It was another active year for commercial real estate investment sales. The National Association of REALTORS® (NAR) reported a sought contraction in commercial investment sales in 2019 due, primarily to less activity among foreign investors. Locally, real estate brokers reported the level of activity was as strong, if not stronger than it was last year ago. The demand for real estate investments in Wichita continues to be driven by local and regional investors. There hasn’t been much activity from larger national investors. Apartments continue to be most sought after properties followed by retail, industrial and office, respectively.
The high level of investment sales activity is causing cap rates to continue to compress. NAR reported that nationally cap rates for apartments sales averaged 5.4%, while other property types had cap rates ranging from 6.3%. for industrial to 6.75% for office. Cap rates are also compressing in Wichita with some apartments projects and single tenant retail properties being sold below 7%. Generally, cap rates in the local market range from 8% to 11%.
Lack of Supply in Investment Sales
The only real problem for commercial real estate investment sales is lack of supply. There are not enough properties coming on the market to meet the demand. This is a problem across the country and it is getting worse as more buyers are looking for opportunities. According to the National Real Estate Investor, “There’s never been more private equity cash chasing real estate assets.” They predict that 2020 could be the most active year for investment in commercial real estate. There are two primary reasons for the strong demand;
Real estate is still a good value that provides steady income and attractive rates of return relative to other investments assets.
Real estate fundamentals are strong and there are not significant concerns about over supply.
Finding sources for loans on commercial investment transactions is not a problem for local or regional investors as lenders are aggressively seeking opportunities to make loans. Buyers with good credit, purchasing properties with solid fundamentals, can often choose from multiple lenders and loan options.
Opportunity Zones started attracting more interest from developers looking for redevelopment projects in the area. There were some local properties purchased late in the year and more purchases are expected in 2020.
A Colorado investment group purchased the shopping. centers: Comotara Center, Normandie Center and Brittany Center.
Investors purchased the 288-unit Southlake Village Apartments.
Investor’s purchased the 240-unit Westlink Village apartment complex.
An investment group purchased the Towne West Mall.
Article composed by: Jerry Gray and Randy Johnston