This year has seen events — from March Madness to Riverfest and beyond — bring energy to downtown Wichita that had been hard to find since the onset of Covid-19’s impact in March 2020.
Developing alongside that boost in activity has been increasing clarity surrounding what businesses of all sizes want in their workplace and how that is shaping the downtown office market.
The WBJ talked with several commercial real-estate professionals about trends they’ve seen and — with clouds of economic uncertainty lingering over the nation and the region — where work in the city’s core could go from here.
The real estate industry, building off of last year’s trend, is seeing two office markets downtown and in the city.
There’s Class A space, which is in high demand.
“Anything that is really nice is gone before it hits the market,” said Jake Ramstack, commercial broker at InSite Real Estate Group.
Ramstack said the Wichita office market — with 45 office, bank or medical deals through May — is keeping pace with 2021’s 114 transactions for the year.
Then there’s Class B and C — where vacant space can linger and buildings face uncertain futures and potential makeovers.
“There is a real chasm between Class A office and Class B and C office,” Occidental Management president Chad Stafford said. “If you are a B and C office, you are having some issues.”
The local perspective aligns with national trends.
According to Jones Lang Lasalle Inc., Class B and C space contributed 69.4% of the 7.8 million square feet of net occupancy loss in the U.S. during the second quarter, while making up 41.7% of U.S. office inventory. Effective rents for Class B and C buildings are down 1.1% nationally so far in 2022, according to CBRE, while rents for Class A-plus and A buildings are up 6.7% through Q2.
Though costs can be high, some older, vacant B and C space may go the multifamily or mixed-use route — with Main Street Living’s announced plans last month to turn the old Commerce Bank building into luxury apartments and a coworking space serving as a fresh example.
Stephanie Wise, broker associate at Street Commercial, said B and C will still get activity, but “it’s going to be a different level of tenant.”
She said there are still strong credit tenants looking at those market segments, and landlords “may need to learn to get comfortable partnering with new business.”
In conversations inside and outside of the real-estate profession, the new downtown offices of Cargill, Hutton, IMA Financial Group and Martin Pringle Law Firm in recent years continue to be held up as examples of high-quality space that benefit the companies, their people and downtown.
Eyes are also on efforts such as the Meritrust Center and Fidelity Bank’s RISE Car Park to bring unique retail and restaurants on site for their teams and the community — and if more could follow their path.
As companies evaluate workplace plans, more are seeing the office as a major piece of the war for talent. For companies determining they are at their best when employees are interacting in-person — whether in a full-time office or hybrid model — the investment in higher-quality space is worth it, Ramstack, Stafford and others said.
For a business touring potential office space, Patrick Ahern, vice president of office services at NAI Martens, said he is seeing something he didn’t several years ago, highlighting the tie-in between office real estate and talent.
“When I show Class A space, I notice potential tenants bringing along someone from their HR department,” Ahern said.
While much of the discussion about quality office space and a vibrant downtown tends to gravitate toward catering to millennials and Gen-Z, Wise said that’s missing a key point.
In her own observations and talking with clients, Wise said other generations, including empty-nesters over 50, are attracted to the Central Business District.
“That’s exciting for businesses to understand about downtown,” she said.
InSite Real Estate Group, which bought its office property in the Delano District in 2009, has had a front-row seat to the district’s growth in the office sector, retail and beyond.
“We could have never imagined it could have been this cool down here,” said Ramstack, who said the neighborhood has “something for everybody now.”
With the likes of Hutton, Slape & Howard, Dunning & Associates and more settled into Delano, not far away on the Arkansas River’s west bank, more Class A space is coming.
The new Ballpark District next to Riverfront Stadium will include a combined 120,000 square feet of Class A office and ground-floor retail space within two new, six-story buildings.
NAI Martens president Grant Glasgow, who along with Ahern is working with Overland Park-based EPC Real Estate to land office tenants in the to-be-built structures, said it’s too early to talk trends with the level and type of interest in the space — but it is getting attention.
“It’s not very many times something is built in this market that changes the skyline,” he said.
He added that the need for Class A space is very present as part of a “flight to quality,” even as overall office vacancy rates in the city and downtown have been in the 21-25% range, according to data released earlier this year from NAI Martens and J.P. Weigand & Sons.
“Those spaces that did have that ‘wow’ factor are full,” Glasgow said.
What Ramstack has seen work in Delano is taking older buildings and revamping them to fit the top-quality needs of potential users.
Just letting an older space sit and having a business imagine what it could be is not good enough — at least some physical improvements are key, as is diagramming how the office could turn into an energized workplace of the future, Ramstack said.
“You have to show not just tell,” he said.
Ramstack said Dunning & Associates’ move in December to its new 4,500 square-foot office at 567 W. Douglas is a prime example of Class A Delano District space being “ready to go” after improvements and getting snapped up quickly.
Beyond the offices themselves, Delano is an example of what a neighborhood around an office can contribute, Glasgow said.
“It’s a unique feel and an identifiable location. If an area has that, then the area itself is enticing,” Glasgow said.
Occidental Management is seeing the latest trends in the local office market from multiple vantage points, as the company is making its own move this October into 13,000 square feet at its Ice House development next to Union Station.
Just as it’s seeing with clients, walkable amenities — like PourHouse, The Kitchen and Jenny Dawn Cellars — are viewed as a draw to the Occidental team. A 1,500 square-foot patio off the breakroom is also eyed as an important feature.
And aligning with what he is seeing in the industry, Stafford said the space is being constructed to be flexible, where rooms and walls can be adjusted as needs change.
Doing what it takes to have the best and brightest want to work for you — in person — is the goal, he said.
“We do our best work as innovators when we’re in the office.” Stafford said.
NAI Martens has also experienced the internal benefits of its move within the last year to the Douglas Design District — where it is across-the-street neighbors from Street Commercial, which moved to its new home in 2021.
Glasgow has seen the office’s open layout and spaces for collaboration pay dividends.
“It’s important to be around each other and learn from each other,” he said. “I have noticed – I see everybody now.”
Recent conversations with local real-estate professionals about the downtown office scene — and the overall real-estate market — have two distinct elements: What comes across as genuine optimism about the progress the city is making, balanced with an awareness of the uncertain short- and long-term impacts that inflation, supply chain and overall economic headwinds could have.
Stafford said “companies are being very deliberate” in determining longer-term office space needs, but that Occidental has seen about a 20% increase in office tours compared to this time last year.
While he said there may not be many 10,000 square-foot-plus deals out there, he is seeing more 2,500 to 4,000 square-foot deals. National and regional companies looking to open a local office in Wichita is one opportunity area Stafford sees.
As the city awaits who might be the next Novacoast — the California-based cybersecurity firm that opened a new office earlier this year in downtown’s Epic Center — Street Commercial’s Wise said she has seen continued interest from the coasts in what Wichita can offer in terms of talent, cost of living and short commutes, among other factors.
That matches what others in the industry have said in recent months, including Landmark Commercial Real Estate’s Zach Zerbe, when talking about the Spaghetti Works District’s office space and iHeartMedia’s move there earlier this year.
“We’re getting attention from local office users, regional users, and we’ve even had some West Coast companies come through — all looking for a Wichita presence,” Zerbe said in May.
Wise said Wichita can be resilient in the face of macroeconomic challenges in the country, and that the city could see more big office move announcements coming.
“I think Wichita is strong enough to outlast these times that we are going through,” she said. “I do believe there is good news coming.”
Ramstack said that even in a downturn, top-quality office space delivers value and can boost morale in otherwise dark times.
“If things are bad, and I’m in a bad building, that sucks all the time,” he said.
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