2013 Multifamily Update

2013 Q2
Wichita Multifamily Update
Bennington Place Apartments
Phase I Opened March 2013
“
The Wichita multifamily market remains
stable with strong occupancy rates and
low monthly rents. However, plans for
new development and an improving
housing market may bring change.
”
Chisholm Lake Apartments
Opening Summer 2013
State of the Market
Occupancy
The Wichita multifamily market remains stable with strong occupancy rates and low monthly
rents. However, plans for new development and an improving housing market may bring
change. The occupancy rate continues to climb, pushing over 94% in Q1 2013. This is led
by a very strong Class A market in both the suburban areas and CBD. Class A properties are
averaging 97% - 99% occupancy throughout the city. Class B properties, which make up
about two-thirds of the market, average 94% and Class C properties typically average the
lowest occupancy rate at 91%. Not included in these statistics are Class D properties, which
are complexes that have a significant amount of deferred maintenance and numerous down
units not in leasable condition.
Occupancy rates have continued to climb in recent years due to a lack of new development,
a struggling single-family housing market and reasonable rental rates. Some signs indicate a
possible change in future market occupancy rates:
State of the Market (continued)
•
There are plans for up to 3,000 units to be built in the Wichita area over the next two
to three years.
•
According to the Wichita Area Association of Realtors, sales of new and existing homes
increased 4.5% from March 2012 to March 2013 and 10.1% from Q1 2012 to the same
period in 2013. An improving housing market may have a slight impact on multifamily
occupancy rates.
•
In recent years, a number of apartment communities have experienced an excess
amount of deferred maintenance. A number of these units have been essentially removed from the market. A handful of these properties have been purchased out of
bankruptcy over the past couple of years with plans to renovate the units. It is expected
at least 1,000 of these units will be reintroduced to the market in the next year or so,
increasing the overall inventory.
Rents
Apartment rents in the Wichita
market were the lowest among
the 82 urban markets reported
by Reis, Inc. with rents averaging
$520/month, compared to the
national average of over $1,000.
According to the data tracked by
NAI Martens, the average rent in
Wichita is slightly higher at $588/
The Commerce Street Lofts in downtown Wichita,
located at 416 S. Commerce.
month, still far below the national
average. The downtown and Old
Town multifamily market has con-
tinued to flourish. Over the past 20 years warehouses and office buildings have been converted to apartments and condos. These projects continue to achieve the highest rents in
the market with most projects averaging $0.95 - $1.05/SF. This is closely followed by the
Northeast Class A market with average rents ranging from $0.90 - $0.95/SF with amenity
rich properties at the upper-end exceeding $1.00/SF. The overall Wichita market averages
$0.74/SF.
Wichita
Multifamily
Class A
Class B
Class C
Overall Market
Studio
Avg Rent/SF
N/A
$0.91
$0.86
$0.89
One-BedroomTwo-Bedroom
Avg Rent/SF
Avg Rent/SF
$0.95
$0.87
$0.74
$0.67
$0.68
$0.62
$0.76
$0.70
New Development
est rates and a demand for Class A product. If all of these
new projects are built as planned, Wichita will add over
3,000 new units to the inventory in the coming years. Most
of these new projects are touted as amenity rich Class
A complexes. This would nearly double the number of
units currently classified as Class A in the Wichita market.
The last surge in multifamily development took place from
1998 to 2000 when over 2,000 units were added, almost
exclusively in the northeast and northwest quadrants of
Wichita. New projects are focusing on similar areas with a
high concentration in northeast Wichita and new construc-
Rock
48 Units
53rd
Bel Aire
180 Units
45thL K
Corner 365
F
Delano Apts
G
Derby Apts
H
Downtown Apts
I
Downtown Apts
J
The Lux
K
Maize Apts
L
Fieldstone Apartments III
M
Stoney Pointe
N
SunStone Apt Homes
O
Waterfront
P
WaterWalk
Q
French Quarter Apartments
R
The Vue Apartments
C
D
184 Units
29th
R
M
21st B
138 Units
Q
Maple
Harry
Pawnee
31st
F
E
P
J
H
I
190 Units
Andover
180 Units
Six CBD
developments
totalling
530 Units
A
N
208 Units
MacArthur
63rd
438 Units
34 Units
O
Central
47th
150 Units
216 Units
37th
13th
Woodlawn
Oliver
Hillside
Hydraulic
Seneca
Broadway
Maize
Meridian
West
Hoover
Ridge
Tyler
Maize
tion in the downtown area.
Chisholm Lake
E
Andover Rd.
fueled by increased occupancy rates, historically low inter-
Brookstone at Bel Aire
D
159th
multi-family construction activity. The new development is
Bennington Place
C
143rd
made public. This follows more than a decade of minimal
Andover Apts
B
127th
projects that are in the planning phases and have not been
A
Greenwich
velopments have been announced along with additional
Webb
Over the last 18 months more than 15 new multifamily de-
180 Units
(Derby)
G
New Development (continued)
Northeast
Over 60% of the planned units are located northeast and most are positioning themselves
as Class A developments with amenities not found at competing properties; such as putting
greens, attached garages, pet washes, upscale clubhouses, stainless steel appliances, and
more. These new projects will predominately following the K-96 corridor along the path of
commercial growth. The first of these projects, the Chisholm Lake Apartments, is currently
under construction near the intersection of K-96 and Oliver. Current northeast Class A apartments average over 97% occupancy with rents around $0.90 - $0.95/SF.
Northwest
The remaining proposed units are split almost equally between northwest Wichita and the
downtown area. Northwest Wichita has experienced a phenomenal amount of growth over
the past 30 years. This has included a number of up-scale, single-family housing developments and an abundance of retail. However, the availability of Class A multifamily has been
limited. New developments plan for similar amenities and quality of construction as the Class
A apartments found in east Wichita. The first phase of Bennington Place, a 138-unit complex
near 21st and Maize Road, opened in March 2013.
Central Business District
The redevelopment of former warehouse and office properties into “loft” style apartments
has been very successful in the downtown and Old Town areas of Wichita over the last decade. These Class A projects have achieved the highest rents in the market and remain virtually 100% occupied. However, for the first time in over 30 years, the CBD may experience a
significant amount of ground-up development. Three planned projects along the Arkansas
River could add 300 units to the market. These properties should be well received assuming rents will be closer to those proposed for the new suburban projects. It’s questionable if
tenants will be willing to pay higher rents typically associated with the unique “loft” characteristics unless projects offer exceptional unit and site amenities.
The big question is…
What effect will the addition of nearly 3,000 units have on the market?
•
Most of the proposed projects anticipate rents in the $1.00 - $1.10/SF range. It is anticipated that the market can absorb the new higher priced units assuming they come on
line over a reasonable time frame and the economy grows at a consistent rate.
•
It is expected that the Class A market will experience a slight decrease in the exceptionally high 97% current occupancy rate. Existing properties, with less attractive amenity
packages and locations, may feel the most impact and will likely experience a decrease
in occupancy leading to a period of increasing use of concessions.
•
The new suburban properties will focus on more amenity loaded projects with conventional floor plans and higher rents. In the long run these trends will result in a shift in the
market creating new standards for Class A multifamily; one with a high level of amenities
and increased rental rates.
Team
MULTIFAMILY BROKERAGE
Jeff Englert
Nathan Farha
Multifamily Advisor
[email protected]
Multifamily Advisor
[email protected]
MULTIFAMILY APPRAISAL
LeAnn Adams
Lee Z. Whyte, MAI
State Certified Appraiser (KS)
Multifamily Specialist
State Certified Appraiser (KS-MO-CO-TX)
Multifamily & Hotel Specialist
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