Wichita’s multi-family construction industry is rebounding following slow years during the pandemic, a new report by NAI Martens finds.
About 800 new apartment units came online in Wichita in 2023, and the same number is likely to be completed by the end of 2024, according to the report. From 2020 to 2022, an average of 325 units were added per year.
NAI Martens, a local commercial real estate firm, tracks the rents and occupancy levels of existing multi-family properties in Wichita, as well as new developments in town.
NAI Martens Senior Vice President Jeff Englert said the flush of construction is because the industry is getting back to normal and catching up on projects that were stalled during COVID. Most of the new units are in northeast and northwest Wichita, but the downtown central business district is expected to see more growth in coming years.
Englert said the new units are meeting a demand for higher-quality apartment options because the majority of Wichita’s multi-family complexes were built before 1990.
“Do we have an overall shortage of the number of units in the market? My opinion is probably not,” Englert said. “Do we have a lack of quality in the market? Some people would say, ‘Yes, we do,’ and that's what this new construction is making up.”
But it's unlikely rents will sink despite the new apartment units coming online. Though the report predicts apartment occupancy rates will dip a little bit in 2025, they'll still be strong – around 94%. Occupancy rates indicate the share of an apartment complex that's actively rented out to tenants.
High occupancy rates mixed with lots of new builds – which typically cost more than existing apartment complexes – can drive rents up, Englert said.
“If properties are staying full, and they're able to push the rents up between 5, 10%, I mean, most ownerships are going to do that,” Englert said.
The report does not include a prediction of how rents will change in 2025, but Englert said he would not be surprised to see an increase of more than 5% next year.
From 2023 to 2024, multi-family rents in Wichita increased by 3.5%. The year before, they increased by about 10%.
In part, that’s due to inflation causing the price of new apartments to increase, Englert said. But he said there’s another reason: the influx of national and regional investors into the multi-family market. Englert said these companies operate more aggressively when it comes to year-to-year rent increases.
“Before, your local operators, they just kind of had theirs set where they would increase about 3% a year,” Englert said. “Well, a national/regional may not operate the same like that. If they see more of the opportunity to increase them, they're going to do it.”
The report divides apartments into three types: Class A, the newest and highest-quality apartments; and Class B and Class C, the oldest and least-attractive apartments.
The Class C apartments, typically the least expensive, saw the largest rent increases in 2023 of 6%, according to the report.
This “is believed to be the result of Class C properties playing catching up (sic), after the strong increases in Class A and B properties during the previous year,” the report said.
