Q2 2012 Wichita, Kansas Retail Market Trends

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Q2 2012 Wichita, Kansas Retail Market Trends

Occupancy is improving in fits and starts in the 6.7-million-square-foot metro Wichita community-neighborhood shopping center market, while the predominant direction of rents remains down. The vacancy rate increased 20 basis points in the second quarter of 2012 to 13.8% on 13,000 square feet of negative net absorption, but had fallen back to 13.6% in the third quarter, according to First Glance data. Net absorption for 2012 through August totaled plus 10,000 square feet, following a total of plus 29,000 for all of 2011.

Annual net absorption for all of 2012 is forecast at just plus 16,000 square feet, with a year-end vacancy rate of 13.7% predicted. No new community-neighborhood space is expected to complete construction for the fourth consecutive year, but with demand forecast to improve starting in 2013, new supply is expected to resume. The vacancy rate is forecast to edge down slowly, reaching 12.3% in 2014. No retail space in any format is under construction as of the date of this report.

Rents are going sideways. The second quarter asking and effective averages of $12.15 psf and $10.51 psf were up 0.3% and 0.2% for the period and 0.7% each from a year earlier, but decreases of 0.8% and 0.6%, respectively, in July and August reversed those gains. First Glance data put the asking average at $12.08 psf for the third quarter. Reis predicts rents will manage gains of 0.6% asking and 0.7% effective for all of 2012, but the increases for each subsequent year are not forecast to be much higher. Not once are rents predicted to rise by 2.0% or more in a year by either measure.

“Retailers are expecting turn-key finishes and low base rents, and sometimes incentives from the city or state,” the Wichita Business Journal reported. “All that can make the return on investment for retail developers ‘almost unbearable’ to stomach considering the risk involved.”