The Kansas City multifamily market continues to exhibit strong market fundamentals as Q3 occupancy rates reached 96.4%
The Kansas City multifamily market continues to exhibit strong market fundamentals as Q3 occupancy rates reached 96.4% - the highest since 2000. Absorption levels throughout Q2 and Q3 pushed annual demand to an all-time high for the Kansas City metro at 5,758 units. While demand was robust throughout the metro, the urban core and South Overland Park submarkets were the most active with renters leasing up recently delivered projects and backfilling existing vacancies.
Kansas City Highlights
- The Kansas City market ended Q3 2021 with an occupancy rate of 96.4%, surpassing 96% for the first time since Q3 2019.
- Overall occupancy is up 100 basis points from this time a year ago.
- Multifamily development in the Kansas City market remains elevated. Total inventory reached 175,815 units at the end of Q3 2021 with another 4,013 units under active construction.
- Effective rents have stayed historically high throughout the Kansas City metro, increasing 3.9% to $1,100/unit ($1.19/SF).
- Annual rent growth was 7.6% for Q3 2021 - a five-year peak in annual change for the KC market which has measured between 0.8% and 7.6%. The five-year average annual change is 2.6%.
- In Q3 2021, 1,316 units were delivered throughout the Kansas City Metro, totaling 2,513 units in 2021. Apartment inventory is projected to grow another 3.0% with 5,229 units expected to be delivered by the end of 2021.
- By the end of Q3 2021, the average effective rental rate per unit was $1,100/month ($1.186/SF). Central Kansas City, South Overland Park and the Shawnee/Lenexa/Mission submarkets continue to command the highest monthly rents within the metro at $1,332, $1,285 and $1,148/unit respectively.
- At the end of Q3 2021, monthly overall asking rents increased across the Kansas City Metro to $1,100/unit. Class A asking rents increased to $1,453/unit ($1.53/SF), Class B rose to $1,032/unit ($1.17/SF), while Class C increased to $836/unit ($0.89/SF).
- The Kansas City market continues to experience robust construction activity and planned development. In Q3 2021, eight multifamily developments added 1,316 units to the 1,197 units delivered in the first half of 2021. There are 4,013 units currently under active construction.
- Villas at WaterSide in Lenexa added 298 units. The Element by Watermark delivered 276 units to the Northland. Additional Kansas City metro apartments delivered in Q3 include Five Twenty East, Converge KC, The Edison at BridleSpur and Midtown Plaza.
- Several other multifamily deliveries are expected by the end of the year including Elevate 114, Trinity Woods, CORE, Arrello Apartments and The Peak at Sonoma.
- In terms of transaction activity, Kansas City multifamily investment continues to be the most active commercial product type in the metro.
- In Q3 2021 there were five Kansas City area multifamily transactions, totaling 1,030 units completed. Volume for four of the transactions totals $146.19 million with a fifth transaction unverified at this time.
- CityView, The Locale and Vale Overland Park all sold in the third quarter.
- Interest rates remain low and cap rates continue to compress based on appetite for multifamily product in stable markets like Kansas City. Values related to multifamily product are expected to remain high for the remainder of 2021 and into 2022.
KC Economic Activity
- The Cordish Company has broken ground on Three Light Apartments, a $140-million, 26-story building located within the CBD. Three Light’s 288 units opening in the fall of 2023 will further transform the Kansas City downtown skyline while adding new inventory to the area.
- The FBI will build a new field office near the KCI airport and is expected to lease nearly 137,000 SF by the fall of 2023, eventually vacating their current downtown office space in the CBD.
- The Industrial market continues to perform very well in Kansas City. Industrial product under construction stands at nearly 12.8 million SF with additional developments in the pipeline. The strong demand for additional distribution and warehousing operations will continue to present future opportunities related to multifamily product.