A former Topeka Kmart on S.E. 29th Street vacant since 2002 has been purchased by an Iowa company and will be transformed into self storage units.
O&H Investments, listed on Shawnee County records as a Council Bluffs, Iowa, company, purchased the retail strip mall at 240 S.E. 29th, which includes the former Kmart space, in July. The mall also has leased space occupied by Harbor Freight and Car Toyz Audio.
The company plans to leave the two tenants intact, but completely renovate the mall and create 450 to 500 climate-controlled self storage units where the former Kmart was located, said Trent Overhue, project manager for the family-owned O&H, which also operates TriStates Investments and NSI Investments. He runs the company’s Affordable Family Storage facilities out of Springfield, Mo.
“It should be an improvement, to say the least,” he said.
Overhue referred to the diplapidated condition of the former Kmart property, which will receive a significant facelift. The project is expected to cost $3.1 million to complete.
“We take centers similar to this and do a higher-end self storage, an adaptive reuse,” Overhue said. “This particular property will be kind of unique for Topeka. It will be a drive-through facility, so you’ll actually pull in the building and out the other side. It should be nice, bright, clean. We like big open boxes like that. They fit well for what we do. This one just needs a little bit more work than most.”
In paperwork filed with the City of Topeka, O&H has asked for the formation of a community improvement district, or CID, of $955,000 to support the extensive renovations that will be done. Discussion regarding the CID is on the Topeka City Council’s Sept. 5 agenda.
Improvements will include roof replacement, facade and landscaping upgrades and utility improvements to include electrical and air conditioning. The proposed CID would be a 1 percent sales tax on all eligible retail sales in the district, with projected sales showing it would be completed by 2039.
Overhue said his company has been working recently to clear out the former Kmart building, and after plans are processed by the city, construction should go quickly. He’s hoping to open the facility by the beginning of 2018.
The self storage facility will add five or six jobs to the Topeka market.
“We’re not a huge job creator,” Overhue said. “It will be a nice, clean, well put together property, especially for the area. Hopefully there will be others to follow suit.”
The self storage industry is flourishing and has grown over the last four or five years, according to Calvin Schnure, senior economist with the National Association of Real Estate Investment Trusts. He attributed that to two primary factors.
“One is with the housing crisis and in its aftermath, there were a lot of people who may have been living in smaller quarters than they have before,” he said. “Another source of demand is for businesses. There are a lot of businesses that have found the storage units to be a cost-saving, convenient way for them to store either inventory or records or furniture.”
Operators of large national REITs have said business demand especially has been growing, Schnure said.
Although the self storage industry growth has been strong, with same-store net operating income ranging from 7 to even 11 percent starting in about 2005, Schnure said it has slowed to 4 or 5 percent in 2017. While that’s still good, the industry might not see the strong growth it had evidenced.
“I’m not sure what are all the factors going on there,” he said. “If you look at the markets two or three years ago, the rents were rising so rapidly it was a really attractive draw. Now it’s an attractive draw, but it’s not full-speed ahead the way it was a few years ago.
“Four percent is still pretty good,” Schnure added. “It’s like saying the star student in the class might have gotten an A minus instead of an A.”