Multifamily Developments: Five Ways to Ensure On-Time, On-Budget Completion in a Tight Market
With millennials opting for flexibility and boomers looking to simplify, the demand for luxury multifamily living will continue to hold promise for some time to come. The challenge for owners is to maintain a return on investment as lending tightens and the cost of construction rises.
While owners can shop around for a better rate, tackling construction costs is not as simple. Labor markets are tight, and materials costs are in flux. Construction projects are taking longer and costing more as a result. To get projects to market on time and budget requires creative thinking from the start. Here are five key ways to value engineer design and the construction process to protect both your budget and your schedule.
In urban infills, podium construction has emerged as a popular model for providing high-density living spaces in costly markets. This building type places a four or five-story wood-frame structure over a concrete podium, which could house retail, offices, or even parking. Podium buildings offer flexibility in both siting and design. They also give owners a foothold in high-demand markets without the costs associated with high-rise buildings.
Higher density layouts are also appearing in suburban and near-urban developments to save on costs. Building up rather than out allows for more units on less acreage. It also creates the opportunity to offer more expansive, resort-like outdoor amenities.
No matter the location, efficiency of the layout is key. Ensuring every square foot is functional enables owners to pack more units and more amenities into their developments.
To reduce construction time, contractors are increasingly using prefabricated solutions.
With prefabrication, building elements are built offsite and delivered ready to be installed. Plumbing, ductwork, soffits, and panelized systems are prime areas for prefabrication. This method is a schedule saver in markets where labor is tight. It can also improve productivity, as trades can work on their respective elements in parallel. And because the work is completed in a manufacturing setting, it is less subject to weather delays. In addition, the prefab, just-in-time system saves space on site, which is crucial for urban infills.
Materials selection is also a natural place to cut costs from the budget. Making smarter, cost-effective decisions about the bones of the building will have a much bigger impact on cost savings than swapping out one level of interior finish for another. For example, as the cost of wood has gone up, more contractors are evaluating the costs and benefits of using metal studs.
Time to market is a key factor to success for any commercial development. But in markets where competition is fierce, lengthy construction schedules and delays can quickly erode profitability.
But rather than assume it’s all or nothing in terms of completion, owners may be able to begin seeing profits by taking a phased approach to completion. For example, the contractor may be able to turn units in phases so that rental revenues can begin rolling in before substantial completion.
The best way to cut costs and get to market faster is by folding the contractor into the development team. Doing so can allow for value engineering to occur from the start, as contractors can bring valuable insights related to layout, materials, and process to the table. In that respect, owners can take a fully informed approach to marrying their vision and their goals to a realistic budget and schedule.
In addition, it’s critical for owners to work with contractors who understand what they are up against. It’s not just about proforma goals. It’s about helping owners look good for their stakeholders—be it their investors, lenders, and even potential tenants—to promote their continued success into the future.
Want to learn how you can ensure success on your next multifamily project? Contact Chris Knueven at 513.774.8400.