Multifamily Development: Pricing, Demand & Design
Multifamily has been a large percentage of construction nationwide this cycle, but WoodWorks senior national director Scott Lockyear (left, with colleague Robbie Kelley at Bisnow’s Austin multifamily event) says that will probably ease soon.
But Austin is like beachfront property; demand will hold strong even if other parts of the country dip. And with that appeal in mind, Austin may still be undersupplied. CWS Capital Partners CIO Mike Engels says Austin created 38,000 jobs in the last 12 months. That means demand for 28,000 housing single- and multifamily units (you multiply job growth by 0.75 to find demand in Austin).
Only 12,000 single-family homes broke ground in the last year, so multifamily developers probably could’ve began roughly 16,000 apartments—but only 10,000 units delivered in the last 12 months. The balance, of course, is that development is delayed; you don’t want to be stuck in a three-year construction cycle when the music stops.
With all the development, construction costs are at an all-time high, and labor is almost fully to blame. Scott says materials pricing has been pretty flat, and may soften some soon.
But labor struggles haven’t eased up. As construction costs rise and financing gets trickier, developers need to make their projects more efficient, DCI Engineers principal Kris Swanson says, and it's driving some projects to use cold form materials. The mid-rise market is hit the hardest; projects from 10 to 15 stories are having major fluctuations in pricing. Kris, who’s working on The Independent, says land prices are also having a major impact on design, pushing developers to use every inch of their sites. His recommendation: Keep your projects structurally simple.
Here’s Kris (far left) with DCI’s Kathryn Bergmann, TX Energy Systems’ HD Perkins and Jesse Lemos, and Clean Scapes’ Jeff Pulley.