KANSAS CITY - Berkadia

KANSAS CITY

2019 REVIEW

Multifamily development remained elevated in 2019 as builders worked to meet pentup demand, particularly in Kansas City's popular urban core. Total apartment inventory reached 171,421 units at the end of the fourth quarter as 2,533 apartments came online among 6 of the 11 submarkets. Most of the new supply and construction starts skewed toward the central business district. Boosted by rental demand in the Central Kansas City submarket, leasing activity exceeded deliveries to shift up metrowide occupancy 50 basis points annually to 95.1% in December, the highest year-end rate in more than 10 years. A 3.1% annual increase in household income encouraged operators to raise effective rent which advanced 2.4% year over year to $966 per month at year-end. Underpinning sturdy apartment fundamentals was accelerated hiring. Kansas City-based companies added 16,000 net jobs. Total nonfarm employment increased 1.5% annually, up from 1.0% growth in the preceding year.

30,000

EMPLOYMENT CHANGE

Employment

20,000

10,000

0 2011

2012

2013

2014

2015

*Estimate; **Forecast | Source: Berkadia, Moody's Analytics

EFFECTIVE RENT AND OCCUPANCY

$1,000

Rent & Occupancy

95.2%

2016

2017

2018

2019*

2020**

ABSORPTION AND DELIVERIES

5,000

Absorption & Deliveries

$900

94.8%

4,000 3,000

$800

94.4%

2,000 1,000

$700

94.0%

14 15 16 17 18 19* 20**

*Estimate; **Forecast | Source: Berkadia, Axiometrics

0

14

15

16

17

18

19*

*Estimate; **Forecast | Source: Berkadia, Axiometrics

20**

2019 PERFORMANCE HIGHLIGHTS

EMPLOYMENT CHANGE

16,000

1.5% YOY

UNEMPLOYMENT RATE

3.3%

10 BPS YOY

OCCUPANCY

95.1%

50 BPS YOY

EFFECTIVE RENT

$966

2.4% YOY

ABSORPTION

3,220 Units

CONSTRUCTION

2,533 Units

4.1% YOY

CAP RATE | PRICE PER UNIT

7.0%

Cap Rate & PPU

$120,000

SALES ACTIVITY INDEX

150

Sales Index

Index Value (Base Year 2014 = 100)

6.5%

120

$90,000 90

6.0%

60 $60,000

30

5.5%

$30,000

15

16

17

18

19*

*Estimate | Source: Berkadia, Real Capital Analytics

0

15

16

17

18

19*

*Estimate | Source: Berkadia, Real Capital Analytics

POPULATION

2,164,400

YE 2019 0.6% YOY

MARKET FACTS

HOUSEHOLDS

882,000

YE 2019 1.0% YOY

MEDIAN HOUSEHOLD

INCOME

$69,936

YE 2019 3.1% YOY

RENT SHARE OF

WALLET

16.6%

YE 2019 10 BPS YOY

2020 PREVIEW

With multifamily deliveries intensifying this year to levels not seen since 2000, occupancy should taper amid vigorous rental demand. Construction is scheduled to complete on 4,399 apartments in 2020 and another 1,107 units in 2021, the bulk of which will be in the highly desired Central Kansas City submarket. The success of luxury communities in the downtown area has been helped by Kansas City's foothold as a Silicon Prairie metro, drawing wealthy, educated millennials. Twelve new properties will reach lease-up in the downtown corridor. Of note is the 341-unit Artistry KC project in the Crossroads neighborhood, which until now has been the domain of smaller businesses such as microbreweries, shops, and food places located in renovated buildings. The 74% annual increase in new supply metrowide will outmatch heightened demand, decreasing occupancy 30 basis points year over year to 94.8% in December. Kansas City employers will continue to add jobs, buoying demand for apartments. A net 5,600 jobs are expected to be created metrowide by December. In concert with a slower pace of hiring and occupancy lowering, landlords will slow annual rent growth. The average effective rent is forecast to end 2020 at $981 per month, a 1.6% annual gain.

Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 2019 are estimated values, while 2020 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

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