The pace of investment activity in the Kansas City market slowed during the past four quarters, with sales volume totaling $4.0 billion, a decrease of 11.6% compared to the prior year. As a leading second-tier market, the Kansas City Metropolitan area ranked fifth out of the largest thirteen Midwest markets in total sales volume during the past twelve months, with multifamily and industrial assets combining for 69.1% of the Metro’s activity. 

Capitalization rates increased 70 basis points (bps) compared to the past twelve months, registering 6.1% in the fourth quarter of 2022. Top quantile capitalization rates increased 34 bps compared to the past twelve months, registering 4.6% in the fourth quarter of 2022. Total net absorption across the industrial, office and retail sectors totaled 17.3 million square feet during the past four quarters, an increase of 7.1 million square feet compared to the prior year. The multifamily sector realized 4,592 units of net absorption during the past four quarters, a decrease of 39.5% over a similar period a year ago. Modern Class A industrial properties quoted on a triple net basis, along retail properties, experienced strong demand during the past four quarters, registering new record highs for asking rental rates during the quarter. 

With development kept in check, incentives being offered to lock tenants in for longer lease terms along with inflationary pressures, average asking rental rates also trended upwards for the office and multifamily sectors during the past two years. Vacancy in the multifamily sector dropped 50 bps from the prior year to 6.2%, while vacancy in the industrial sector is at a record low of 3.6%. After realizing six consecutive quarters of increasing vacancy rates in the retail sector, rising to 5.7% by the second quarter of 2021, vacancy has declined six consecutive quarters, totaling a decrease of 140 bps, registering a ten-year record low of 4.3% in the fourth quarter of 2022.

The Newmark Zimmer Midwest Capital Markets team anticipates reduced sales volume in the first half of 2023, due to continued price exploration among buyers and sellers. Allocations for commercial real estate investment continue to remain steady for industrial, multifamily, and medical office with strong fundamentals. In 2023 we expect activity to increase for general office and neighborhood retail assets as investors seek yield and data points support pricing. We continue to monitor the impact of interest rate increases on leveraged buyers return expectations and valuations.

Newmark Zimmer (NZ) is a full-service commercial real estate company that provides a range of services including sales and leasing, property and facilities management, global corporate services, and investment sales and capital markets. We also specialize in owner’s representative services for public and private development projects and public sector consulting.

NZ is regularly recognized as one of the top brokerage firms in the region, negotiating more than 500 transactions per year. The firm currently manages more than 13.5 million square feet of office, medical, industrial, retail and educational property and serves as corporate real estate advisor for an assortment of local, regional, national and international companies.

NZ’s approach provides clients with real estate solutions that deliver quantifiable results. Our offices are located in Kansas City, Missouri; St. Louis, Missouri; and Lee’s Summit, Missouri. As an affiliate company of Newmark, yet still independently owned and operated, the NZ Team leverages the breadth and depth of the Newmark platform to offer its services throughout the Midwest, the United States and around the globe.