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City tax incentive program could help offset need for industrial space

Friday, December 8 2017 8:34 AM
Read more in this article from the Wichita Business Journal below!
By   –  Reporter, Wichita Business Journal

The need for more industrial-type real estate in Wichita has been talked about for some time, but it looks like the city could be doing something about it.

At its Dec. 19 meeting, the City Council is scheduled to discuss a new speculative industrial building program that would potentially offer tax abatements in the form of industrial revenue bonds to companies looking for large industrial building space.

According to city documents, each potential building project under such a program would come before the City Council for approval individually.

The program would be similar to one adopted in 2012 that led to the construction of three industrial buildings, all of which featured at least 95,000-square-feet of space. All three are currently under lease agreements.

"If they approve it, something like this will be really good for the city," says Scott Salome, an industrial advisor with NAI Martens. "I think Wichita is missing out on opportunities. I've already talked with two or three developers who are looking to put up a building. Some, if there's not a building ready to go here, they'll pass us up."

According to the city and the Greater Wichita Partnership, companies have been inquiring about the availability of warehouse space — generally at least 50,000-square-feet worth of space — but have taken their projects elsewhere because of Wichita's lack of "modern" industrial buildings.

Salome added that companies looking for less than 50,000-square-feet would also benefit from such a program because smaller spaces would likely be made available.

According to city documents, "Wichita is increasingly missing the opportunity to seriously vie for new capital and jobs investments from out-of-region users."

The Partnership relayed to the city that 14 "leads" were made roughly from September through November, though companies have been moving forward with plans in other markets because of Wichita's lack of necessary space.


"A lot of times companies will use site-selecting or consulting companies," Salome says. "If they find out that Wichita doesn't have available space, they'll just move on."

In its 2018 Wichita market forecast report, NAI Martens mentioned the issue.

"Tenants are reluctant to wait for 'build-to-suits,' thus having inventory ready to lease is vital to the market," the report said. "Recent speculative development, supported by tax abatement, has been substantially absorbed..."

Although it's only talk right now, the city has put forth the framework for what a program might look like. According to city documents, industrial revenue bonds could provide a tax abatement for up to 10 years — 95 percent abatement for the first five years and 50 percent for the second five years — and a sales tax exemption on construction materials.

Some might argue that tax abatement programs offer a tilted playing field for some companies, though Salome argues that such incentives are common.

"This would offer some relief," Salome says. "I think even some local companies would move benefit from (speculative building). Out-of-area companies, they'll go somewhere else if they can't get incentives here."

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