The real estate market is slightly improving in Kansas, and experts predict it will continue on that course through 2013.
In February, Kansas realty firm J.P. Weigand & Sons offered a 2013 forecast, presenting findings at a conference in Wichita, Kan.
According to coverage in the Wichita Eagle (“Real estate forecast in Wichita area: Market is improving”), “Jerry Gray, vice president and general manager of Weigand’s commercial/investment division, said the way to characterize business in the real estate industry in 2013 is what he generally says when he’s asked out and about in the community: ‘Not bad. The markets are improving, and we expect this to continue.’”
The conference keynote speaker, Texas A&M real estate economist Mark Dotzour, said true economic recovery is poised to occur as a result of Americans satisfying five years of pent-up demand for houses, cars, and other big-ticket items. The Eagle quoted him saying, “A real economic recovery is when people buy houses because they want to,” he said. “A real economic recovery is when people buy a new car because they want to.”
John Stearns, a reporter with the Wichita Business Journal, summed up the J.P. Weigand presentation with the following:
- The residential market saw its best year last year since 2009. Sales activity will continue to improve, declining inventory of homes for sale could benefit sellers, new home construction will increase, and prices for existing and new homes will start to increase.
- The office market is stable, with an overall vacancy rate last year of 17.5 percent. The vacancy rate this year should be similar. Quoted rates averaged $11.75 per square foot. This year, new properties will be well-received, Class C properties will struggle, and conversions of downtown properties will continue but on a smaller scale. Northeast Wichita is the most popular area for tenants wanting new space, and newer offices in the northwest are doing well.
- Total retail vacancy was 13.7 percent, and quoted rates averaged $10.50 per square foot. Retail will see steady improvement and more openings of national retailers. New strip center construction will be limited, and Class B and C centers will diversify tenants to fill vacancies.
- The overall industrial vacancy rate last year was 19.5 percent, and the overall asking rates were $3.97 per square foot. The majority of vacant industrial space in buildings exceeding 20,000 square feet doesn’t meet the needs of today’s users, particularly national businesses. Market activity this year will be similar to 2012. Lack of modern inventory will continue to be a problem, industrial users wanting to buy will have limited options, and new speculative buildings will be well-received.
- The investment market will continue to improve, and small retail projects and multifamily housing will be the most sought-after properties. Local cap rates, or the rate of return investors seek, have generally hovered in the 7 to 11 percent range and probably will remain there locally. Prices will stabilize, and investors’ purchase of single-family homes will slow as the residential market continues strengthening.
- Farm and ranch land is potentially subject to drought impacts, and it’s expected that land values will stabilize after a decade of appreciating values.
- The multifamily market saw overall vacancy rates drop to 9.3 percent last year, which has allowed landlords to increase rents. In 2013, the market will absorb new units being developed, growth will continue in new units for downtown, rents will increase modestly, and multifamily properties of all sizes will be attractive to investors.
A March American Family Resources blog post (“Wichita Real Estate Outlook”) highlighted the positive side of the Wichita real estate market. “Wichita felt the full brunt of the 2007-2008 real estate collapse, but the region’s housing markets have slowly started to move toward recovery,” it reads. “In December 2012, Wichita housing sales were up 9 percent from the previous year, reaching their strongest point since 2007.
“According for the 2013 Kansas Housing Markets Forecast compiled by the Center for Real Estate at Wichita State University, sales of single family homes in the Wichita area are expected to rise 4.2% in 2013. This growth is fueled by consumer demand, as the ongoing economic recovery and record-low interest rates make buying an attractive option for many consumers.
“The renewed interest in home buying has had an effect on other industries in the region. Local builders are reporting growth in new home construction. Many of them are reporting their strongest numbers since 2007, and all anticipate further growth to come. The number of single family home construction permits reached its highest monthly level for the second time in 2012 on October 1st. Additionally, the overall number of home construction permits issued in October 2012 was up by over a third from its counterpart in 2011.”
Meanwhile, the residential rental market has grown significantly enough that J.P. Weigand & Sons recently formed a property management division for rental homes.
There is, however, one dark cloud on the Kansas 2013 real estate outlook horizon – Forecastcharts.com predicts Wichita’s real estate market is facing a downward trend for three years.
Click here for 2012 Predictions