Q2 2019 Market Update

W I C H I T A

K A N S A S

Q22019 MARKET UPDATE OFFICE R E TA I L INDUSTRIAL INVESTMENT

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

18.3% 17.9%

OFFICE

17.0%

16.6%

14.6%

Q2 ‘18

Q3 ‘18

18.3%

VACANCY RATE

The Wichita office market had a very strong second quarter with 186,190 SF of positive absorption. A large portion of that is due to the leasing of the Corporate Hills Office Building at Webb & Douglas.

Vacancy rates in Class A dropped slightly from 12.4% to 12.2% for the second quarter. Class B vacancy rates had a considerable drop in the second quarter from 18.8% to 15.9%. Average asking rates had a slight decrease in both the Class A and B space.

Q2 ‘19

Q1 ‘19

Q4 ‘18

186,190

17.9% 17.0% 16.6%

Q1 ‘19 Q4 ‘18

14.6%

Q3 ‘18 Q2 ‘18 Q1 ‘18

Q2 ‘18

Q3 ‘18

35,162

45,001 31,772 Q4 ‘18

27,354 Q1 ‘19

Q2 ‘18

Q3 ‘18

Q1 ‘19

Q4 ‘18

Q2 ‘19 Q2 ‘19

Q1 ‘19 Q4 ‘18

CLASS A

RENTAL RATE (FULL SERVICE)

186,190

$18.90

Q2 ‘19

Q3 ‘18

$18.94

Q1 ‘19

Q2 ‘18

$19.13

Q4 ‘18 Q3 ‘18

18.3%

31,772

Q2 ‘19 Q2 ‘18

$11.85 Q317.0% ‘18

27,354 $19.14

17.9%

CLASS B

Q1 ‘18

$19.16

45,001

Q2 ‘18 35,162

Q4 ‘18

Q1 ‘19

Q2 ‘19

16.6%

Q1 ‘19

$12.30 $12.17

14.6%

$12.19

Q2 ‘18

Q3 ‘18

Q2 ‘19

Q1 ‘19

Q4 ‘18 $18.90

Q2 ‘19

$18.94

Q1 ‘19

186,190 $19.13

Q4 ‘18 Q3 ‘18

$19.16 $19.14

Q2 ‘18

Q1 ‘19

$11.85

Q2 ‘19

Q4 ‘18

$12.30

Q1 ‘19

Q2 ‘18 35,162

31,772

Q2 ‘18

Q3 ‘18

27,354

Q4 ‘18

Q1 ‘18

$12.17

45,001

$12.19

Q1 ‘19

Q2 ‘19

NOTABLE LEASES Building

$18.90

Q1 ‘19

$18.94

Address

Size

Corporate Hills

Q4 ‘18 Office Building Q3 ‘18

$19.13

101 S Webb

$19.16 89,800 SF $19.14

Q2 ‘18 Former Convergys Q2 ‘19Call Center $11.85

7236 E Harry Ct

Q4 ‘18 Q3 ‘18 Q2 ‘18

49,862 SF $12.30

Q1 ‘19

$12.23 $12.17

Q3 ‘18 Q2 ‘18

$12.23

Q4 ‘18 Q3 ‘18

Q2 ‘19

The Wichita office market has remained very steady and experienced several notable transactions in Q2.

We are pleased to see the continued commitment to the downtown office environment, as well as continued growth of office users throughout the Wichita market.

Shane Pullman Commercial Advisor

$12.23

Q4 ‘18 Q3 ‘18

Q2 ‘18

NET ABSORPTION

Momentum continues to build for downtown Wichita with Fidelity Bank’s announcement of a $51-million expansion that will add a 10-story tower and private car park. Fidelity has purchased the former city-owned parking lots at 324 S Market and 319 S Broadway where it will build the 17,000 SF car park that will include retail or office space on the first floor. The 135,000 SF, 10-story office building will be connected to Fidelity’s current building and is expected to be completed in 2023.

Construction continues on the 60,000 SF Spaghetti Works District building with Martin Pringle as the lead tenant. In the northwest quadrant, construction was completed on the 3,300 SF Open Mortgage office building at 37th & Ridge in the Estancia development. Work continues on Village Tours & Charters new headquarters located just north of K-96 & Ridge which is expected to be completed this summer. Just south of Kellogg & Oliver, Mid American Credit Union is constructing a new 5,000 SF building that is expected to be finished this summer.

Notable office sales in the second quarter include the Thorn Building near Rock & 37th. The two buildings total almost 150,000 SF and currently have Ascension Via Christi as the largest tenant.

The property was purchased by Dallas-based CIP Investment Properties, who plans to make renovations and additions to the building. Other notable sales included the River Park Place office building at 727 N Waco and the Creekside Executive Center near 13th & 127th.

In medical office news, a few projects were completed including: the 70,000 Center at Waterfront Rehab Center near 13th & Webb, the 9,500 SF Mid-Kansas Ear, Nose & Throat in the Estancia development, Eye Care Associates new 6,000 SF space near 37th & Maize and the 4,300 SF Montoya Family Practice near Pawnee & Rock. More plans were announced for the new Kansas Health Science Center. Sudha Tokala’s five downtown buildings will be renovated to include a 119-unit student housing center, a 119-room Marriot hotel, a food hall, commercial kitchen, culinary school and event center.

$12.19

(316) 262-0000

10.9%

10.9% 10.6%

Q2 ‘18

Q3 ‘18

RETAIL

Q2 ‘19

Q1 ‘19

Q4 ‘18

61,874

The Wichita retail market saw 61,874 SF of positive absorption for the second quarter. Greenwich Place at K-96 & Greenwich and Maize Road from 21st to 37th continue to lead the Wichita retail market, attracting national tenants to these areas. Asking rental rates remained fairly steady across all property types with a slight dip in the overall asking rate from $12.08/SF in Q1 to $12.00/SF in Q2.

38,999

VACANCY RATE

11.9%

23,783 11.4%

Q2 ‘18

10.9%

Q3 ‘1810.9%

Q2 ‘19 Q4 ‘18

10.6%

Q1 ‘19

Greenwich Place continues to be a major draw for Wichita, with the latest announcement being the opening of outdoor recreational gear and clothing retailer REI in 20,000 SF next to Stein Mart.

Construction is nearing completion on the multiple inline spaces at Greenwich Place that will feature Michaels, Five Below and Famous Footwear. Progress continues on Dave & Buster’s and Saltgrass Steak House. Panera is also starting construction on a new building at Greenwich Place soon.

(21,035)

Q2 ‘18

Q3 ‘18

Q2 ‘19

Q1 ‘19

Q4 ‘18

(42,186)

61,874

RENTAL RATE (NNN)

38,999

10.9%

Q2 ‘19

$12.00

23,783

$12.08

Q1 ‘19 Q4 ‘18

Q2 ‘18

Q3 ‘18

11.9%

$11.93

11.4% Q4 ‘18 Q1 ‘19

Q2 ‘19

$11.89

Q3 ‘18

10.9%

(21,035) $12.40

10.6% Q2 ‘18

(42,186)

Q2 ‘18

Q3 ‘18

Q1 ‘19

Q4 ‘18

NET ABSORPTION

Q1 ‘19

Q2 ‘19

$12.08

38,999 $11.93

Q4 ‘18 23,783

$11.89

Q3 ‘18 Q2Q2 ‘18‘18

Marshall Johnson Commercial Advisor

61,874

$12.00

Q2 ‘19

Q3 ‘18

Q2 ‘19 Q4 ‘18

$12.40

Q1 ‘19

(42,186)

Trader Joe’s confirmed they will be opening at Bradley Fair before the end of the year in the former Fresh Market space that has been closed since 2016.

NOTABLE LEASES

Q1 ‘19 Q4 ‘18

Tenant

Address

Trader Joe’s

1800 N Rock Rd

Shoe Show

1514 S Oliver

4,000 SF

Greenwich Place

2,100 SF

$12.08

California Tortilla

Q3 ‘18 Q2 ‘18

$12.00

naimartens.com

$11.93

The Delano Gate development located on Seneca just north of Kellogg is expected to be completed in August. Other retail buildings under construction include the Hilton Garden Inn Hotel Commercial Space, Gander Outdoor & Camping World near I-235 & Seneca and Hobby Lobby in the Cadillac Lake development at 29th & Maize. Just north of Kellogg on West at the former Rowdy Beaver and Willie C’s site, Kwik Shop is opening a 7,500 SF store in November that will also have a Taco John’s and another restaurant yet to be announced.

Kohan Retail Investment Group, based out of New York, has purchased Towne West Square Mall. The company plans to resurrect the struggling mall by bringing events, restaurants and more to drive traffic to the mall.

(21,035)

Q2 ‘19

Wichita continues to see new development in expanding regions such as the Greenwich Place and the north Maize Road corridor, as well as the revitalization of spaces that have lost their original purpose. The steady flow of new concepts and redevelopment have created a strong local retail market for the first half of 2019.

Size 14,000 SF

$11.89 $12.40

A new Meddys will open near Kellogg & Ridge east of the new Cracker Barrel and Cheddar’s restaurants. The California Tortilla franchise is coming to Wichita, opening in the former Dickey’s Barbeque Pit space at the Village at Greenwich strip center near 21st & Greenwich.

Notable retail sales in Q2 include the long time Fisher Lumber Co. property near Taft & Ridge, the net-leased Mardel’s at the Greenwich Place development and 306 N Rock Rd, occupied by Fuzzy’s and the Spectacle Shoppe.

6.8%

INDUSTRIAL

6.4%

5.9%

5.7%

5.5%

Q2 ‘18

Q3 ‘18

Q2 ‘19

Q1 ‘19

Q4 ‘18

The Wichita industrial market had another robust quarter with 124,872 SF of positive absorption, lowering the overall vacancy rate from 5.87% to 5.54%. The current supply of quality warehouse space continues to lease up, driving demand for further spec development through Wichita’s industrial building incentive program.

The weighted average asking rental rates dropped slightly from $5.06/SF overall to $4.96/SF.

VACANCY RATE

6.8%

255,207

6.4%

Q1 ‘19

149,469

5.9%

5.7%

Q4 ‘18

124,872

5.5%

Q3 ‘18 Q2 ‘18 Q1 ‘18

Q3 ‘18

Q2 ‘18

Q3 ‘18

Q2 ‘18

Q4 ‘18

Q4 ‘18

Crossland and Barrett’s two spec warehouses at 3144 N Ohio are now fully leased. WAM Capital LLC completed its 108,000 SF spec building at 9180 E 35th St N.

11,139

Q2 ‘19 Q1 ‘19 Q1 ‘19

Q2 ‘19

(65,695)

255,207

RENTAL RATE (IG)

6.8%

Q2 ‘18

Q1 ‘19

Q2 ‘19

149,469

Q3 ‘18

$5.06

Q1 ‘19 Q4 ‘18

5.9%

5.7%

Q3 ‘18 Q3 ‘18

Q4 ‘18

Q2 ‘18

Q2 ‘18

Q1 ‘19$4.92

5.5% Q2 ‘19

$4.88

(65,695)

Q3 ‘18

Q1 ‘19

Q4 ‘18

Q2 ‘19

255,207

Scott Salome Vice President - Industrial

$4.96

Q1 ‘19 Q4 ‘18

149,469 124,872

$5.00

$4.92

Q3 ‘18 Q2 ‘18

Q3 ‘18

Q4 ‘18

11,139

$4.88

Q2 ‘19

Q1 ‘19

Q2 ‘18

Roberts Concrete is building a new 13,300 SF building at 4151 S West St. The company currently occupies 6,000 SF at 1444 S St. Clair. Metal Pros has started construction on a new 48,000 SF building located near K-42 & Tyler.

NOTABLE LEASES

Q1 ‘19

Address

Size

Submarket $4.96

3144 N Ohio

23,760 SF

Northeast $5.00

Q4 ‘18

Notable industrial sales in the second quarter include the 73,740 SF industrial building at 3737 S Midco occupied by Cessna/Textron, the Straub International building at 3200 W May St and the Buckley $5.06 Industries building at 1850 E 53rd St in Park City.

$4.92

Q3 ‘18 Q2 ‘18

Two more projects utilizing the City of Wichita’s spec industrial program have begun. Jeff Lange is developing another 100,000 SF building at the Ironhorse Industrial Park, located near Q4 ‘18 MacArthur & Seneca, next to the 103,000 SF building occupied by Q3 ‘18 Hyper Pet. The building is expected to be completed in October. In Q2 ‘18 the northeast quadrant, Crossland and Barrett are moving forward Q1 ‘18 with a 136,580 SF building located near 39th & Webb. Under the industrial spec building program construction must begin within 120 days of approval and be completed within 15 months of the same date. If those timelines are met the property is eligible for a 95 percent ad valorem tax abatement for the first five years.

building $5.06 Q1 ‘19

(65,695)

Q2 ‘19

The manufacturing sector remains healthy with limited inventory, making it difficult for companies to find quality buildings for relocation. Continued expansion of the aerospace and defense industries bode well for the future of manufacturing in the Wichita area.

Q1 ‘18

$5.00

11,139

Q2 ‘18

Q2 ‘19

NET ABSORPTION

Q4 ‘18

$4.96 124,872

6.4%

In the northwest quadrant, the Maize Industrial Park at 53rd & 119th continues to see activity. Construction has been completed on the new 21,000 SF Shuttle Aerospace building and construction has begun on Evans Building Co.’s 35,000 SF new headquarters.

$4.88

(316) 262-0000

INVESTMENT MULTIFAMILY Two apartment buildings are planned south of Wichita State University near Bluff Ave and 17th. The developers are planning to add 84 units with 147 bedrooms around an existing building that has 35 one-bedroom apartments. Tom George, who converted the former Kellogg and Sunnyside elementary schools into apartments, has just opened eight apartments made from shipping containers across from the Kellogg apartments. The rents range from $480 to $500 for the 400 SF units. Notable sales in the multifamily market for the second quarter include the 253-unit Farmington Place Apartments, the 94-unit Garden Pines Apartments, 88-unit Ridgeport Apartments, and the 192-unit Somerset Apartments.

HOSPITALITY The Wichita City Council voted to allow a 30-day first right of refusal to the DoubleTree by Hilton Wichita Airport for a land lease and use agreement that would last until 2069. The city was originally planning to grant the lease to developer Mitesh Patel, who planned to construct a 90-room hotel before concerns were raised about the first refusal. The hotel would be just north of the existing airport Hampton Inn. Construction continues on the 131-room downtown Hilton Garden Inn – Commerce Plaza located at Douglas & Topeka as well as the Home2 Suites at 21st & K-96. There were no notable sales in the hospitality market for the second quarter.

MANUFACTURED HOUSING COMMUNITIES Notable sales in the manufactured housing community market for the second quarter include the 119-site Cedar Ridge Manufactured Housing Community at 5135 S Hydraulic and the 199-site Lakeside Landing Manufactured Housing Community at 2625 S West St. SELF-STORAGE

Activity in the Wichita multifamily market has remained steady in the first half of 2019. Approximately 2,000 units are projected to be sold in 2019 - similar to 2017 and 2018, but down from the nearly 3,000 sold annually from 2014 to 2016. Both regional and local buyers remain active in the market, however available quality product is limited, leading to multiple at or above asking price offers on stabilized, well-maintained properties.

The Wichita Self Storage development at the former Jeff Englert Johnson’s Garden Center site at 802 N Ridge is getting Senior Vice President closer to completion and should be finished in the third quarter. Construction continues on the three-story U-Haul rental and self-storage facility located at 600 S Holland just west of Kellogg & Ridge. The facility will have more than 700 climatecontrolled storage units and 110 outdoor drive-up storage units. Construction has yet to start on the three 105,000 SF Centennial American Properties that will each have three stories with 750 units. The first two locations are planned for 13th & Maize behind CVS and the other at Kellogg & Webb.

NOTABLE NAI MARTENS TRANSACTIONS

For more details view our full Q2 2019 Transactions Report

SOLD

SOLD

SOLD

LEASED

LEASED

LEASED

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Q22019

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