Martens

Wichita, Kansas, has a geographically balanced development scheme. Significant retail development is occurring in the northeast and northwest areas, office development is taking place in the east and northeast areas, and a large public/private waterfront project is being developed downtown. Also, new large-tract industrial sites will be coming online in the northeast and southwest areas of the city.

In 2003, the Wichita office market reached a turning point, according to Steve Martens, president and CEO of Wichita-based Grubb & Ellis|Martens Commercial Group. The Wichita-Sedgwick County Law Library purchased the 33,000-square-foot Executive Center to relocate the law library while still remaining in the central business district. “Since the library stayed in the core area, it will go a long way in keeping other law firms near it and the courts,” Martens says. Also in the central business district, Excel Corporation, the meat-processing subsidiary of ConAgra, is adding new jobs and looking to expand from 100,000 square feet to 150,000 square feet in their corporate offices. VeriPrime, a start-up food assurance company, has announced up to 400 new jobs in the downtown area.

Suburban development received a significant boost with four major announcements. Commerce Bank, Foulston Siefkin and BKD are relocating to the Waterfront development, located at 13th Street and Webb Road. These companies will anchor the 160-acre development when it opens in June 2005. The Webb Road medical office corridor continues to expand with the relocation of Greene Vision Group, the construction of the 54,000-square-foot Kansas Spine Hospital, and the proposed 90,000-square-foot expansion of the Wichita Clinic at 21st Street and K-96.

Wichita, with almost 1.7 million square feet of office space available, has a high vacancy rate and low rental rates for Class A space compared to other cities. Office space in Wichita is widely available and a great value, but the challenge becomes finding the demand for absorption, Martens says.

“The retail sector is clearly the bright spot of the Wichita commercial real estate market,” Martens notes. The northwest sector saw tremendous success with New Market Square, a 433,000-square-foot retail center located at 21st Street and Maize Road. This Slawson Companies' development opened in July 2001 with a Wal-Mart Supercenter. It is now joined by Old Navy, Borders Books & Music and Gart Sports. Phase II, which will total 425,000 square feet, is currently under construction and scheduled to open this fall. The new phase will be anchored by a SuperTarget.

“In the industrial market, the opportunity for growth and development of new industrial parks has heightened,” Martens says. The city of Wichita has initiated a strategy to identify industrial land within the city limits, and other communities in Sedgwick County are providing prime industrial sites with zoning and infrastructure in place. For example, the city of Bel Aire is offering a 1,100-acre site that is shovel ready and has direct access to two four-lane highways. “This central U.S. location, with an aggressive mix of state and local incentives, is attractive to large industrial users,” Martens says.

“Virtually every aircraft manufacturer in Wichita mothballed manufacturing space, either on a temporary or permanent basis,” Martens says. For example, Boeing placed more than 900,000 square feet on the market in 2003, with another 135,000 square feet coming on the market this year. “This creates significant opportunity for new manufacturers seeking large space,” Martens says.

“I believe that there will be tremendous opportunity for real estate investors in the coming year,” Martens says. Existing multi-tenant properties that require some degree of management offer returns significantly above the 7.5 percent to 8 percent threshold. Also, the rapid pace of new development in Wichita has created several overlooked areas of opportunity for the management-active investor. “Combine these factors with the current cost of capital, and a smart purchase can lock in double-digit returns for an extended period of time,” Martens says. “Leverage this further through a 1031 exchange and the investor has the potential to realize returns not seen during the last 15 years.”

Other areas of development to watch include east and west Kellogg (U.S. Highway 54/400). West Kellogg will see increased development with the completion of the west Kellogg interchanges at Tyler and Maize roads. Also, the large number of major automobile dealerships that have moved to west Kellogg during the past 3 years has created a solid foundation for anticipated growth.

The area has strengthened its ability for growth through the implementation of the Greater Wichita Economic Development Coalition, according to Martens. This effort, led by the private sector, but funded through private/public sources, creates a focused effort for job creation through business retention and new business recruitment programs. The targeted goal for this regional effort is to create 8,000 new jobs. “Strong support from the business community, local elected officials and the Lieutenant Governor, shows promise for this initiative,” Martens says.

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.