2010 Global Market Report - NAI Commercial Real Estate

Wichita, KansasLexington, KentuckyContactNAI John T. ArnoldAssociates, Inc.+1 316 263 7242Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold Income604,427626,523342,244$64,274$54,875As the Wichita Metro area entered the economic downturn,all its major sectors--aircraft manufacturing, energy,agricultural and healthcare--were in excellent health. Thelocal unemployment rate at the beginning of 2009 was6.0%. As the local economy softened, the unemploymentrate rose to 8.9%, largely due to layoffs in the aerospacemanufacturing industry.The commercial real estate rental rates and market valueshave not decreased appreciably from last year; however,the transaction volume as a whole is down approximately30-40%. Vacancy rates in the industrial sector haveincreased approximately 3%, while the office and retail rateshave only increased approximately 1%. Sales of commercialproperty due to bank foreclosures are not yet significant.This is largely due to long term stability in lease rates andproperty values. However, sales of development land for newprojects are down significantly.Local and national restaurant chains are opening new storesin the Wichita market. The Burger King franchise will beopening four new stores in 2010, and Spangles, a localchain, will be adding a new location as well. By the end of2009, construction will be complete on the 15,000 seat,$185 million downtown Intrust Bank Arena. This facility isdebt-free and was financed through sales tax revenue.Also under construction is the National Center for AviationTraining. This 222,000 SF world-class training facility willprovide students the opportunity to receive hands-on,real-world training in the areas of general aviation manufacturingand aircraft and power plant mechanics. The $54million, 1,300-student facility will open in the fall of 2010.The employment rate has stabilized and is expected to beginto rise again in 2010, but the economy is predicted toimprove slowly as the aircraft industry rebounds. Financingfor new construction remains challenging. Energy, healthcareand agricultural sectors are expected to experiencestability and modest growth in 2010.ContactNAI Isaac+1 859 224 2000Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold Income553,080600,196268,464$63,094$50,307Lexington’s commercial real estate market continues toexperience reduced activity. There has been an increase invacancy in all segments of the market. Since Lexington isnot overbuilt, occupancy is expected to rebound in 2010.2010 should also yield opportunistic property purchases asa vast amount of equity anticipates asset re-pricing and REOsales.The office market has experienced a decline in occupancyin the suburban market and the CBD. Office constructionhas slowed significantly, which will assist the market inrecovery and increase occupancy as the economy improves.Rental rates have declined but should stabilize in 2010.Retail remains slow with little growth planned for 2010.Value-oriented retailers continue to expand on a selectedbasis while rates remain stagnant.Property owners have been more flexible to lease vacancies.Recent activity has occurred in small office/warehouses andsome adaptive reuse of older bulk warehousing. Industrialwill remain stable for 2010 with gradual absorption ofvacancy and limited new construction.Investment has been quiet in 2009 with an apparentdisconnect between buyers and sellers. Buyers are seekingadjusted capitalization rates based on the re-valuation ofassets. Sellers have not been willing to reduce prices. 2010should see increased sales with an improving economy.Several student housing projects and new market rate complexeswere completed in 2009. This has caused anincrease in vacancies, particularly student housing. Due tothe lack of existing zoned multifamily land, very few projectswill be started in 2010.Vacant land is near a historical low. There is a communityeffort to utilize techniques to encourage growth through urbanredevelopment. Farm real estate values for the year are $750higher than the national average.Lexington should weather the recession better than mostareas due to its broad-based economy, central geographiclocation and controlled zoning and development, whichprevents significant overbuilding in the commercial sector.Total PopulationMedian Age35Total PopulationMedian Age36Wichita At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAIL$$$$$$$$N/A11.009.0023.5018.0011.002.503.507.00$$$$$$$$N/A16.5011.0027.0021.0013.503.756.0011.00$$$$$$$$N/A14.0010.0025.0019.0012.003.504.0010.00N/A9.0%17.0%4.5%8.5%15.0%8.0%10.0%5.6%DowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$6.00$12.00$10.00N/A$$$12.0016.0022.00N/A$$$10.0014.0015.00N/A12.6%9.0%6.0%N/ADEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential$$$$$$200,000.00190,000.0070,000.00170,000.00240,000.005,000.00$$$$$$900,000.00450,000.00165,000.00250,000.00960,000.0020,000.00Lexington At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$$N/A17.0013.5018.0017.0016.003.003.758.0010.0011.0015.0030.00$$$$$$$$$$$$N/A20.0016.0022.0020.0017.004.504.7515.0020.0021.0028.0075.00$$$$$$$$$$$$N/A18.5015.0019.0018.0016.004.004.2511.5015.0017.0021.0050.00N/A10.5%8.6%40.0%16.3%11.8%14.8%7.5%9.4%25.4%11.7%9.4%0%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBD$ 40.00 $ 60.00Land in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential$$$$$425,000.00125,000.00125,000.00575,000.0040,000.00$$$$$850,000.00140,000.00500,000.001,200,000.00135,000.002010 Global Market Report ■ www.naiglobal.com 93