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Kansas City multifamily investment activity continues to be the most active commercial product type within the metro in terms of transaction activity
The Kansas City market continues to experience robust construction activity and planned development relative to the historical norm of the market. Effective rents also remain elevated from a historic standpoint throughout the Kansas City metro. In similar fashion to 2020, Kansas City multifamily investment activity continues to be the most active commercial product type within the metro in terms of transaction activity.
Kansas City Highlights
- The KC market ended Q1 2021 with an occupancy rate of 94.7%.
- Kansas City’s overall occupy rate dropped below 95% for the first time in 27 quarters. Overall occupancy is down by 50 basis points from this time a year ago.
- Multifamily development in the Kansas City market continues to be elevated relative to historical market metrics. Total inventory reached 173,416 units at the end of Q1 2021, while another 3,181 units are under active construction.
- Effective rents remained elevated from a historic standpoint throughout the Kansas City metro. Average monthly rental rates increased to $1,006 per unit. The average rate per square foot increased slightly to $1.08 at the close of the Q1 2021, which represented a 0.3% quarterly increase.
- Annual rent growth was 0.8% for Q1 2021, representing a five-year trough in annual change for the KC market which has measured between 0.8% and 3.7%.
- In Q1 2021, 618 units were delivered throughout the Kansas City metro. Apartment inventory is projected to grow another 3.0%, with a total of 5,109 units expected in 2021.
Rental Rates
By the end of Q1 2021, the average effective rental rate per unit was $1,006 per month or $1.08 per square foot. Central Kansas City, South Overland Park and the Shawnee/
Lenexa/Mission submarkets continue to command the highest monthly rents within the metro. Those submarkets command rent of $1,233, $1,142 and $1,054 per unit respectively. At the end of Q1 2021 monthly overall asking rents slightly increased across the Kansas City metro to $1,006 per unit. Class A asking rents slightly declined to $1,298 per unit ($1.38/SF). Class B monthly rates increased to an average of $975 per unit ($1.07/SF), while Class C remained steady with an average of $789 per unit ($0.83/SF). Concessions related to leasing activity continue to be offered on a more prevalent basis to renters in order to finalize leases.
Construction Activity
The Kansas City market continues to experience robust construction activity and planned development relative to the historical norm of the market. In Q1 2021, two multifamily developments were delivered totaling 618 units, in addition to the 1,175 units that were delivered in Q4 2020. At the end of Q1 2021, there are currently 3,181 units under active construction. Apex at CityPlace added 370 units at the southwest corner of College Boulevard and Switzer Road. Davis Development delivered 248 units within Vale at Overland Park in South Johnson County. Several other multifamily developments are expected to be delivered in Q2 2021 including Uptown Lofts, Midtown Plaza, Sixty16, Elevate 114 and Streets of West Pryor.
Multifamily Investment
Similar to 2020, Kansas City multifamily investment activity continues to be the most active commercial product type within the metro in terms of transaction activity. In Q1 2021, six transactions involving Kansas City area multifamily assets were sold for a total volume of $170.74 million. A total of 1,313 units were involved in the transactions. The multifamily sector accounted for over 62% of the total investment volume within the Kansas City metro in 2020. New investors are discovering the Midwest and specifically
Kansas City’s diverse economy and resiliency throughout the pandemic. Interest rates remain low and cap rates continue to compress based on appetite for multifamily product in stable markets, such as Kansas City. Values related to multifamily product are expected to remain high throughout 2021.
Kansas City Economic Activity
The industrial market continues to perform very well for the Kansas City market as there is a strong demand for additional distribution and warehousing operations which
will present future opportunities related to multifamily product. In early Q1, the Federal Transit Administration formally executed a $174.1 million Full Funding Grant Agreement for the KC Streetcar Extension line, which will fully connect River Market to the Country Club Plaza and UMKC. The project which is expected to be operational by 2025 will spur future development activity throughout the urban core. The new KCI airport terminal reached the halfway point of construction in Q1. The $1.5 billion development is set to open in March 2023. There are currently about 850 construction workers onsite each day working on the largest infrastructure project in the metro’s history.
