Kansas City, KANSAS (October 26, 2020) – Despite a year of shutdowns and slowdowns, new construction of apartment communities has been on a record pace in Kansas City, according to a development report from NorthMarq’s Multifamily Investment Sales team. The 2020 Pipeline Report shows 22 projects with more than 4,600 units delivered as of the end of the third quarter.
“This is a record 3.3 percent growth on Kansas City’s market-rate inventory. 2016 was the only other year in this economic cycle to deliver over 4,000 units,” said Gabe Tovar, vice president-Investment Sales. Delivery is based upon when the development offers the first units for lease.
Since 2014, Kansas City has delivered an average of 3,400 units per year, adding between 2.1 – 3 percent to the existing inventory. In the last three years, nearly half of those units have delivered within the urban core (River Market to Midtown), however, 2020 is seeing less than one third of the market’s deliveries arriving there.
According to Lamott, “Even with lower volume this year, the urban core ranks number one among all submarkets for annual deliveries. Developers have harvested the low-hanging fruit and there are plenty of high-quality demand drivers substantiating its continued expansion.”
A few other key findings:
- Downtown’s pipeline is tapering. Historically, 33 percent – 50 percent of the market’s total pipeline was under construction or planned in this submarket, but is slowing to 25 percent and 12 percent, respectively.
- Other major concentrations of Kansas City’s pipeline include the Olathe/Gardner and Shawnee/Lenexa submarkets, with each carrying over 2,000 units planned, under construction, or in lease-up.
- Nearly 70 percent of the planned pipeline is located in the suburbs and may be indicative of a shift in renter preferences induced by the COVID “work-from-home” summer.
- Reports of record supply can draw concern for overbuilding, but NorthMarq sees stability in Kansas City with occupancy hovering at 94.5 percent and rent growth above 2.0 percent in a year when many markets have dipped to neutral or negative
“Developers are reporting leasing velocities at par with prior years, so when you factor in the roller coaster of 2020 I think we’re seeing both urban and suburban locations succeed as they focus on right-sizing interiors, creating flexible amenity spaces, and delivering first-rate services,” said Tovar.
NorthMarq’s Kansas City office, with a 30-year history providing clients with debt and equity financing, expanded the office’s services in 2019 with an investment sales team comprised of Jeff Lamott, managing director-Investment Sales, Tovar, and Bayley Pinney, transaction manager. Greg Duvall leads the seven-person debt and equity team.