Something happened in Kansas City in 2012, and it marked a turning point. That year, Google Fiber Internet launched in the midwestern city that straddles the states of Missouri and Kansas, making it the first market to offer the tech giant’s then-new high-speed broadband service. Google Fiber became a springboard for Kansas City to gain a foothold in the tech industry, and the city has been transforming itself into what is now one of the nation’s emerging tech hubs.
Google Fiber served as an inherent tech magnet, immediately attracting small companies to Kansas City. Local officials and economic development entities capitalized on being a Google first by initiating a number of programs. In 2014, the Downtown Council and the Economic Development Corp. kicked off LaunchKC, which sponsors a grants competition that awards $50,000 to tech startups to set up shop in the city’s downtown area.
Between 2015 and 2019, Kansas City increased its share of the tech sector’s total nationwide employment at a compound annual growth rate of 3 percent, accounting for 40,000 new tech jobs, according to Brooking’s study. By the close of 2022, net tech employment in Kansas City exceeded more than 74,000, placing the town at 25 on the list of the nation’s leading tech markets, essentially tying Raleigh, N.C., coming in not too far behind San Diego, which ranked 19 on the list, as per statistics from CompTIA, the Computing Technology Industry Association.
While the tech industry can’t take full responsibility for the influx of jobs to the Kansas City Market, where the healthcare sector reigns supreme, it has added to the rental-housing-seeking population. As the tech industry has grown in Kansas City, so has the multifamily market. At the close of 2009, plagued by the consequences of a lackluster economy and substantial development of new multifamily properties, the apartment vacancy rate reached 9 percent, marking a notable increase from the 7.5 percent vacancy rate in 2008. But becoming the first metro with Google Fiber a few years later changed the multifamily market, which has consistently recorded a vacancy rate of 5.5 percent or less for the last decade, as per research by Northmarq, has seen the delivery of new apartment units go from just 1,500 in 2014 to no less than double that amount annually to date.
A total of approximately 1,700 new apartment units hit the market in the first half of 2023 alone. Builders have been giving the high-end segment of the multifamily market a great deal of attention. Luxury apartment developer LuxLiving is in the midst of or planning five new upscale, skyline-altering apartment projects totaling approximately 1,200 residential units across metropolitan Kansas City. The company’s plan to infuse the city with such a substantial number of upscale residences may seem excessive at first glance for Kansas City, which doesn’t have the glamour of leading midwestern metropolis Chicago, but the demand exists. There’s a growing percentage of high-wage workers in Kansas City, many of whom are in the tech industry. According to research from CompTIA, the estimated median wage of tech workers in Kansas City is 92 percent higher than the overall median wage in the area. The expanding number of well-paid tech workers will likely be enough to maintain positive absorption as new projects come online. But tech’s fingerprints aren’t just on the multifamily sector.
The burgeoning tech industry in Kansas City has also played a role in the office sector. Tech companies, large and small, have been active in establishing a footprint in the city over the last 10 years, helping to whittle down the overall average office vacancy rate from roughly 21 percent in 2012 to a pre-Covid 19 low of just 13.7 percent in the fourth quarter of 2019, according to numbers from Cushman & Wakefield. However, Kansas City’s tech boom hasn’t proved vital enough to stabilize the office sector, which now has an overall vacancy rate of 21.8 percent. The numbers are grim, but looking ahead, tech industry tenants may be able to help fill up some of the vacant square footage, which is most prevalent among the non-prime Class A and Class B properties. As noted in a third-quarter 2023 report by CBRE, the tech industry will continue to drive job growth in Kansas City with a projected average annual growth of 2.2 percent from 2024 to 2027.
Projected tech job growth in Kansas City is solid, but it may very well go on a major upswing soon, which could translate into a boost for the office and multifamily sectors. On October 23, 2023, the White House announced that Kansas City had been chosen as one of 31 U.S. communities that will be designated as Regional Innovation and Technology Hubs through the Department of Commerce Economic Development Administration. These Tech Hubs will have access to grants of as much as $75 million to support the development and growth of innovative industries within the technology sector.
Google could enhance Kansas City’s stature on the national tech map once again. Having filed planning applications with the city several weeks ago in September, Google appears to be moving forward with a long-held vision for the development of a $600 million data center at the Hunt Midwest Business Center, where the search engine leader has gobbled up the majority of the acreage. While specifics of the project have yet to be released, the new development will certainly bring more tech jobs, which means more demand in the residential market and, should the project serve as an attractant for more businesses, perhaps even a little increase in the office sector.
Kansas City is not precisely poised to break into the top 10 U.S. tech hub club, but the city is moving up the list, and with that movement will come everything from more tech startups to larger tech firms. In this climate of hybrid work, these businesses will require office space, and their workers will need housing. There’s a big spotlight on Kansas City’s tech industry right now, and the area’s real estate industry is likely to reap some of the benefits, like an even tighter apartment market and a likely bump in office occupancies. The addition of Google’s high-speed broadband and the city’s efforts to court the tech industry could be a playbook that other cities could use to bring in employers and invigorate their downtowns.
