Construction Costs & Smaller Markets
Ryan Carver, Multifamily expert, shares his input on construction cost smaller markets across the United States:
Land costs, supply chain issues, and higher insurance rates are major challenges for construction firms at the moment. To combat this issue, construction companies choose to control what they can with a greater focus on managing subs, controlling costs, and project timelines. These days, money is expensive, and as always, “time is money” too. The costs of deals have easily tripled in recent years; builders’ risk and liability have increased, interest rates have risen, and materials have become more expensive, making project timeline management even more important.
Construction firms continue to streamline their processes where possible. Additionally, teams have started having more frequent meetings to raise accountability and create clear timelines for each stage of the project to ensure that all parties involved are aware of the timeline throughout. This reduces downtime and allows more timely adjustments along the way. By focusing on managing project timelines, construction companies can save money and offset the impact of supply chain issues. Additionally, it’s important for design teams, their construction counterparts, and contractors to remain flexible, even after coming out of the ground.
Smaller markets are often overlooked by potential tenants who are looking to relocate or change their lifestyle. However, they can be great places to explore for well-being and the cost of living. Secondary and tertiary markets, such as Greensboro, Winston-Salem, Columbia, and Spartanburg, may cost less than larger markets and offer access to more desirable locations. All these factors make smaller markets an attractive option for those looking for a quality of life that may be hard to attain in larger cities.
After the pandemic, the real estate market shifted under everyone’s feet. The changing landscape has pushed developers to react, which includes navigating changing markets and exploring smaller market viability. In response to this, developers are now listening to customer demand. However, they often struggle to make deals work in these areas due to increased costs on the front end and rent caps on the back end. Rents in smaller markets haven’t increased as much as they have in Charlotte over the last several years, making the additional challenges and costs in these smaller markets harder to overcome. In many cases, it’s harder to get these deals to pencil because there is a lot of CYA regarding debt and equity, but when projects are completed successfully in these areas, they often have a unique offering within the marketplace.
Realizing the importance of project oversight, reducing the project schedule, focusing spending, and pursuing new markets can be beneficial to the success of up-and-coming projects. The pros and cons of a smaller market can affect your real estate and development decisions, and with the right knowledge, it is possible to meet the demands of the market or even create new demand. It’s no secret that the world of development and the cost of construction are changing and evolving, and keeping up with trends can be tricky. Share your experiences while navigating the everyday scene with others. What challenges have you faced? What are your goals? What advice would you give someone just starting out to help them succeed? By joining the conversation, you can make a difference and inform others.
About Ryan Carver: Ryan Carver is a licensed architect with more than 25 years of experience in the industry. He has expertise in the realm of multifamily and consulting in private development among many other business endeavors.
For further inquiries or to learn more about SGA|NW, a GF design company’s multifamily design services, please contact Ryan Carver, managing director of multifamily at SGA|NW, a GF design company, at [email protected] or Danielle Barr, senior marketing manager at GF, at [email protected].