Market Study Analysis for the Assessment Year 2019 – Johnson County

Jan. 1, 2019

Pursuant to K.S.A. §79-1460a

A study of the residential real estate indicators reflects the market has continued to grow with nearly 93% of the residential properties increasing in value for 2019.  In our annual valuation process, we reviewed over nineteen thousand residential sales and used this data in a sales comparison analysis within ORION to develop Market values. In addition, the ORION Mass Appraisal system utilizes a national cost service, Marshall & Swift, which provides the Appraiser’s office with annual updates each July. No changes were implemented from the annual depreciation study performed for residential property. Land analysis indicates the supply is generally in balance with minor adjustments made to land values. Land values in the Northeast area of the County have seen continued upward pressure due to improved residential properties being purchased and subsequently torn down to facilitate construction of totally new residential dwellings.

Commercial real estate uses the Income, Cost, or Market approach to estimate value. Conditions for most of the commercial real market remain fairly stable. The number of new construction permits still points to a trend of market expansion for most property types, but conversely, publications and studies indicate capitalization rates for single tenant retail and shopping centers in general have increased by 25 to 50 basis points over the last twelve months. Multifamily and industrial properties remain the strongest for construction activity.              

Multi Family construction numbers are; recently completed units of 868, this year’s new construction starts at 2,335 units, continued completion of prior year starts are 1,711 units, and proposed units for start of construction are currently 10,101. The proposed projects seek approval for initial plans, zoning changes, Tax Increment Financing and other dynamics. Rents, occupancy, and capitalization rates are currently stable.

Industrial Property continues to be at the top of the expansion cycle as there has been 3.5 million square feet constructed among warehouses that are greater than 200,000 square feet. One heavy equipment manufacturer began construction on two warehouses that are greater than 900,000 square feet each near the BNSF Intermodal, and at least three other distribution warehouses are larger than the 200,000 square foot size are being constructed. Though the southwest part of the county is seeing this large warehouse construction activity, Shawnee, Overland Park and Bonner Springs are also experiencing industrial building construction.

Office Properties have construction of more than 510,000 square feet and most is in the city of Lenexa and Merriam. More specifically, one multistory office near Shawnee Mission Medical Center and a multistory regional headquarters office building in Lenexa City Center. Office capitalization rates remain stable and speculative construction is at a minimum. Generally office properties have seen only slight upward pressure in values.

Retail Construction trends during 2018 have been stable compared to the past few years. Most retail development has been redevelopment in nature and occurred in mixed use type properties throughout the county. Multiple developments for convenience stores and fast food restaurants continue to occur. In total there has been roughly 100,000 square feet of new construction starts in 2018. Capitalization rates for retail have seen some increases over the last twelve months.

Hotel/Motel property continued to see new construction during 2018, adding nearly 359 new hotel rooms. Locations that opened new facilities are typically close proximity to I-35 and 95th street, or I-435 and Midland Avenue. Capitalization rates remain unchanged for the current value estimates. The county is showing significant hotel growth with eight new hotels under construction and ten more proposed.

The annual depreciation study for commercial property found evidence for adjusting some structure categories for depreciation, economic life, and other table variables as they relate to some retail and industrial properties. These adjustments realign internal depreciation with verified sale transaction indications. The land study for commercial property is updated annually and found minimal upward pressure for land values. Computer Assisted Land Pricing (CALP) models were expanded to include more commercial properties that were previously manually priced, and now include land for parks, churches, schools, and other miscellaneous properties.