Other than the Chiefs winning the Super Bowl in February, there was not much to cheer about in the Kansas City Metro Area in 2020.
The COVID-19 pandemic wreaked havoc on so many levels – both nationwide and locally. Nationwide lockdowns took a human toll as Americans were isolated from loved ones, friends, colleagues, and classmates.
The most heartbreaking example of the psychological toll from social distancing was when residents of a nursing home in Greely, Colorado gathered outside – many in wheelchairs – and held up signs that read:
“Rather die from COVID than loneliness.”
“Prisoners in our own home.”
“Give us freedom.”
Financially, the toll exacted by COVID-19 on Americans has been devastating. After dipping to 3.8% in February – among the lowest on record – unemployment shot up to the pandemic peak of 14.7% in April. It has since fallen but still lingered at a high level (6.7%) in November.
No region was spared – including Kansas City.
Nationwide, multifamily took a hit as unemployment impacted rents. Despite all the doom and gloom, there is reason to be optimistic in Kansas City – not only for the Chiefs to repeat as champions but for the economy and the multifamily sector to rebound in a big way.
As the data trickles in, the numbers are confirming to me what I’ve known all along about Kansas City – that it has a strong underlying economy. It was strong before the pandemic and there is now data showing that Kansas City and Missouri, in general, were the most resilient during the pandemic and shows signs of being among the areas poised to bounce back the quickest and the strongest.
First, a discussion of Kansas City’s strong economy before the pandemic. Kansas City’s economic strength lies in its strong job numbers. Before the pandemic hit, the employment numbers in Kansas City were strong.
Total employment in the Kansas City Metropolitan Area increased by 8,500 workers in 2019, growing 0.8 percent, for the area’s ninth consecutive year of employment growth.
The unemployment rate declined to 3.3 percent in March – just before the pandemic – the area’s lowest since 1999. The KC Metro Area’s unemployment rate was a full half-point below the national rate.
Strong job growth translated to strong multifamily numbers in the KC Metro Area. By the end of 2019, vacancies dropped to 4.5 percent – falling a total of 50 basis points in 2019. This translated to strong rent growth where asking rents rose 3.8 percent in 2019.
How did the region fare in comparison to the rest of the country during the pandemic? Better than most. Unemployment in the KC Metro Area peaked at 11.7% in April, compared to 14.7% nationwide -a full three percent below the national rate.
This resilience can in part be explained by a Missouri economy composed of a diverse mix of industries – not solely dependent on one or more sectors. This translated to lower economic vulnerability to the pandemic than almost any other state.
According to a June study conducted by Wallethub, Missouri was ranked #49 out of 51 states and DC among the states most exposed to Coronavirus. States were ranked by the levels of “Highly Affected Industries & Workforce” and “Resources for Businesses to Cope Better with the Crisis” with Missouri ranking lower in the former and high in the latter – giving its low vulnerability ranking.
As for the effect of the pandemic on the KC multifamily sector; while the rest of the country saw rent declines in 2020 – to the tune of a -0.9% decrease nationally – Kansas City was one of the few cities that saw an increase (1.1%).
As for 2021, Kansas City is expected to recover faster than most cities. In another ranking by Wallethub that compared cities whose unemployment rates are bouncing back the most, Kansas City was ranked #17 among 180 cities.
What about the multifamily outlook for Kansas City in 2021? The outlook is good.
According to CBRE, suburban assets in the Midwest and Southeast regions will provide the best opportunities for solid market performance and achieving expected revenues next year. Kansas City was singled out among other Midwest cities as being among the best multifamily performers in the country.
2020 was rough all around but there are signs of optimism for the KC Metro Area – especially in the multifamily sector.
The KC multifamily sector proved its resilience during the pandemic and with jobs and the economy poised to make a rebound in 2021, many are pegging Kansas City to be a top performer in 2021.
Just like there is a strong case the Chiefs will repeat as Super Bowl champions, there is a strong case for Kansas City multifamily investments for 2021 and beyond.