The amount of new multifamily developments in the Kansas City area has decreased dramatically during the past 2 years. “There has been little to no growth during the last year due to the rapid overbuilding that took place from 1999 to 2001,” says Mac Crowther, a principal with Kansas City, Missouri-based Grubb & Ellis|The Winbury Group. “The saturation of space, coupled with a slow economy and historically low interest rates, caused a deterioration of occupancy levels and put downward pressure on rental rates.” As a result, the current pace of development is about 50 percent less than the pace of development 3 years ago. Presently, there are only three significant developments either under construction or planned, including the 340-unit BarreWoods Apartments being developed by ePartment Communities in the Northland area (a metropolitan area north of the river).

Mac Crowther Principal Grubb & Ellis|The Winbury Group

The most significant trend currently taking place in the midtown and downtown areas is the multiple conversions of existing multifamily structures into condominiums. “This is reducing the competition between multifamily rental properties in these areas,” Crowther says.

The majority of development is taking place in Johnson County, Kansas; the Northland area; and Eastern Jackson County, Missouri, which includes eastern Independence, Lee’s Summit and Blue Springs. “The primary reason for development in these areas of the market is the quality of the school systems,” Crowther says.

Rental rates for Class A and Class B properties range from $0.77-per-square-foot to $1.15-per-square-foot. Vacancy rates, which range between 5 percent and 12 percent, are highly dependent upon the submarket, property type and class of space.

“The slowdown in new construction and positive job growth will cause 2003 to be a transitional year as the market returns to some form of normalcy in 2004,” Crowther says. “In 2004, the market should be healthy again with some level of predictability, such as rents with an annual 4 percent growth and occupancy rates in the mid 90 percent range without the assistance of the concessions we have seen for the last 2 years.”

KANSAS CITY OFFICE MARKET Net absorption turned positive during the first two quarters of 2003 as Kansas City’s office market showed some positive improvements. Developers wisely pulled back on construction projects in early 2001 as demand dipped, thereby preventing further saturation of the market. The recent improvements are accompanied by declining vacancies — currently at 18 percent — although asking average lease rates continue to experience downward pressure, and the investment market remains spotty. However, positive momentum should persevere during the next 12 to 18 months as the economy finds traction and the office demand rebounds. — Jayland Wheeler is research services manager for Grubb & Ellis|The Winbury Group, based in Kansas City.

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