$875 2Q 2024
2.4%
92.9% 2Q 2024
0 BASIS POINTS
356 [YTD: 563]
216 [YTD: 592]
Wichita’s construction pipeline is decelerating following a significant expansion in 2023, with roughly 518 units currently under construction as of the end of June.
Rent growth has been predominantly fueled by the mid-tier apartment segment, which has seen an impressive annual increase of approximately 4.0% as of June 2024.
The average occupancy rate in the Wichita market has stabilized at 92.9%. As the pace of new unit deliveries tapers off, owners and operators can expect a gradual increase in occupancies.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In the second quarter of 2024, Wichita area renters absorbed 356 units, significantly surpassing the 216 units that came online during the same period. This surge in rental demand is evident in the newer suburbs, with the Northwest, East Wichita, and West Wichita submarkets together accounting for nearly 70% of all metro-wide absorption in the second quarter.
Wichita’s construction pipeline is tapering off after a significant growth spurt in 2023. As of the end of June, approximately 518 units are under construction, while eight properties totaling 1,365 units are in the lease-up phase. The current pipeline is concentrated in four suburban submarkets: Northwest (252 units), Bel Air/Northeast (118 units), West Wichita (108 units), and East Wichita (40 units).
In the second quarter of 2024, Wichita saw the highest quarterly absorption rate in three years, with 356 units absorbed. Over the past 12 months, more than 800 units were absorbed, essentially matching the number of new units delivered during this timeframe. Consequently, the average occupancy rate remained unchanged over the year, signaling that the Wichita multifamily market has reached stabilization. However, newer vintage assets, which face direct competition from a surge of new projects, saw occupancies dip below 90%. In contrast, mid-range assets, less affected by supply-side pressures, maintained a steady occupancy rate of 93.1%. As the large share of properties in lease-up phases tapers off, occupancies are anticipated to gradually trend upwards heading into 2025.
Wichita has been experiencing consistent rental growth, with the overall market rate increasing by 2.4% annually in the second quarter of 2024. This growth has primarily been driven by the mid-tier apartment segment, typically consisting of multifamily communities built between 1980 and 2010, where annual rent growth measured approximately 4.0% in the year ending June 2024. In contrast, higher-quality assets—those built within the last fourteen years—are facing softer market conditions, primarily due to the influx of new units last year. This influx has intensified competition within this segment, resulting in a slight annual decrease of 0.6% in average rents for these properties. With approximately 1,365 units still in the lease-up phase, rent growth in this segment is expected to remain subdued for the next few quarters.
The Northwest submarket is currently the highest-priced in Wichita, with effective rents averaging $1,133 as of June 2024. This submarket has experienced significant expansion over the last few years, with its inventory increasing by 25% in just the past year alone. Of the 1,580 units that currently make up the inventory, 76% were constructed in the last seven years. Given that this inventory is heavily weighted towards higher-quality properties, it was one of only two submarkets to record an annual decrease in average rents.
Average Monthly Mortgage Payment
Average Monthly Rent
Sales activity in the first half of 2024 was subdued, with only two transactions totaling $9.9 million reported by MSCI. Assessing trends in a market like Wichita, which is not typically heavily traded, can be challenging. For context, over the last ten years, annual transaction volumes have fluctuated significantly, ranging from a high of $126 million in 2021 to a low of $6.1 million in 2017. While it’s unlikely that annual volumes this year will approach the peaks seen in 2024 and 2021, there are still two quarters remaining in 2024 for the volume to meet or exceed the pre-pandemic average of $36 million.
The composition of ownership in Wichita has remained relatively stable in recent years. As of mid-2024, private investors have dominated the buyer pool, accounting for all purchases over the past four quarters. This group now controls almost 80% of properties in Wichita.
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.1%
|
-0.9%
|
0.2%
|
-0.7%
|
1.8%
|
0.1%
|
-0.5%
|
The 65-74 age group is the fastest-growing renter demographic in the Wichita metro area, expanding by 1.8% from 2019 to 2022. This trend underscores a demand for housing that is conveniently located near healthcare facilities and lifestyle amenities such as parks and golf courses.
Wichita’s apartment market appears to have escaped unscathed compared to larger neighboring markets that experienced a higher volume of construction. The combination of a narrowing supply-demand gap and stabilizing occupancy rates has created a favorable environment for property owners and operators. This dynamic is expected to continue, with rent growth projected to exceed 4.3% by mid-2025.
The broader economic landscape in Wichita is also contributing to this positive outlook. The city’s strategic role as a hub for aerospace manufacturing and maintenance, along with recent and planned large-scale investments, is driving economic growth and job creation. Notable projects, including the $300 million Wichita Biomedical campus currently under development in downtown Wichita and the Outdoor Adventure Sports Complex, are set to significantly boost the local economy and, consequently, drive housing demand.
