Outlook Positive for Real Estate in Wichita Housing Market

A strong Wichita economy means a good 2007 for commercial real estate, according to a forecast released Wednesday by Grubb & Ellis Martens Commercial Group and reported by The Wichita Eagle.

Fueled by expansion in the northeast office market, a shrinking industrial real estate inventory, retail growth across the city and more out-of-state investment in local real estate by Kansas mortgage seekers, 2007 will be an active year, said Steve Martens, president of the Wichita company.

“We’re very optimistic that it will be a strong year,” he said, “based in large part on the number of calls we have from entities interested in relocating here or in moving into new properties.

“Capital-wise, we think interest rates will remain affordable in the high sevens or low eights. It’s a good environment for commercial real estate.”

The only downside to 2007, Martens said, could be an economic slowdown.

However, Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University, said there’s no “predictable reason” to see a slowdown - barring a terrorist attack or another spike in energy prices.

“I think that nationally the economy will continue to expand, but at a slower rate,” she said. “We’ll see the same thing in Wichita.”

Here are a few of the report’s highlights:

• Out-of-state investors will continue to buy Wichita properties.

“As the investment markets on the East and West coasts drive [housing prices ]out of sight, investors are becoming more and more willing to invest in Kansas and Wichita,” Martens said.

“On the coasts, the actual point to control a property is several million dollars. In Wichita you find the same thing for $500,000 to $2 (million) to $3 million.”

• The inventory of quality industrial real estate has shrunk over the past three years.

“As it does, you’ll see rental rates rise and more attention paid to building new space,” Martens said.

• The Wichita office space market is “incredibly active,” Martens said.

Several downtown firms, including Commerce Bank, Foulston Siefkin and Delta Dental, have left for new headquarters, freeing up space in the central business district.

Meanwhile, the planned acquisition of the SC Telecom building by Minnesota-based Real Development Corp. brings its holdings to 1 million square feet, or 25 percent, of downtown office space.

The biggest challenge in the office market, Martens said, is predicting the equilibrium between construction costs, rental rates and the demand for new space.