Kansas City Economic Update
From the moment you step into Kansas City, you can feel the city's vibrancy. We purchased our first complex in Kansas City in 2019, beginning our journey to grow the portfolio in the Midwest. That first purchase has performed extraordinarily well, giving us much confidence in the market. Kansas City is unique as a part of it is in Kansas and the other part in Missouri. And since the two properties managed by Jb2 Investments are located on the Missouri side, and there is a downtown presence there, that is where we have decided to focus our efforts.
The JB2 Investments Five Factors Test
Kansas City passed the first "five factors" test we look for when selecting a market. Those five factors are:
Population growth
Income growth
Crime
Job Growth
JB2 Investments “gut check”
The total population of the whole metro is 2.2 million, with a growth rate of over 1% a year. It is healthy growth all around where we like to see it. On top of that, we're seeing the following:
Wage growth has risen about 2.6% a year since 2010, from $45,214 to $56,925, above our 2% threshold
The FBI violent crime rating is 468 per 100,000 people, below the 500 we want to see. However, we try our best to stick to better pockets.
Job growth is 2.2 % which is above our 2% threshold for that as well
And as for a gut check, the area is laden with cool coffee shops, restaurants, shopping, sports (the Kansas City Chiefs; 2023 Chiefs Super Bowl Champs), etc., which make it a great place to live and work. We like visiting and enjoying the BBQ and everything it has to offer.
Once Kansas City passed these five factors test, our next step was to dig into the state of vacancy rate and rent growth.
Rent and Vacancy Stats
“On a national level, Kansas City is outperforming the U.S. Rents in the 4- & 5-Star category gained 4.4% annually, beating the national average of 2.2%. This trend continues in the 3 Star category, with Kansas City increasing 5.3% and the U.S. averaging just 3.7%.” CoStar*
The market has seen and will continue to see healthy rent growth. Another thing to note KANSAS CITY is landlord friendly market with no Rent Control. The average rent for the market is $1190, which is 27% below the national average. Meaning it's still very affordable and has room to go up.
Vacancy has been and is forecasted to be well below the 10% or less mark, which is a must for us, though on average, our properties run around 5% vacancy, thus beating the average.
Lastly, rents in the Kansas City metro in 2022 have held very well compared to other markets. It's a steady market that holds up well even in recessionary periods.
Major Employers in Kansas City
Below are the major employers in the Kansas City, Missouri area.
Children’s Mercy Hospital, which accounts for approximately 3.5 billion dollars in economic impact on the market
Cerner, the largest private employer in the area, was recently acquired by Oracle for 28 billion dollars.
Honeywell manages a manufacturing site, overseeing the supply of non-nuclear components to support the nation's national security mission. And they manage a 1.8 billion budget for the U.S. Department of Energy.
Kansas City has a robust set of employers that will continue positively affecting the economy.
Transportation Projects
Kansas City's new and improved international airport, MCI, will open on February 28, 2023, with 39 gates. This $1.5 billion project broke ground in March 2019. Residents and tourists will finally enjoy smoother travel, just in time for the NCAA Regionals and the NFL Draft mega-party to come shortly after. This new terminal will almost double the number of daily passengers it can handle, increasing from 30,000 to 50,000.
As Kansas City is right in the middle of the country, it means only three hours to Los Angeles or New York, making it a good transportation hub to get to any part of the country. This airport will have substantial economic implications and create a great new face for the city.
Another large transportation project is the Streetcar Main Street 3.5-mile Extension. It's a 351-million-dollar extension with nine additional stops, connecting most of the urban core and beyond in Kansas City. It's about 1/3 done and should be completed by 2025. This extension will be another positive addition, providing ease of transportation in the city's core.
Tech Scene
“Kansas City, with more than 100,000 net-tech employment, grew 1.7% year-over-year in 2020, ranking it third in tech job growth after Austin and San Francisco” according to CompTIA Cyberstates 2021 report.
META (Facebook) Is opening an 800 million hyper-scale data center in Kansas City.
The Wrap
We could go on and on. The Kansas City market is very robust and will continue to have healthy growth well into the future. We are bullish on the market, and this is yet another city that has benefited from the work-from-home movement since COVID. We are excited to continue to grow our portfolio in Kansas City and the Midwest as a whole.