for the commercial real estate market in Wichita.
That’s according to an annual area forecast released Thursday by J.P. Weigand & Sons, which was highlighted by a prediction that more businesses will relocate to Wichita’s downtown core.
Last year’s numbers show that vacancy rates for mid-level quality office space in the city’s central business district dropped to 19 percent, a 5 percent decrease from 2014. The decrease was due in part, the report indicated, from added occupancy at the High Touch building at 110 S. Main.
Citing “excitement” created by the refurbishment of a number of old and vacant properties for apartments and other uses, the forecast predicts that businesses will continue to consider relocating downtown in 2016.
Among city quadrants, the northeast section of Wichita showed the lowest overall office space vacancy rate with a figure of just under 13 percent. The overall office vacancy rate for the city was nearly 18 percent for 2015, which was up slightly from 16.8 percent in 2014, according to the forecast.
The highest office vacancy rate in the city for 2015 in an area with at least 30 buildings was 41 percent, which was for space that typically features below average rents – classified by Weigand as “class C” – in the downtown area.
The lowest office vacancy rate in an area with at least 30 buildings was found in the northeast quadrant of Wichita, which featured a 12 percent rate for the most prestigious spaces also known as “class A.”
In all, the forecast said 2015 was a “dynamic” year for real estate in Wichita, adding that virtually all areas of the commercial market saw enhanced activity.
The new Wichita Eisenhower Airport terminal and Koch Industries’ 210,000-square-foot expansion were cited as two of the most notable expansion projects in the area.
While bullish on the real estate market overall – especially new projects like Wichita State University’s Innovation Campus and the Union Station complex downtown – the forecast also cited concerns, especially in the office sector.
“The older properties continue to struggle throughout the market,” the report said. “The market continues to struggle to achieve significant absorption of office space. This has been the case for several years and it will remain way until new businesses can be recruited to move to the city.”
In other sectors, the forecast predicted:
▪ Continued strong activity in the retail market, highlighted by new developments in northeast and northwest Wichita, along with the Derby area. The most prestigious retail properties in Wichita had a vacancy rate of 8.8 percent in 2015, in addition to an 11 percent increase in asking rates per square-foot.
Overall, the report said retail vacancy rates increased slightly to 15.5 percent, due largely to the difficulty that older shopping centers have had in attracting new tenants. National franchises should continue to drive activity in this sector.
▪ Lack of inventory will become a concern within the industrial real estate market, which could push businesses to build rather than lease spaces. The availability of “modern industrial space” for lease is beginning to be a concern, and asking rates per square-foot are likely to remain flat.
▪ More of the same for the red-hot commercial real estate investment market. Investors – looking for a safe place to put their money amid lower commodity and oil prices, and unstable market conditions – will likely to continue to pursue deals as interest rates remain low.
▪ Apartment living will continue to be attractive to millennials and empty nesters. The overall apartment vacancy rate for Wichita was 9.8 percent in 2015, essentially the same as it was the previous year, despite the fact that several new complexes came online. The amount of new apartments scheduled to open, however, will test the market in 2016.
▪ The housing market will likely remain active this year, though inventory continues to be absorbed. A total of 9,686 homes sold in the area in 2015, about a 4 percent jump from the previous year. This year will continue to be a seller’s market.