New multifamily construction has declined sharply this year across Kansas City, Missouri, with building starts on pace to reach the lowest level in more than a decade.

About 2,200 apartment units have broken ground this year through October. That figure is less than half of the total in 2022 and 50% below the market’s average since 2013.

Several factors are contributing to this pullback in development. The interest rate environment has made the cost to finance projects much higher. Meanwhile, annual rent growth has slowed from its peak of 8.2% in the second quarter of 2022 to 3.1% through October. As a result, some developers face difficulties moving forward with their proposed projects. This is projected to lead to a slowdown in completions starting in the middle of 2025.

Before this recent slowdown, the Kansas City multifamily market experienced significant investment in new projects. Demand reached record levels, peaking in 2021 with absorption, or the difference between move-ins and move-outs, reaching over 7,000 apartment units. The demand fueled new development, adding more than 13,000 new apartment units in Kansas City in the past three years. This is 40% more than nearby cities, such as St. Louis and Indianapolis.

More than half of these new units were built in Johnson County, Kansas, and Northland, just north of downtown Kansas City. Johnson County has the highest number of apartments in the market, and more than 5,000 units have been built in the past three years. Many of these buildings were developed along the Interstate 35 corridor in cities such as Overland Park and Olathe.

This is not to say development has dried up. Several projects across the market are in the planning stages. These new projects are in Country Club Plaza, Northland and Downtown, among others. However, they are not projected to break ground until 2024.

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