BY JOSH HECK
Anita Oberwortmann started her own cleaning business in 1978, working long hours and often sacrificing sleep to make ends meet.
Years later, she added to her business portfolio with the purchase of Metro Courier, a business growing thanks in part to partnerships with e-commerce retailers.
Construction continues on The Douglas in downtown Wichita. When finished the $66 million project will ass 240 apartments along with a 273 - space parking garage to the city center. The project will feature studio, loft, one- and two-bedroom apartments. Residence will also have access to a rooftop patio complete with reflection pool.
Construction continues on The Douglas in downtown Wichita. When finished the $66 million… more
Now, Oberwortmann is pursuing another potential business — apartment developer.
She and other officials at that cleaning business, Wilson Building Maintenance, are evaluating a feasibility study for a project that could potentially add around 50 one- and two-bedroom apartments to the downtown market by converting the company’s headquarters at 624 E. First Street.
“When I bought the building, I would dream about what it could be,” Oberwortmann says.
If it happens, Oberwortmann’s company would be another developer entering the Wichita apartment game to capitalize on a push to add hundreds — if not thousands — of new units to apartment inventory. It’s a rush to take advantage of a spike in demand, analysts say, driven by millenials and older adults who don’t want to own homes.
Oberwortmann isn’t the only developer wanting to add more apartments in Wichita.
“The reason for that is latent demand,” says Jason Van Sickle, an apartment developer whose portfolio includes the newly expanded Flats 324 at 324 N. Emporia. “The more supply you create the more demand is created.”
A $7 million, 72-unit expansion of the Flats 324 campus opened in June, adding to the existing 68 units in that development.
More on the way
About 800 new apartment units are expected in the Wichita market by the end of 2016, according to a NAI Martens real estate forecast. That’s up 200 from the company’s fall 2015 report projecting the addition of 600 new apartment units this year.
Why the increase? Some units are becoming available sooner than originally anticipated.
Those units are in addition to the roughly 1,200 new apartments that were added to the market from 2012 to 2014, the Martens’ study shows.
“There’s been pent-up demand for awhile,” says Jeff Englert, a commercial advisor with NAI Martens, a developer for the 70-unit Pinnacle Lofts & Apartments project near Central and Waco. “We are not seeing huge population growth. I think it’s more of a shift in demographics.”
Another estimated 1,600 apartment units are under construction citywide with the largest concentration in Wichita’s Central Business District, essentially the area in and around downtown, amid a push to more than double the number of residents in the city center.
A Zimmerman Volk Associates study in 2010, part of the city’s downtown master plan, estimated demand for 1,270 additional units of downtown housing. Van Sickle says that forecast was revised in 2014, based on the market reception to a host of new and planned projects, to indicate downtown could support 1,930 additional apartment units in the coming years.
Apartment developers also are targeting northeast and northwest Wichita for new projects because of commercial and residential growth in those areas.
Projects that are expected to add more than 1,100 apartments to the local market will begin over the next two years, experts say.
Rent vs. own
The market is responding favorably, developers say, to all of the new building, with Class A occupancy hovering around 95 to 97 percent. Often, new units are pre-leased well ahead of their scheduled openings.
So what’s driving demand for new apartments?
Stan Longhofer, director of the Center for Real Estate at Wichita State University, says changes in the housing market in the aftermath of the financial crisis in 2008 and 2009 pushed some people toward rentals because mortgage lending standards tightened.
And corporate relocations also are playing into the demand for additional apartments in Wichita, he says.
Some of it, Longhofer says, centers on aging apartment complexes around town.
“There’s been some need for upgrading of the apartment stock,” he says.
Others say a larger number of students coming to the University of Kansas School of Medicine-Wichita for four years of medical school plus residency is contributing to the increased demand.
But lifestyle preference is perhaps the largest driver of apartment demand in Wichita, analysts say.
Paul Jackson, president of Vantage Point Properties, says nationally 40 to 45 percent of renters are millennials, those in their 20s up to age 34.
Jackson says that demographic generally is coming out of college with more student loan debt and might not be able to afford a down payment on a house or be interested in home ownership right away — if at all. People in that age group also tend to be more mobile and change jobs more frequently, thus making them less likely to purchase a home, Jackson says.
Older people are gravitating toward apartments because of a desire to downsize or avoid home maintenance.
Studies show home ownership is declining, a trend that is reflected by the relatively flat new homes construction market in recent years. In 2000, approximately 32 percent of households in the Wichita metro rented, according to data from NAI Martens. By 2014, that total had increased to 35 percent and continues to move upward.
Market saturation?
But there’s a tipping point.
Developers agree the market is being tested with all of the new apartment projects under construction or planned in the months ahead.
Longhofer says it’s possible more apartments will be added than the market can absorb, which will place downward pressure on apartments on the lower end of the price spectrum. Apartments that were once considered Class A properties likely will filter down to Class B status, Longhofer says.
He says newer amenity-rich apartments, however, will continue to fill up, with higher vacancy rates creeping in at the lower end of the spectrum.
“Developers are being more creative in what types of amenities they are trying to offer to differentiate themselves,” Longhofer says. “New is an amenity in and of itself.”