2021 Industrial Report

2021 INDUSTRIAL MID-YEAR REPORT naimartens.com • (316) 262-0000 435 S. Broadway, Wichita, KS 67202

OVERVIEW The Wichita area industrial market has continued to outshine the other submarkets.

This trend is not unique to Wichita, with the constant growth of e-commerce causing industrial markets across the country to flourish. Even before the pandemic, the Wichita market witnessed an increase in industrial development – particularly of large speculative buildings. While other sectors, such as office and retail, began to struggle as a result of the pandemic, the upward trend continued for industrial.

Multiple changes that are contributing to the strength of the industrial market are a direct result of the COVID-19 crisis. Online retailers, such as Amazon, saw growth before the pandemic, but as businesses shut down and workers went remote, online shopping exploded. Businesses already well-positioned sought more warehouse space to keep up with demand and those that relied heavily on brick-and-mortar were forced to re-evaluate their real estate needs and quickly adapt in order to serve their customers. The pandemic had another effect on industrial real estate; as businesses with heavy reliance on China for their supply chains experienced various roadblocks and delays, many began looking at re-locating at least some piece of their operations to the states.

In Wichita, Amazon leased its first delivery station in 2020, located at 4044 N. Toben, and announced plans to build a one million square foot fulfillment center in Park City.

The delivery station is a 100,000+ square foot warehouse built as a result of the City of Wichita’s speculative building program – which was extended beyond its original timeline in the hopes of attracting more national tenants. Other businesses, such as Pratt Industries and Advance Catastrophe Technologies, have chosen to build their own new facilities. At 21st and I-135, a new development called ICT21 Industrial Park is in progress and offers up to 120 acres with highway and railway access.

OCCUPANCY & RENTAL RATES While the pandemic shutdown caused some business to downsize, other essential services needed room to expand. With aviation manufacturing making up a significant percentage of industrial occupants, the dramatic drop in air travel during the pandemic resulted in layoffs by various companies and caused some increased vacancy. The increase in vacancy, however, is not necessarily negative depending on the quality of the space – since solid warehouse spaces are in demand. The rate has also been skewed by new product entering the market, but as demand continues and these spaces begin to lease up the vacancy rate is expected to begin trending down.

Asking rental rates over the past year have remained fairly consistent from quarter to quarter during the pandemic. During 2020, there were minimal increases and decreases in both the General Industrial and R&D/Flex rates. However, as the economy is recovering and new buildings are entering the market, asking rents have begun to trend upward and will likely continue to do so due to lack of product. The consistency of asking rents throughout the pandemic demonstrates the strength of the market – despite the uncertainty rates did not ever see a significant decrease.

VACANCY RATE 8.00% 7.80% 7.60% 7.40% 7.20% 7.00% 6.80% 6.60% 6.40% 6.20% 6.00% 2020 Q1

2020 Q2

2020 Q3

2020 Q4

2021 Q1

AVERAGE ASKING RENTAL RATE $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $2020 Q1

2020 Q2

2020 Q3

General Industrial

2020 Q4

2021 Q1

R&D Flex

ABSORPTION 2021 Q1

2020 Q4

2020 Q3

2020 Q2

2020 Q1 (250,000)

(200,000)

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

DEVELOPMENT

Planned and Under Construction

PARK CITY 81st & I-135

Amazon Fulfillment Center 1,000,000 SF

Pratt Industries 925,000 SF

WEBB ROAD 40th & Webb

DISTRICT 96 K-96 & Oliver

Webb Road Speculative Warehouse 114,000 SF

Flex Warehouses 7,500 - 10,000 SF

HOOVER INDUSTRIAL PARK Hoover & K-96

Advance Catastrophe Technologies 22,000 SF

ICT21 INDUSTRIAL PARK

Flex Warehouses 10,000 SF

21st & I-135

Industrial Development Land 120 Acres

OUTLOOK Overall, the outlook remains positive in the local and national industrial markets. Both large- and small-scale warehouses are under development and seeing significant leasing activity. As the demand remains high for quality space, property values will continue to rise.

Manufacturing is once again ramping up as the economy reopens. Air travel is quickly recovering and many aviation companies are again hiring workers as they attempt to make their way back to pre-pandemic production levels.

The aviation industry has seen its fair share of ups and downs, but a new federal program has been developed to ease any remaining burden caused

by COVID-19. The Aviation Manufacturing Jobs Protection Program will split a portion of their workforce’s compensation 50-50, in exchange for certain commitments that maintain local jobs.

All of these signs point to a quick recovery for any areas of the market that struggled over the past year and a continuation of the growth seen before and during the pandemic.

TRANSACTIONS Notable in the Wichita market YTD 2021 SALE

Amazon Building (Investment Sale) 136,580 SF

LEASE

Bennett Packaging 8909 E. 35th St. 70,000 SF

SALE

1910 E. Industrial Ave. 36,656 SF

LEASE

WAXIE Sanitary Supply 9180 E. 35th St. N. 52,000 SF

2021 INDUSTRIAL MID-YEAR REPORT

Grant Glasgow, SIOR

Scott Salome, SIOR

Senior Vice President

VP - Industrial

(316) 847-4908

(316) 641-2028

gglasgow@naimartens.com

ssalome@naimartens.com

naimartens.com • (316) 262-0000 • 435 S. Broadway, Wichita, KS 67202 © Copyright 2021 NAI Martens. Reproduction in whole or part is permitted only with the written consent of NAI Martens. The information contained herein was obtained from sources believed reliable; however, NAI Martens Company makes no guarantees, warranties or representations as to the completeness or accuracy thereof.