Construction costs for multifamily housing rise by half

Multifamily developers are still facing delayed shipments of construction material and rising project costs due to inflation and interest rates.

Construction costs are up about 50% for most development projects, said Matthew Jacocks, principal for Lee & Associates South Florida, who specializes in multifamily development.

“Every month we’re having to readjust our numbers based upon the rising construction cost,” he said. “There are two factors that are really happening right now, the rising construction costs and the rising interest rates, which affect the overall construction of projects.”

Developers are getting squeezed, Mr. Jacocks added, “especially if they’re having to build with the price of concrete or having to build on smaller-sized parcels without having to build on podium parking, which is very expensive. Even rent increases are not going to justify some of these developments being built right now. So, you’re going see less inventory coming on the market because of these factors, which is going to exacerbate the housing situation.”

Construction costs should level out in 2023 and the cost of commodities will also go down, he predicted. “Interest rates will eventually even out, and they’ll get inflation under control.”

In Miami-Dade County, land is very expensive and scarce along with naturally restricted boundaries, said Louis Archambault, partner for Saul Ewing Arnstein & Lehr.

“Most of the larger tracts that would otherwise have been available if you go back a few decades are all developed at this point, so that scarcity of land increases the value of any potentially developable land,” he said. “The other factor is just the increases of hard materials. It’s not just the increase of the cost due to less supply, but the ability for transportation and logistics to get those transported from the areas where they’re located.”

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