Kansas City’s multifamily market had a strong year in 2022, as apartment development activity accelerated throughout the year, with both completions and permitting activity surpassing levels recorded during 2021, according to a new report by Northmarq covering the Kansas City, Missouri, apartment market.
The report notes that the multifamily vacancy rate throughout the Kansas City market tightened by 30 basis points in 2022, ending the year at 5.3%. However, vacancy ticked up 20 basis points during the fourth quarter, indicating some signs of a market that is cooling off.
But the best news? Northmarq predicted in its report that 2023 will be another solid year for the Kansas City-area multifamily market, with strong sales and vacancy rates that will remain low.
Kansas City-area apartment rents continued to rise at a healthy pace during the fourth quarter, with average rents increasing by 1.8% in the last three months to reach an average of $1,159 a month. Asking rents advanced by 9.5% in 2022, according to Northmarq.
The multifamily investment market remained active throughout 2022, too. Sales activity gained momentum while prices pushed higher. The median sales price was $183,900 a unit in 2022, considerably higher than in the preceding year. Cap rates trended higher in the fourth quarter, too.
Investors gravitated toward Class-A assets in 2022, with upper-tier properties accounting for nearly half of the sales in the past 12 months. As activity picked up in the sale of Class-A properties, prices pushed higher. The median sales price was $183,900 a unit in 2022, while the median price of Class-A assets reached $250,000 per unit.
Not surprisingly, developers have gravitated to the multifamily sector across the country. Kansas City was no exception last year. According to Northmarq’s research, developers have delivered an average of more than 4,000 apartment units a year in the Kansas City market since 2020.
But what does the future hold? Is the Kansas City multifamily market poised for another solid, it not necessarily record-breaking year in 2023? Northmarq says that the signs are good.
While there were some indicators of a market cooldown during the last three months of 2022 — with vacancies trending higher and the pace of rent growth slowing — operating conditions remain solid heading into 2023, according to Northmarq.
The company’s report concludes that prevailing conditions have been supporting construction of new apartment units for the past several years, and the outlook remains positive for the multifamily market in Kansas City.
