No End Is in Sight for Kansas City’s Multifamily Development Needs

by Kristin Harlow

By Chris Armer, Hoefer Welker

People who call the Kansas City metropolitan area home know it’s a desirable place to live. From the robust job market and vibrant arts scene to its rich history and, of course, stellar sports teams, the Kansas City metro area attracts a diverse group of people. Kansas City is evolving and so are its housing needs. 

In recent years, the demand for multifamily development in Kansas City has grown, driven by a range of factors. Mass retirements and flexible work arrangements are shifting priorities, while the housing shortage and rising interest rates are sending prospective homeowners on the search for attractive alternatives.

Chris Armer, Hoefer Welker

The multifamily housing trend stands to gain momentum, creating a space for discerning real estate and architecture firms with development expertise to pave the way in an evolving housing market. 

The great shuffle  

Much has been said about the Great Resignation, but the COVID-19 pandemic didn’t only affect young and midlife workers who left their jobs to pursue higher-paying and more meaningful employment. It also hastened the Great Retirement, a massive wave of baby boomers leaving the workforce, many of them earlier than planned. 

Now those homeowners are selling their suburban single-family homes and seeking a maintenance-free lifestyle. This transition has given way to the active adult sector, a crucial division of the multifamily market, and one that only stands to grow as millions of baby boomers transition into the next stage of their lives. 

Real estate and architecture firms hoping to play a part in this growth will need to think expansively about building amenities that bring residents together. The active adult sector is looking for social areas, such as onsite bars, distributed party rooms and hobby-oriented spaces. These specific residents are looking for a connected community as much as they are a home. 

And baby boomers aren’t the only ones migrating to multifamily buildings. Younger adults with decades of work ahead of them are reevaluating their priorities as employers expand flexible work arrangements. With the physical boundaries between work and play collapsing, people are searching for communities where they want to spend the majority of their time. Gone are the days of walking to lunch from the office building. Now, these workers are walking to lunch from their homes.   

Supply and demand

In many ways, today’s housing shortage can still be traced back to the financial crisis of 2008. With fewer builders constructing homes, and more prospective homeowners unable to qualify for affordable home loans, more people are turning to multifamily rentals as an alternative. 

The Federal Reserve’s recent rate increases — with a possible third bump signaled for September — have made the cost of buying a house even more prohibitive, driving demand for apartments and townhomes. As urban developers, we have an opportunity to supply multifamily options that — due to their affordability, amenities and locations — don’t feel like the next best thing to single-family homes but a desirable choice in their own right. We need to build places that feel like the first choice, not a consolation prize.

The missing middle 

There’s still plenty of opportunity in the luxury market. But the upward trend of luxury apartments, combined with the housing shortage and affordability issues, has created an opening to be addressed: the missing middle. 

Neither single-family units nor amenity-rich apartment buildings, these multifamily developments are more affordable by the square foot and more cost-effective to build. Developers opting for smaller-unit buildings may face an investment challenge unless investors see the great potential in serving the missing middle. At Hoefer Welker, our client, Elux, is working on Woodland Crossing in Spring Hill, which is not only fulfilling a housing need but is so successful that investors are knocking on the door to get involved. 

The future of single-family home alternatives — which will undoubtedly be led by multifamily development — is vast and exciting. Building into the missing middle also allows firms to be good community stewards, one of our values at Hoefer Welker. 

Changing attitudes

In a suburban-oriented environment like the Kansas City metro area, another challenge developers face when it comes to multifamily buildings is resistance from single-family homeowners who are hesitant about bringing apartment buildings into their neighborhoods. 

How can we convert attitudes toward being more apartment friendly? For starters, communities can revisit and adapt development standards that were created for single-family homes, a movement that we’re beginning to see in places like Leawood and Overland Park. 

As for developers who want to offer affordable and attractive rental options, projects such as two-story townhome buildings are likely to be more agreeable to residents of single-family neighborhoods — as are projects that prioritize preservation and revitalization. 

A new life for Katz

One such preservation-oriented project designed by our firm is the Katz project in Kansas City’s Midtown area at Westport Road and Main Street. Vacant for a decade, the former Katz drug store with its iconic clock tower is a fixture in the area. In fact, it was placed on Historic KC’s most endangered list in 2019 and was under threat of demolition. 

Now, Lux Living is building a six-story, 192-unit multifamily property behind the Katz building and converting the former drug store into an amenity center, including a gym, pool, audio studio and coworking spaces as well as a bistro café that will be open to the public. 

Right off the new streetcar extension through Westport, the area will allow carless commute options for residents. A project that combines urban renewal and multifamily housing in a previously neglected space, the Katz project is an excellent example of what developers can bring to their communities. 

While much has already been accomplished in the multifamily sector in the Kansas City metro area, there’s no end in sight for growth. As Kansas City residents adapt their lifestyles and priorities in 2022 and beyond, multifamily developments are the clear response to an unequivocal need. 

Chris Armer is vice president and commercial studio director with Hoefer Welker. This article originally appeared in the September 2022 issue of Heartland Real Estate Business magazine.

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