The 8.7-million-square-foot Wichita general purpose, multi-tenant office market is crawling out of a long, deep slump. Net absorption was minus 697,000 square feet for the decade from 2001 to 2010, and minus 3,000 square feet last year. Including the plus 40,000 square feet in the second quarter, however, net absorption through the first eight months of 2012 was plus 50,000 square feet. The vacancy rate was 19.9% in the second quarter, with a rate of 14.0% for Class A and 23.2% for Class B/C. The overall rate was down 30 basis points from both a quarter and a year earlier. There was no change in the third quarter, according to First Glance data.
Despite weak demand, modest amounts of new supply have been added in most recent years. The 16,000-square-foot building 1100 of Northrock Business Park in the northeast submarket, and the 18,350-square-foot The Office Park at Eberly Farm outside submarket boundaries, completed construction in April, leaving two projects with 32,000 square feet under construction. Reis predicts modest new supply and modest net demand will keep the vacancy rate above 19.0% through 2015.
Rents are nonetheless edging up. In a weak market nationally, the 0.3% increase in the average asking rent for the second quarter, to $14.19 psf, was the eighth largest increase among the top Reis markets. The average effective rent increased 0.2% to just $10.89 psf. Preliminary third quarter data show a 0.1% gain in the asking average; the effective average had been unchanged in July and August. Gains of 1.1% asking and 1.2% effective are forecast for 2012, followed by modestly improving gains year-by-year. The second quarter Class A and B/C asking averages, meanwhile, were $18.06 psf and $12.03 psf.
“Offices in the northeast and the central business district are doing well, holding their occupancies and their rents, but they haven’t been able to raise rents much,” the Wichita Business Journal reported. “Class A is improving. Class B is struggling. I don’t know who would be interested in Class C.”