Wichita Business Journal
March 9, 2012
Last year, developers announced plans to build a handful of spec office buildings in east and west Wichita.
Those types of projects have been a rarity in recent years, but developers say they are an indicator of strengthening demand for office space in the Class A range.
The locations of those projects also shows that a number of businesses still prefer the city’s fringes to its downtown, commercial real estate brokers say.
The Class A distinction is further proof that businesses are gravitating toward the more upscale offices with amenities like door-side parking, scenic views or patios.
“More people looking at the outlying areas,” says Ross Way, a partner in Anderson Management Co., which owns Northrock Business Park. “People still find that it’s better to park at your front door, not in a parking garage or down the street.”
Way says the demand is coming mostly from businesses that are looking to expand their existing space or relocate.
While the demand for Class A space is high, Class B has lagged behind, and some say it may be time for that category of office space to catch up.
“Class B has been a little bit slow the past couple of years,” says Craig Simon, an associate broker at Landmark Commercial Real Estate, who joined Landmark in December after being a partner in Simon Palmer Properties.
Local market studies support that notion and indicate a Class A vacancy rate of around 8 percent and a Class B at more than 18 percent.
Brokers say a combination of factors is leading to the increased demand for Class A space, such as five-year leases coming up for renewal or continued economic recovery.
“From a macro standpoint, you have companies with profits at all-time highs that have held back on making capital decisions,” says Chad Stafford, president of Occidental Management.
He says companies are now more willing to look at making decisions regarding where their offices are located because lease rates are favorable.
Stafford says in some cases companies can upgrade from Class B space to a Class A space for a comparable price.
But the interest isn’t limited to the new projects or the outlying areas.
While that segment is getting the most attention, the downtown office market still is generating some activity because of the renewed focus on revitalizing the city’s core, says Tony Utter, president of Utter Commercial Real Estate Inc. He says some businesses want to have a centralized location and prefer offices downtown.