MIDDLE MARKET HIGHLIGHT, FEBRUARY 2007

Topeka, Kansas
Dan Marcec

As the state capital of Kansas, Topeka’s commercial real estate market is driven dramatically by the state government, and as a result, the market rarely experiences great highs or lows. Growth in the retail sector has been a trend in recent years, and the city has supported a boom in national restaurant chains. Generally, most of the new office development is supported by owner/occupant projects.

“There has been growth in the office market, and in a town of 130,000 people, any little activity will keep us busy,” says Mike Morse, vice president of brokerage for KS Commercial Real Estate Services. “We have seen new office construction and there have been some land sales, but most of the activity is local businesses moving locations.”

Rental rates and occupancy rates in Topeka have been healthy across the board. For Class A retail properties, rental rates are averaging $13.50 per square foot, and occupancy stands at nearly 96 percent. In the Class A office sector, only 7 percent of all properties are vacant, and rental rates are running around $16.62 per square foot. In the Class A industrial market, rental rates average $5.26 per square foot, and occupancy is high at almost 99 percent.

The Topeka Chamber of Commerce works very closely with the local businesses and within local industry in order to attract other companies to the area. “We work closely with the Kansas City Area Development Corporation and the Kansas Department of Commerce and Housing, in addition to maintaining contact with national site consultants, to keep outside businesses abreast of what’s happening here in Topeka,” says Kathy Moellenberndt, vice president and director of economic development for the Topeka Chamber of Commerce. “The most important ambassadors to businesses coming in from outside are the companies already operating successfully here; when outside companies see that Topeka is pro-business and that others have been successful here, they are attracted to what we can offer.”

Topeka is making the most of its location at the center of the United States, and it is recognized as a corridor to the west. Home to manufacturing and distribution centers for Payless Shoe Source, Goodyear Tire and Rubber Company, US Food Services, Ritz Camera and Jostens — as well as home to Frito Lay and Del Monte — the city boasts an assortment of large, nationally prominent companies. In fact, Target recently built a 1.3 million-square-foot distribution center, which has about 600 employees, on 143 acres in the city.

Most of the development in Topeka is occurring in the west and southwest sections of the city, as well as along the Wanamaker Road corridor. Wanamaker intersects both interstates 70 and 470, where significant developments are underway. A former truck stop near the I-470 and Wanamaker Road intersection is being converted to a retail development, including national restaurants such as Buffalo Wild Wings, Jason’s Deli and Starbucks. Also along the corridor, a 28,000-square-foot office building is being constructed, the largest speculative office project to rise in Topeka in the last few years. Another 35-acre tract of land in the area is expected to be developed in the near future, but there has not been specific activity there to date. In addition, Reser’s Fine Foods added 150 new jobs with a $31 million expansion to its existing manufacturing warehouse facility, and Coca-Cola recently built a new $3 million, 50,000-square-foot facility.

The most significant project in the Topeka market right now is GO Topeka’s Central Crossing Industrial Park. GO Topeka is a division of the Chamber of Commerce that has developed a 500-acre business commerce park, zoned for light industrial use. Target’s new distribution center is located at the site. With access to I-70 and U.S. Highway 75, the site is shovel-ready for more development, offering both manufacturing and distribution opportunities.

“Our reason for developing the park was to keep ourselves ahead of the game,” Moellenberndt explains. “So many projects are on a fast-track these days, and we wanted to be ready when businesses and industry come knocking. A company will come in and ask what is ready for them in a short period of time, and with the Central Crossing Industrial Park, we have an infrastructure prepared.” Topeka has dedicated itself to economic development in recent years. In 2002, a half-cent sales tax was passed, generating $5 million a year expressly for economic development; with the tax in place for 10-12 years, development will retain major support.“The market is positive right now, and it looks to stay that way for another year. The office market took a downslide after 9/11, which ran through 2003 and 2004, but the last 2 years have improved,” Morse says. “We’re trying to press forward with rental rates — with the new construction, disparity between secondary and new buildings is enough where we can pull up rates on the older buildings.”



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