Metro Multi-Family Construction

[normalthings]

Interesting articles from Biz Journal. 0 applications for multi family projects under the new incentives requirement since it went into effect. article goes on to say that if the projet doesn't pencil without incentives, it just doesn't get built. Lack of cheap and/or easy development sites and higher construction costs greatly reducing the number of projects that can pencil out.

Today, Biz Journal wrote an article about how Leawood, etc are far surpassing the downtown corridor in apartments constructed. 2x as much construction out there vs Plaza-Riverfront.


Incentives See a Drop off in Development
https://www.bizjournals.com/kansascity/ ... tives.html

JoCo holds top spot for multifamily development
https://www.bizjournals.com/kansascity/ ... n-top.html

[TheLastGentleman]

Although everyone wants to develop affordable hoousing and recognizes the need, he said, to make it happen "we have to create an incentive tool that works for everyone."

I'm not sure how we square this circle.

[normalthings]

Although everyone wants to develop affordable hoousing and recognizes the need, he said, to make it happen "we have to create an incentive tool that works for everyone."

I'm not sure how we square this circle.

Cash investment, simplified zoning, legalized missing middle and infill. Adding more incentives for affordable instead of taking them away from market rate. IE, offer 40 years for affordable and 20 years for market rate instead of functionally removing incentives for market rate.

[earthling]

^Those are reasonable. In urban core they should have somewhat more strict requirements for incentives though, such as requiring streetfront retail space and/or public spaces on ground floor and/or some form of broader public benefit. IE Katz was too much of a giveaway. Incentives would've been fine if ground floor had something like a public market or the bowling alley public, not private. Incentives for luxury buildings that may go condo later is really unfair to existing condo buildings.

[normalthings]

^Those are reasonable. In urban core they should have somewhat more strict requirements for incentives though, such as requiring streetfront retail space and/or public spaces on ground floor and/or some form of broader public benefit. IE Katz was too much of a giveaway. Incentives would've been fine if ground floor had something like a public market or the bowling alley public, not private. Incentives for luxury buildings that may go condo later is really unfair to existing condo buildings.

Katz isnt going to go Condo and the incentives were entirely for the historic renovation part of the project, a cut out in the current affordable ordinance.

[TheLastGentleman]

Katz isnt going to go Condo and the incentives were entirely for the demolition and reconstruction part of the project, a cut out in the current affordable ordinance.

FTFY

[TheLastGentleman]

Cash investment, simplified zoning, legalized missing middle and infill. Adding more incentives for affordable instead of taking them away from market rate. IE, offer 40 years for affordable and 20 years for market rate instead of functionally removing incentives for market rate.

Can the city afford to miss out on even more tax revenue though? Seems like things are operating on a tight budget already, and as the city grows there's going to be more to maintain

[earthling]

^Those are reasonable. In urban core they should have somewhat more strict requirements for incentives though, such as requiring streetfront retail space and/or public spaces on ground floor and/or some form of broader public benefit. IE Katz was too much of a giveaway. Incentives would've been fine if ground floor had something like a public market or the bowling alley public, not private. Incentives for luxury buildings that may go condo later is really unfair to existing condo buildings.

Katz isnt going to go Condo and the incentives were entirely for the historic renovation part of the project, a cut out in the current affordable ordinance.

Any luxury apt project is a candidate to eventually go condo and the incentives for renovation should've have been granted for a broader public use, not private bowling alley. Incentives are fine for luxury projects if they provide broader public use benefit. Lux was essentially exploiting the local 'historical' public value of building while not contributing to the neighborhood with a great way to use that building _for_ the neighborhood = such as including public market or making the bowling alley public. And no, there was no real threat the building would be torn down. Those who bought into that were being played.

[moderne]

Of course good old structures are never razed in Kansas City. Also I do not believe most apartments in the KC market are candidates for condo conversion. If you look at most condos in KC the majority are larger square footage than most apartments.

[earthling]

^Smaller units can be joined. Happens often with apt buildings that go condo, typically with one of kitchens turned into laundry room. Even two two-bedrooms are often joined with two bedrooms joined into a large suite, one a den and another bedroom, happens in my condo building. I didn't imply most apt buildings would go condo but any 'luxury' class like Katz could easily in future, especially given it's desirable location. Am not anti-incentive but incentives for luxury buildings either way need broader public benefit than just filling lots and saving buildings. And yes, buildings get razed but Katz wasn't under any real threat.

KCMO does need to loosen up incentive requirements to more than just affordable but expect broader public benefit if market rate/luxury asking for incentives. We need to up the ante with making urban core buildings engaged with the area, not private islands - at least those asking for incentives.

[earthling]

Aug YTD Permits. Columbus jumps in both permits, passing KC. May partly be due to KCMOs affordable incentives restrictions but Minneapolis is on a roll and also has affordable restrictions for incentives, though not as strict. Or maybe they got rid of them lately?

[chaglang]

So wait... between 12/2020 and 4/2021 applications were up 700% over the previous year: 31 vs 4. Between 4/2021 and 8/2021 that number went back to 4. Are we sure that the project pipeline wasn't emptied out by that December-April project dump?

Also there is a graph at the bottom that seems to indicate that 2019 was as bad as 2021.

[normalthings]

Talked to a developer this week who can put a product up in KC and peers for about the same price. Difference is that he can get 50-70 cents per sqft more in other markets. In addition, they can get incentives with no affordability strings attached in those markets. We need to put attracting jobs and incentivizing development into high gear,

[earthling]

MF permits picked back up in Sept with about 700 units and 19 5+ unit buildings, compared to about 200 units and 9 buildings in August.

https://www.census.gov/construction/bps ... 202109.xls

[earthling]

Berkadia Q3 MF report just one dashboard slide with no detail, shows metro occupancy improved to over 96% from around 94% in Q2. YTD absorption higher than forecasted. No city breakdown.

https://base.berkadia.com/wp-content/up ... s-City.pdf

[earthling]

Cushman hasn't published the Q3 KC multifamily report online yet so no link but here's a snippet. Cushman only tracks about 120K units in metro, Colliers tracks over 170K but no report yet.

According to Cushman, the Q3 YTD absorption rate for RCP corridor has unfortunately slowed down while JoCo has more demand. City absorption is not keeping up with new supply while JoCo net demand exceeds recent deliveries. Vacancy rate highest in City because of the huge amount of deliveries over last 2 years, not because of lack of absorption. Will be interesting to see if Yardi and Colliers reports are generally inline with this one. There may still be a fair amount of new projects for City but might slow down relative to past partly due to slower absorption (hopefully temporary), partly due to strict KCMO incentive restrictions, partly due to rising construction costs.



Here's Q1 for comparison...

[Sani]

According to Cushman, the Q3 YTD abortion rate

The what now?

[earthling]

^Fixed. Wonder how often that typo 'fixed' by spell checker in industry reports often using term.

[Sani]

^Fixed. Wonder how often that typo 'fixed' by spell checker in industry reports often using term.

"These are rookie numbers!"

[earthling]

Berkadia has updated the KC MF pipeline report for Q3. Also shows what is currently under construction, nearly 4K units. It still shows 3 Light as 'planned' even though now UC, so apparently report a couple months delay or poorly compiled. Any projects missing or shown in wrong phase?

Q3 pipeline..
https://base.berkadia.com/wp-content/up ... Report.pdf

Q2 pipeline for comparison..
https://base.berkadia.com/wp-content/up ... Report.pdf