$1,290 2Q 2024
3.3%
93.2% 2Q 2024
-50 BASIS POINTS
1,675 [YTD: 2,551]
502 [YTD: 1,638]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In the second quarter of 2024, Kansas City experienced a surge in renter demand, with absorption totaling 1,675 units—a 50% increase from the same quarter in 2023 and the fourth-highest quarterly total since 2014. By mid-2024, the Kansas City multifamily market is clearly on an upswing. Year to date, demand has totaled 2,551 units, significantly outpacing the 1,640 units delivered in the same period. This robust absorption has driven rent growth well beyond the broader country’s pace and helped raise local occupancy levels on a quarterly basis. The submarkets of Johnson County and Jackson County were particularly popular with renters this spring, with a combined absorption of 900 units, accounting for over 50% of this quarter’s demand.
With 6,800 units currently under construction, making up 3.8% of the total inventory as of the second quarter of 2024, Kansas City’s development pipeline slightly exceeds its 10-year average but trails the national share of 4.7%. Despite this, construction activity has decelerated as developers react to increased borrowing costs and elevated construction expenses. Over the past four quarters, fewer than 3,500 units have started construction, marking the lowest level since 2019. This suggests that supply-side pressures in Kansas City have likely peaked and are now in the rearview mirror.
Through the first two quarters of 2024, Kansas City’s multifamily market demonstrated strong absorption with 2,551 units leased, contrasting sharply with the 1,638 units completed during the same period. This surge has contributed to a robust quarterly increase in the average occupancy rate across the Kansas City market, rising by a healthy 30 basis points from Q1 to Q2, despite occupancy recording a slight contraction year over year. With approximately 2,000 more units slated for completion in the third and fourth quarters of this year, 2024 is on track to see absorption surpass deliveries for the first time since 2021—a positive development for Kansas City’s property owners and operators.
At a more detailed level, most of Kansas City’s submarkets observed stability or improvement in their quarterly average occupancy rates, despite a general decline in annual rates. Johnson County saw a notable 50-basis point increase, while Jackson County recorded a 40-basis point rise on a quarterly basis. In contrast, only the less developed Cass County and Leavenworth County submarkets experienced a quarterly decrease in occupancy.
Despite the deceleration in rent growth from its peak in 2021 and 2022, Kansas City’s multifamily market remains ahead of the national curve. Owners and operators have seen robust performance compared to other major U.S. markets. Throughout 2023, Kansas City consistently ranked among the top ten of the 50 largest U.S. markets for annual rent growth, maintaining this trend across six consecutive quarters now. By the end of the most recent quarter, Kansas City’s average rental growth rate had surged to the third-highest position for annual rent growth among major U.S. metropolitan areas, recording a significant 3.3% increase. This growth far exceeds the national average, which has languished below 1.0% for four consecutive quarters.
In terms of submarkets, Johnson County and Northland, Kansas City’s largest submarkets, each reported impressive annual rent growth rates of 4.1% and 3.3%, respectively. These figures are noteworthy given the influx of new units delivered in these areas in recent quarters. For owners and operators in Johnson County and Northland, the high rate of completed units is beginning to level off, with a reduced pipeline forecasted by 2025. This trend is expected to exert upward additional pressure on rents beyond 2024 in these locales.
Conversely, Kansas City’s urban core exhibited weaker rental growth, with Downtown Kansas City experiencing a modest annual decrease of -0.5%. Several factors contribute to this decline. The downtown area, known for its premium rents—approximately 23% higher than the metro-wide average—is facing economic pressures affecting renters’ choices. Consequently, many are opting for more affordable yet well-appointed housing options in suburban areas like Northland and Johnson County. This shift, combined with a substantial influx of new downtown units, is likely restraining potential rent increases.
Average Monthly Mortgage Payment
Average Monthly Rent
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.2%
|
-0.4%
|
-1.0%
|
0.6%
|
1.0%
|
0.1%
|
0.2%
|
The 65-74 age group is the fastest expanding renter demographic in the Kansas City metro area, showing a 0.8% growth from pre-pandemic 2019 to 2022. This suggests an increasing demand for rental housing that caters to an aging population.
Moving into the latter half of 2024, Kansas City is poised to witness renter demand outpacing supply, a trend not seen since 2021. With one of the highest rental growth rates among major multifamily markets in the country, Kansas City is expected to offer a more favorable landscape for landlords heading into 2025. Rent growth, based on current projections, is anticipated to exceed 4.0% over the next two quarters, while occupancy rates are forecasted to increase on a quarterly basis. This positions the Kansas City multifamily market among those transitioning into growth mode, contrasting with sunbelt markets contending with substantial supply overhangs in the quarters ahead.
