NAI Martens’ Johnson: Wichita is diversifying

Tom Johnson

Tom Johnson

Municipal and business leaders in Wichita have learned an important lesson: The city can’t rely solely on the aviation and aerospace businesses. That’s why city leaders today are working to attract a diverse group of businesses to the city, everything from technology firms to healthcare providers to financial institutions. Midwest Real Estate News recently spoke to Thomas Johnson, president of Wichita’s NAI Martens, about what the future holds for this key Midwest city.

Midwest Real Estate News: This is a broad question, but are you seeing more commercial activity in Wichita today than you were last year or the year before at this time?
Tom Johnson: Over the last three to four years, we have seen a gradual ramp-up of activity on the commercial side. Leasing and sales have been positive pretty much across the board. Some sectors are down, some are up. But the trend line is going in the right direction.

MWREN: How has Wichita rebounded from the Great Recession?
Johnson: We’re like a lot of other areas across the country. The results of the recession in 2008 and 2009 still linger here. Our total employment is not yet back to where it was pre-recession. A big part of that decline in employment is in the aircraft-manufacturing and aerospace markets. The primary OEMs haven’t seen a return yet to their pre-recession levels of employment. They are in a holding pattern. Private aviation still hasn’t returned yet to the level we’d like it to be at.

MWREN: There has been a lot of upheaval in the aviation industry, an important one for Wichita.
Johnson: Boeing left the market a couple of years ago. The company will probably by the end of this year have totally phased out operation in Wichita. That has left a hole that hasn’t yet been filled. Beechcraft has gone through some changes, too. It has phased out its jet operation. It now primarily focuses on prop business. Beechcraft is doing a little bit better now. Bombardier’s Learjet has gone through a lot of layoffs, but the company seems to be doing better now. The whole aviation industry is going through a period of fits and starts. It hasn’t made as big of a comeback as everyone would like to see.

MWREN: What about the other industries in Wichita? How are they doing today?
Johnson:  On the positive side, the rest of the economy here is doing well. Oil and gas is doing very well. Ag has had a very strong couple of years. Medical is doing well. Other industries are also doing well. Koch Industries, despite the political side and attention it receives, is enjoying a very strong period. The company’s business is doing well. The company is building a new 250,000 square foot addition to its campus in north central Wichita. On balance, we are hanging in there OK. The commercial real estate market is doing a little bit better. There is pent-up demand. People were worried about layoffs, the issues with Boeing. A lot of businesses sat on the sidelines. Now that all of the major layoffs and the downtown are over, people feel better about what the future holds here. We are seeing more commercial activity because of this.

MWREN: What lessons has Wichita learned from the Great Recession?
Johnson: The city and the chamber, the economic development agencies have recognized that the city can’t depend so much on the aviation and aerospace industries. They are still a big part of our economy. But we have to look at more diversification here. The agencies are now very aggressive in pursuing non-aviation businesses while still continuing to take care of the airline industry.

MWREN: What commercial sectors are performing well today in Wichita?
Johnson: Multi-family is certainly one of the hot spots right now. There are probably 2,000 apartment units in construction or in the planning phase right now. The investment market has hung in there pretty well. Our multi-family investment group has really done well. We did $16 million in sales in the first month-and-a-half of this year. Investors are clamoring not only for multi-family but for any good investment properties. The problem we have is a lack of industry. That is common in a lot of markets across the country today. Outside of multi-family there has not been a lot of construction activity. We are seeing continued growth on the retail side. The Bradley Fair retail area has been especially active. That is the preeminent lifestyle center in Wichita right now. As vacancies come up, that center is continuing to upgrade its tenant profile. There’s a new Sam’s Club under construction here. A new Menards has opened.

MWREN: How about the office sector? How is that sector performing?
MWREN: There is not a lot of office construction going on right now. I don’t see a lot of it in the foreseeable future, either. There won’t be any spec construction unless a building is 50 percent pre-leased.

MWREN: And industrial?
Johnson: Industrial continues to hang in there. It is OK, but it is not dynamic by any stretch. The occupancy rate has stayed consistent, but the rents are still below where they need to be. They have stabilized somewhat, though. We are still limited in our availability in quality manufacturing and warehouse space. There just isn’t a lot of industrial spaces on the market that have high ceilings and are well-located.

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