OKC & KC Apartment Market Update
This will be a general update on how the apartment markets are doing in Oklahoma City and Kansas City. We currently own buildings in both OKC and KC. Therefore, we have first-hand knowledge of how they are performing.
OKC
Vacancy has crept up higher across the metro. We have felt some of that across our portfolio. It has not been a significant hit. We still currently at 5.4% Vacancy, which is ½ of the metro average is of 10.6%.
In the submarket of Norman, where most of our units are, the average vacancy is 7.6%, while our average is 4.7%, beating the market significantly. We contribute to our success there because of our managers being on the ball with leasing making sure we have a high rate of renewals from our existing tenants.
“Rent growth performances in Oklahoma City have softened over the past year with growth of 2.7%, but still outpacing the U.S. average of 0.7%. Relative to other markets, rents remain affordable at $960/month, which is about a 56% discount compared to the national average.” -costar
We have been able to raise rents across our OKC portfolio by about 4% in the last 12 months. Significantly beating the market average. Which has been a big help to our income levels on top of our higher average occupancy.
This was another interesting graph that shows sales volume tanking in 2023 compared to the two years previous. Showing the effect on the market by an increase of borrowing costs. This is evident in what we see in deal flow, and we have not made any purchases in OKC in 2023.
OKC Economic Anecdote
In 2023, Canoo, the electric vehicle company, made an exciting announcement by selecting Oklahoma City as the home for its new manufacturing facility. The company disclosed plans to establish a state-of-the-art production site spanning over 120 acres, with intentions to initially employ over 500 skilled professionals while leaving ample room for future expansion.
KC
The average vacancy rate in the KC market has slightly increased to 7.6%, which is in line with our average on our portfolio of 7.2 %. Our vacancy was slightly higher on the asset we bought in 2023 because we have been making more serious improvements there.
The rent growth in the KC market has grown 2.9% in the last year, which put it among the top ten markets in the nation. In the last six months on our portfolio, rent growth has been 2.8%. If you extrapolate that out a year, it’s 5.6%. We are making more improvements on our large property in the market, and therefore, much more significant rent increases than that market is not surprising. CoStar's base case forecast is that annual rent growth will stay from 3.5% to 4.5% through the end of 2024.
Sales volume has taken a dip in the KC market. Last year's sales volume was 418 million, more than a 1/3 lower than the market peak of 1.5 billion in 22Q3. We are also seeing a lack of deal flow there. The only deals that seem to make sense are loan assumption deals. The one KC deal we bought in 2023 was that and helped make the deal work.
Tying it Together
In general, both markets remain robust. There has been some market performance pain. It has not been significant. Our markets are currently one of the top markets in the nation for rent growth. The market conditions have continued to prove our thesis, as these markets are quite stable throughout any recession.
