At SHARE, we understand the essence of strategic investment – finding hidden gems that promise profitability and sustainability. After meticulous market analysis, we're thrilled to expand our clients' portfolios into Kansas City, a place that embodies affordability, rental demand, and investor-friendly policies. In this Spotlight Series, we dive into the core reasons driving our decision and why Kansas City should be on every investor's radar.
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Kansas City's affordability isn't just a perk for residents; it's a goldmine for investors. With a median property price of $237,778, compared to the national average of $355,390, housing prices are 6% cheaper than the U.S. average. This offers an entry point for investors seeking high yields in a major metropolitan area without the exorbitant price tag.
Approximately 46% of occupied housing units in Kansas City are renter-occupied households, indicating a significant rental market. We’ll take a closer look at the key factors that drive demand for rental housing in KC.
Central Location:
Kansas City is the largest city in Missouri and the 6th largest in the Midwest. As Kansas City spans two states, 18 counties, and 50 communities, the area boasts a population of over 2.16 million people. According to GoBankingRates, Kansas City ranks 7th on the most affordable and fastest-growing cities. Additionally, due to its business-friendly environment, companies here can benefit from two state tax structures, double the incentive programs, and urban and suburban location options. Several eCommerce and distribution giants already call the Kansas City region home including Amazon, Chewy, Niagra Bottling, and Walgreens.
Local Economy:
Kansas City's economy thrives on diversity, with no single sector dominating more than 15% of overall employment. This diversified economic base enhances resilience and mitigates risks associated with dependence on any one industry. This resilience is bolstered by a low cost of living and a low unemployment rate of 3.1% (as of February 2024), compared to the national average of 3.8%.
Additionally, over the past decade, the population of highly educated individuals in KC has grown at a rate 3x higher than the overall population. This influx of talent enriches the labor pool and fosters innovation across various sectors.
A Global Presence
These favorable conditions have not gone unnoticed by major corporations, many of which have chosen to establish their headquarters in Kansas City. Notable examples include American Century Investments, Garmin, Dairy Farmers of America, Hallmark Cards, Interstate Bakeries (maker of Twinkies and Wonder Bread), Sprint Nextel, and YRC Worldwide, one of the largest freight shipping companies globally. Their presence underscores the city's attractiveness as a hub for business and commerce.
Global Tech Presence
The Kansas City area is rapidly emerging as a powerhouse in the tech industry, ranking as the third fastest-growing tech market in the U.S. It boasts one of the highest numbers of tech jobs per capita among major metropolitan areas, with over 102,000 technology jobs and more than 3,900 established tech firms.
This appeal to major companies and brands is rooted in Kansas City's business-friendly environment, strategic central location, and exceptional connectivity. Being the first Gigabit Region in the nation, thanks to Google Fiber, it has deployed over 5.5 million miles of fiber, making it the most connected region in the U.S. In a significant move, Google announced plans in March 2024 to invest $1 billion in a data center, aimed at advancing the company’s artificial intelligence efforts. This project is expected to create over 1,000 construction jobs and 1,400 positions upon completion.
Adding to the city's tech allure is Meta's decision back in 2022 to establish a new $800 million hyperscale data center in Kansas City (expected to be operational in 2024). Meta cited the city's excellent infrastructure and fiber accessibility as key factors in their decision. This development is set to provide over 1,400 jobs to the local community, further solidifying Kansas City's position as a burgeoning tech hub.
Automotive Sector
Over the past decade, the Kansas City region has experienced substantial economic growth driven by investments in the automotive sector. This surge in investment has attracted automotive suppliers seeking to establish new facilities in the area. With its status as a leading automotive logistics hub, Kansas City is home to major players like Ford and General Motors, along with over 70 other auto industry suppliers, collectively generating over 21,000 jobs for the local economy.
Ford's presence in Kansas City is particularly noteworthy, with its local plant earning the distinction of being the company's most productive worldwide. In response to this success, Ford has committed a $95 million investment to upgrade its local manufacturing operations, aiming to create an additional shift and open up more than 1,000 job opportunities in the process.
Distribution
Kansas City's exceptional infrastructure, including fiber optics, highways, interstates, railways, a major airport, and public transportation systems, positions it as the most centrally located city in America. This strategic advantage drives the distribution and e-commerce sectors of the economy. According to CBRE’s Kansas City report, the city boasts the largest rail center in the U.S. by tonnage, while Kansas City International Airport handles more air cargo annually than any other air center in a six-state region.
Furthermore, approximately 5.9% of the workforce in the Kansas City region is employed in the transportation/warehouse industry, surpassing the national average of 4.7%. This robust infrastructure and workforce presence underscores Kansas City's pivotal role in facilitating seamless logistics and commerce operations on a national scale.
In conclusion, Kansas City may not always be the first city that comes to mind when people think of real estate investment, but it's a hidden gem that offers substantial opportunities for building a high-yield rental property portfolio. With its affordable housing market, strong rental demand, favorable landlord laws, and diverse neighborhoods, Kansas City provides a fertile ground for real estate investors looking to maximize their returns. So, if you're in search of an investment destination that combines solid rental income potential with long-term growth prospects, consider exploring what Kansas City has to offer—you might just find your next real estate success story in the heartland of America.