Slow and steady continues to win the race for many Midwest multifamily markets, including Kansas City, Missouri.
“A good example of today’s relative resilience is not a strength of demand, but it’s a stability of demand in the absence of new supply,” says Carl Whitaker, senior director of research and analysis at RealPage.
As of January, the Kansas City market continued to top RealPage’s leaderboard, experiencing 2.4% year-over-year rent growth and an occupancy rate of 94%.
“I think the primary takeaway in the Kansas City stats recently is that rent growth and occupancy are effectively performing in line with historic norms,” Whitaker says. “For example, the market’s average rent growth in the 2010s was 2.7%, which is strikingly close to current figures. Similarly, occupancy averaged about 94.5% during that same period.”
According to Whitaker, Kansas City also fits the Midwest market profile where new apartment deliveries are modest compared with national standards. While many markets in the Sun Belt are at a 40- to 50-year peak on deliveries, Kansas City saw 4,200 units delivered last year, which was less than in 2017, 2020, and 2021.
Over 7,600 units had been under construction in the market as of early March. However, Whitaker says some submarkets in the metro are seeing decent levels of activity, with about 1,800 units under construction downtown, 1,500 units in South Overland Park, and 1,000 units in Shawnee and Lenexa. That’s about 50% of the construction in the market.
“The market might not have some of that big demand prowess, but most of these markets in the Midwest don’t seem to have any glaring weaknesses either,” he explains. “One thing to keep an eye on over the next couple of months is how this supply gets absorbed. There’s not so much supply with cause for concern, but there could be pockets if operators focus on occupancy.”
For rents in 2024, Whitaker says he expects more of the same for Kansas City—2% to 3% annual rent growth, putting the market in the top quartile for this year.He also notes that the market has seen 58.5% of leases renew, with the lack of turnover helping to further stabilize local performance trends.
“Perhaps a level deeper, I think this is maybe a market that will serve as a pacesetter,” he says. “With a lot of inventory, operators are going to focus on retention because there’s going to be more competition and turnover costs have gone up two to two-and-a-half times over the past 12 to 24 months. You’re going to see that play out as a key trend nationwide, and Kansas City might be a market to watch.”
