Q3 2021 Core Retail Report

Q3 2021

RETAIL

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

OVERVIEW The Wichita area retail market took a small hit over the last year due to COVID-19. The pandemic is something no one expected. The core area in particular struggled, as people stayed in or near their suburban homes and only ventured out for essentials, rather than patronize the entertainment and specialty businesses in the downtown area. However, the dark days are coming to an end and retailers are beginning to flourish again in the Wichita market. Bars, restaurants and retail shops have reopened and revitalized themselves after being shut down. Wichitans have reacted positively to this reopening. Restaurants are operating at full capacity; bars are open for their regular hours again and retailers are welcoming customers with open arms. Many retailers are still experiencing the aftermath of the pandemic through problems with logistics and supply chains. The pandemic truly exposed weaknesses and created holes in the manufacturing of goods and the supply chain, which has caused issues for retailers. As the world returns to normal, we will continue to see a revival of brickand-mortar retail, as doors are opened back up to the public. Retail should return to full strength sooner than initially predicted, as many studies indicate there is a high desire amongst the community to get back out and shop in person again.

CORE AREA VACANCY & RENTAL RATES 7.20%

$9.40

7.10%

$9.20

7.00%

$9.00 $8.80

6.90%

$8.60

6.80%

$8.40

6.70%

$8.20

6.60%

$8.00

6.50%

$7.80

6.40%

$7.60 Q3 2020

Q4 2020 Asking Rent (per SF)

Q1 2021

Q2 2021

Vacancy Rate

OCCUPANCY & RENTAL RATES The vacancy rate and asking rental rate both hit lows for the year in the fourth quarter of 2020. Despite many retailers in the core closing either temporarily or permanently during 2020, a few leases were completed for new business ventures near the end of the year—including Alzavino Wine Tavern and The Gilded Cookie. The vacancy rate as well as asking rental rate increased steadily during the first half of 2021, as building owners regained confidence in the retail market and again began listing spaces and asking for higher rents on available properties.

Though the lock downs were a burden to retail business, particularly small businesses, the pandemic did not have the long-term negative impact that many predicted. There are still development and renovation projects being announced, bringing more square footage and high-quality spaces to the market. As newer spaces and spaces vacated by businesses which were forced to close during 2020 begin leasing up, the vacancy rate will likely start trending down again and asking rents should hold steady.

7.52%

6.26% VACANCY RATE

VACANCY RATE

$14.16/SF

$9.91/SF

ASKING RENTAL RATE

OLD TOW N DOU DES GLAS IGN

ASKING RENTAL RATE

CORE AREA RETAIL Market Share

by Square Feet

7.37%

DO W NT DE OW LA N NO

6.06%

VACANCY RATE

VACANCY RATE

$5.30/SF

$9.17/SF

ASKING RENTAL RATE

ASKING RENTAL RATE

Jeff Fluhr President Downtown Wichita

Jerry Jones Wichita Developer

From a profile standpoint, downtown and Delano have really changed 100%. Back in 1992 when I moved to Wichita, very few people were living downtown. Lots of businesses that were here moved out. Most of the anchors were public services. Then in the late ‘90s, the redevelopment of Old Town became a catalyst for newer developments, but I think the residential aspect of downtown and people moving to the core has really revitalized the area. You’re building a core area from Old Town all the way to Delano that is walkable, and you see that manifest on the weekends. As for the future, I really think it’s mixed-use developments. Walkability has become more important to employers. We now have regional destinations and museums. That all adds to the unique fabric of the community.

The core area offers an epicenter of events and diversity that draws in from not only the Wichita community but those outside of that. The downtown and core area render an incredible environment for unique retailers. As the residential and commercial base market continue to grow through economic development, the core area and downtown will continue to expand and create opportunities for retailers to expand and grow. From a talent attraction and retention opportunity, the core area will continue to strive and have a healthy market share to create a more unique city. With the recent cultivation of Douglas, walkability and connectivity have become essential pieces in continuing the expansion of the core area.

CORE AREA BUSINESS PROFILE Standard Issue Co. Levi Fitzmier and business partner Rodney Horton opened Standard Issue Co. on June 6, 2020. Despite being in the middle of a global pandemic, they marched forward and continued with the opening of the men’s clothing store located at 924 E Douglas. Levi is very familiar with retail and the daily challenges that come with it, as the former owner of FNL Denim, a company of which he was a co-owner for approximately eight years. One of the biggest challenges Levi identified is the lack of locally owned clothing concepts for men in the downtown area. He believes that there is ample opportunity for the expansion of unique concepts that would thrive and create amazing growth opportunities for downtown Wichita.

When asked what he sees as the biggest obstacle to create more unique concepts, he said “it’s just going to take some of the younger generation of business owners to get out there and invest, and create the environment you see in some of the larger areas of the United States.”

Levi said Wichita needs to establish a plan to increase its retention rate of young talented entrepreneurs who can invest into the local community and continue the expansion of the downtown area. Levi believes there is ample opportunity for growth. He would love to see more local expansion and sees a very positive outlook on the horizon; especially after surviving COVID as a retail-based business.

OUTLOOK As evidenced by the 6.97% vacancy rate (compared with 12% overall retail vacancy in Wichita), core area retail is stronger than the shopping center and power center focused retail that has dominated in the past. More than 100 restaurants and shops make up core retail, which has seen a nearly 40% increase in just the past decade. The emphasis in Wichita of building a strong downtown, focused on livability, walkability and small businesses, has helped blossom retail in the core. In the past year, local retailers like Standard Issue have chosen to start their businesses downtown, and various local movement have taken off, creating a renewed sense of community among small businesses in Wichita. Investments like Riverfront Stadium, 225 Sycamore and office projects like Fidelity, Cargill, Hutton and IMA Financial continue to draw residents, workers and visitors to the core. In January, the Metropolitan Area Planning Commission voted to approve a zone change for the seven-acre site north of Riverfront Stadium.

This is a key step for the site, on which developers plan to construct Riverfront Village — a project featuring 500,000 SF of commercial space, including apartments, a hotel, shops and restaurants.

Overall, with the continued focus on downtown, the revitalization of key green spaces like Naftzger Park, and the burgeoning small business community in Wichita, the future of core retail is bright.

NOTABLE PROJECTS COMPLETE

Spaghetti Works District

PLANNED

Riverfront Village

UNDER CONSTRUCTION

740 W. 2nd Street

PLANNED

Arena Pointe

Q3 2021 RETAIL

CORE REPORT

Miles Osborne

Trevor Stacy

Retail Specialist

Retail Specialist

(316) 928-8613

(316) 613-2449

mosborne@naimartens.com

tstacy@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 makes no guarantees, warranties or representations as to the completeness or accuracy thereof.