2020 Duplex report

DUPLEX REPORT 2020 WICHITA KANSAS

435 South Broadway Wichita, KS 67202 (316) 262-0000 naimartens.com

DUPLEX REPORT

WICHITA KANSAS

DUPLEXES GAINING POPULARITY An increasing number of households are renting duplexes as the property type continues to appeal to a variety of age range demographics. Empty-nesters often require less living space than they once did and no longer want the maintenance that comes with home ownership. The Millennial generation often does not want to be tied down to owning a home and, like the empty-nesters, many find maintenance to be a burden.

The percentage of households that rent rather than own has continuously increased, both locally and nationwide, over the past two decades.

In 2000, approximately 32% of the households in Wichita rented. That has increased to nearly 37% in 2020. Duplex developments have continued to grow in popularity for renting households for a number of reasons:

Percentage of Households that Rent 38% 36% 34% 32% 30% 28% 2010

2000

Wichita MSA

2014

2020

United States

•

Often duplexes offer a backyard unlike apartments, which is attractive to tenants with children or pets

•

Most duplexes offer garages and private driveway parking

•

Duplexes offer more privacy and less issues with noise than apartments

•

Duplexes have a greater home-environment feel than apartments

•

Duplexes offer larger living space and more bedrooms than most apartments

Based on the number of duplex building permits in the City of Wichita, the number of units hit a peak in 2016-2017 and has slightly declined in recent years—this only includes permits within the Wichita city limits. Duplex developments in the surrounding suburbs have continued to remain popular.

Duplex Building Permits - City of Wichita 160 140 120 100 80 60 40 20 0

2015

2016

2017

2018

2019

2020 Projected

435 South Broadway • (316) 262-0000 • naimartens.com

ATTRACTIVE ALTERNATIVE FOR INVESTORS Purchasing new construction duplex properties has continued to remain desirable to both local and out-of-state investors. Duplexes offer a variety of unique benefits that attract investors when compared to apartments and other commercial properties, including: •

Duplexes tend to attract more families than apartments, which typically leads to less tenant turnover

•

Duplex developments offer investors the opportunity to buy newer construction properties, which is not commonly available with apartments in the Wichita market

•

Duplexes have lower operating expense ratios than apartments due to no onsite employees, more utility responsibilities on the tenant and less maintenance issues on newer construction duplexes

•

Duplexes typically offer a higher return than newer construction apartments

PGIM

Cap Rate

Two major indicators of property values that are used when analyzing duplex sales have continued to improve in recent years. The cap rate, which is the net operating income divided by the purchase price, has continually decreased from 2016 through 2020. A lower cap rate means a higher property value. The second indicator, the Potential Gross Income Multiplier, which is the purchase price of a property divided by the potential rental income if fully leased, Wichita Area Duplex Cap Rates & PGIM has increased during 2016 2017 2018 2019 2020 YTD this timeframe.

A 6.0% 9.0 higher PGIM translates 6.5% into a higher property 8.5 7.0% value. Overall, this 8.0 means that investors 7.5% have been accepting 7.5 8.0% a lower return in order to purchase newer 7.0 8.5% construction duplexes.

Cap Rate PGIM

Northwest

Northeast

$1,127

$1,263

Southwest

Southeast

$1,148

$1,280

The overall average for newer construction duplex rent in the Wichita area for a three-bedroom/ two-bathroom is $1,200 per month. According to the NAI Martens Q2 2020 Multifamily Market Update the average three-bedroom Class A rent was $1,357 per month.

2020 Deals SOLD

SOLD

Gold Coast Condos 19 Units

Falcon Falls Duplexes 12 Units

SOLD

SOLD

Goebel Duplexes 32 Units

Rushwood Duplexes 10 Units

CONTACT OUR MULTIFAMILY TEAM

Jeff Englert (316) 847-4924 jenglert@naimartens.com

Nathan, Farha CCIM (316) 263-9669 nfarha@naimartens.com

435 South Broadway Wichita, KS 67202

Trent Garman (316) 210-2061 tgarman@naimartens.com