By Kevin Collison
A several point drop in apartment occupancy rates indicate the downtown market may be cooling after the torrid pace of the past couple years, according to two real estate professionals well-versed in the area.
John Bennett Jr. of KCLoftCentral said his suspicion the market was softening was reinforced when he noticed that 909 Walnut, one of downtown’s premier apartment buildings, was 91.5 percent occupied, according to its recent sale listing.
That matched up with the current experience of KCLoftCentral which manages more than 1,000 units downtown.
“We’re seeing our portfolio-wide occupancies 3- to 4 percent lower than previous years,” Bennett said. “It’s not a huge drop, but it’s potentially the point of a trend.
“It’s a question of how much is too much too fast.”
Over the past few years, downtown landlords have been accustomed to 95 percent occupancies as more and more people have opted for its walkable lifestyle. Thousands of new units have joined the inventory with more in the pipeline.
For example, the first tenants of the new 296-unit Two Light luxury project built by Cordish are expected to move in this May, and the firm recently announced the development of 300-unit Three Light tower.
CityScape is beginning to lease its 221-unit Crossroads West development.
Flaherty & Collins is expected to begin work next month on the 232-unit The Yards project in the West Bottoms and is finishing construction of its massive 410-unit Union project next to Berkley Riverfront Park.
KCLoftCentral also continues to develop new apartments. Bennett said the firm’s historic rehab of the old Hotel Bray at 1114 Baltimore into a 29-unit project called the New Yorker is due to open in June and is 70 percent leased.
“I’m not trying to be anti-development,” Bennett said, “but there are little warning bells going off.”
Christina Boveri of Boveri Realty Group has specialized in the downtown housing market for many years. She also is worried that it may be entering a rough patch.
“There’s a lot of competition out there and we haven’t felt the full effect,” she said. “We work with all the buildings and we know what specials and incentives people are giving.
“We’re right at 90 percent, but we still have all this new product coming on. A year from now will be the true test.
“I anticipate that with all the new units coming on, landlords are not going to get $2 or $2.10 per square foot. Prices will stabilize or even go down.”
Boveri added the downtown housing market would benefit by having more employers arriving.
She also said that while there is an abundance of rental apartments, there is an acute shortage of for-sale condominiums.
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Downtown KC added about 3,000 units downtown between 2013 and 2017, or 600 a year. In 2018, it looks like downtown will add approximately 1,400 units between the following projects:
531 Grand – 140 units
600 Central – 25 units
Crossroads West – 273 units
905 Broadway – 26 units
The New Yorker – 29 units
Two Light – 296 units
Traders on Grand – 202 units
The Union – 410 units
Union Hill on Main – 96 units
Based on this, I would definitely expect the rental market to soften up even more dramatically.
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