Wichita is going through an apartment construction boom, which will mean more choices and, increasingly, a break on rent increases.
Developers built 800 units this year and more than 2,300 units since 2013, according to a recent report from Martens Commercial.
2017 may come close to matching 2016, with two apartment projects on the west side and two downtown under construction. And after 2017, the number of potential projects on drawing boards goes on and on.
It took nearly 20 years for local developers to reignite an apartment-building flurry, following two deep recessions, a housing bubble and a credit crisis.
But aiding these developers are low interest rates and billions of dollars in investment money searching for high-return projects. Building apartments has been one of the hottest real estate plays nationwide since the end of the recession.
It took a while for that money to find its way to Wichita, but it is here now. The city is in the midst of its busiest apartment construction cycle in nearly 20 years.
But the end may already be within sight.
Wichita landlords were able to raise rents in recent years because the market for apartments was tight. Occupancy rates reached nearly 95 percent in late 2015, but those rates appear to have dipped in 2016.
The good news for renters is that the new apartments – and the ones that are in the pipeline – have put a cap on rising rents, as landlords have to compete harder for tenants, according to Martens.
The Central Bay Apartments, a line of eight buildings off of West Central, sits just west of the Big Ditch.
Simpson Construction Services took out $11 million in building permits and started work in June. Leasing could start late next summer.
The 150-unit complex, owned by Builders Inc., will include one- and two-bedroom units, a swimming pool, walking paths and a 19-acre lake with an island. The architect for the project is Spangenberg Phillips Tice Architecture.
Five miles to the north, at Maize Road and about 40th Street, workers for Mies Construction are digging trenches for the water, sewer and drainage lines for a 270-unit apartment complex in the Watercress development. Owner Case Development has taken out $18 million in construction permits.
Douglas Place, at Market and Douglas downtown, has opened 66 apartments in the 11-story former Bitting Building. It expects to open another 174 units in February in the former Exchange Place building and combined parking garage/apartment building.
There will be a resort-style wading pool, cabanas, firepits, grill areas, dog wash, a free bike storage area and storage bin area.
River Vista, on the west bank of the Arkansas River, will feature 204 units, with a pool deck area and clubhouse for residents.
But even though renters may think rent is plenty high, it isn’t when compared to the cost of construction or with existing housing alternatives.
Rental website Zumper shows Wichita in October as having the 99th-lowest rental rates out of the top 100 metro areas, with an average one-bedroom unit going for $490 per month and a two-bedroom unit going for $650.
There hasn’t been any significant apartment construction in Wichita in more than 15 years.
“There was a big pent-up demand,” said Nathan Farha, an agent with Martens Commercial who specializes in apartment investment deals.
But Martens agent Jeff Englert said there are signs Wichita is reaching the peak in this apartment construction cycle.
“We haven’t seen any trouble getting the new space absorbed yet, but we are seeing rents flat and some very minor decrease in occupancy rates,” he said.
Englert said the owners of the new units may be able to institute new, higher rent levels because of the newness of the product. But their presence will still be felt as other landlords have to remodel or lower prices to compete with the attractive new space.
But new construction is expensive to pay for, and developers count on the buildings to fill up fast. That’s why construction in a boom cycle can be like musical chairs.
The first ones into the market stood out and likely are doing well. Those who wait to enter the market risk waiting too long and not having their projects fill up without some money-losing incentives.
“You just don’t want to be that last guy,” Englert said.
Craig Hanson, president of Weigand-Omega, one of the city’s largest property managers, said he expects a lot of pressure to fall on older apartment complexes, from the nicest properties in the good locations, called Class A, to the next level down, Class B.
Their owners will have to reinvest to stay even or will have to accept a lower rent to compete.
“They’ll feel more pressure for incentives and free rents across the entire market,” Hanson said.