Nexgen Building Products Insights

How Multifamily Developers Are Adapting to Disruption

Written by Scott Lidberg | Jul 19, 2023 1:00:00 PM

 

These are complex times for multifamily developers. Between supply chain turmoil, labor shortages, rising costs, and shifting demand, the old blueprint for success no longer applies. But through resourcefulness and resilience, leading developers are charting a path forward.

Recent insights shared at the NMHC Apartment Strategies Conference and reported on by Multifamily Dive reveal the creative solutions developers are embracing to drive their pipelines despite economic headwinds. By pivoting their focus, leveraging partnerships, tracking market indicators, maximizing efficiencies, and embracing innovation, leading firms are charting a path forward. Read on to learn the approaches developers are taking to adapt and thrive in today’s fluid marketplace.

 

Key Takeaway

Partnerships with local entities allow access to vital resources for affordable housing projects.

Tracking market shifts, maximizing current assets, and standardizing design controls costs.

New materials like MgO board improve speed, quality, sustainability, and address labor shortages.

Adaptability and innovation empower developers to maintain pipelines despite headwinds.

 
 

 

Read on to learn the approaches developers are taking to adapt and thrive in today’s fluid marketplace.

Reevaluating Project Types 

With delays and constraints hitting many planned market-rate projects, developers are reassessing their mix. Some firms like Jair Lynch Real Estate Partners have invested heavily in shifting toward attainable and affordable housing projects, sinking over $1.6 billion into acquisitions to expand this portfolio.

The company’s recent partnership with Arlington County to preserve The Barcroft, a 1,300-unit affordable property, exemplifies this pivot. By collaborating with local agencies, they aim to ensure critical affordable housing remains available to residents relying on it, despite changing market forces.

Other developers are refocusing efforts on workforce housing projects in growing secondary and tertiary markets. These areas often offer advantages like lower land costs, faster permitting, and favorable fee structures. Building in these communities aligns with demand from essential workers seeking housing near major employment hubs.

Forming Local Partnerships

Partnerships with municipalities, agencies, and community groups can unlock resources vital for acquiring land and securing financing on new developments. Tapping into funds, grants, and subsidies available at the local level can determine whether affordable and mixed-use projects are financially viable. 

Developers pursuing these projects are prioritizing outreach early when exploring potential sites. For instance, Jair Lynch joined forces with both Arlington County and the Amazon Housing Equity Fund to access $310 million in low-interest financing for The Barcroft acquisition.

Collaborative efforts like these get everyone invested in creating projects that meet community needs. Developers benefit from local leaders’ experience navigating zoning approvals, permitting, resident concerns, and more. With stakeholders working together, affordable and mixed-income projects have the best chance of becoming a win-win reality.

Monitoring Industry Indicators

While the shifting economic climate poses hurdles, it also offers some silver linings that developers are keeping a close eye on. As rising interest rates cool demand for single-family homes, for example, a tapering of starts in that sector is projected. In turn, subcontractors and skilled crews are expected to gradually shift back to multifamily projects.

This easing of extreme labor constraints, combined with a reduction in permitting backlogs, can improve developers’ bargaining power on construction costs over the next 6 to 12 months. Savvy developers are tracking these indicators closely to inform budgeting and identify the best time to move new projects forward.

Maximizing Existing Assets

Within their existing portfolio, developers are finding efficiencies to optimize performance. Strategies include assessing properties for repositioning potential and implementing value-add renovations tailored to each market’s needs.

Developers are also capitalizing on their scale and pipeline density by standardizing design processes and materials across projects. Bulk purchasing allows them to secure discounts on everything from lumber and appliances to flooring and fixtures. Strong relationships with subcontractors, forged through years of collaboration, help ensure adequate crews are available at competitive pricing.

Even small and mid-sized firms can boost buying power by pooling resources. Teaming up gives them collective leverage to negotiate better deals and incentivize partners to prioritize their projects.

Rethinking Design Strategies

Value engineering has long been part of the multifamily development process. But as construction costs escalate, developers must take a creative approach to provide essential housing while controlling budgets. 

The most effective strategies start early in the design phase. This prevents excessive cuts to finishes and features after plans are complete, which could negatively impact rental appeal.

Optimizing floor plans for efficiency allows developers to reduce costs per square foot without shrinking apartments. Strategies include right-sizing rooms based on usage, minimizing hallways and entryways, and creating repetitive layouts that streamline framing. Using standardized design elements and fixtures facilitates bulk orders while giving each property consistent character.

Embracing Innovation

As the construction landscape evolves, builders are embracing the use of high-productivity materials and processes in lieu of traditional ones. One such example is the rising use of MgO board as an underlayment replacement for Gypcrete in multi-family projects. This material offers the advantage of not requiring specialized trades or significant setup time. Additionally, off-site building processes such as MgO-based Structural Insulated Panels (SIPs) are gaining traction due to their efficient installation process, which takes a fraction of the time compared to on-site building techniques. Notably, the use of SIPs requires less skilled labor, providing a practical solution to the current labor shortage in the construction industry. These innovative adaptations are ushering in a new era of construction efficiency and effectiveness.

Though the multifamily development arena is undeniably challenging today, the current climate also presents opportunities for smart, nimble firms to gain market share. By learning from industry peers and proactively adapting to the times, developers can overcome obstacles and continue providing the modern housing communities want and need.

The Future Is Now

Construction innovation waits for no one – the future is already taking shape. As an industry leader, NEXGEN invites developers to explore how our MAXTERRA MgO panels can empower them to build faster, safer, and more affordably. Revolutionize the way you build, and get a free sample kit today to see the benefits of MgO for yourself.