How to Reduce the Cost of Development
At NMHC's 2019 Apartment Strategies Outlook Conference in San Diego, a group of panelists shared ideas on how to lower development costs through innovation and simplified amenities.
From left to right: Jeff Adler, Cliff Nash, Bob Flannery, Leonard Wood Jr., Kim Bucklew.
Development experts gathered during the National Multifamily Housing Council’s (NMHC) annual Apartment Strategies Outlook Conference in San Diego to discuss their development strategies for 2019.
The discussion led by Yardi Matrix Vice President Jeff Adler opened with a national picture of multifamily supply. “Demand is not a problem, so attention turns to supply,” said Adler. Multifamily supply has leveled out nationally due to construction delays and financing.
Secondary tech cities have the most active supply pipelines, with North Dallas, Seattle, Denver and Austin topping the list with the most units under construction. Secondary tech cities also have the highest risk of oversupply over the next two years, Adler warned, and some markets to watch are Denver, Seattle, Charlotte and Dallas. Although some markets may be at risk of oversupply in the short-term, Adler noted that opportunities still exist outside of the urban core, specifically in intellectual capital nodes.
Consumer-Centric Approach
The conversation was opened up to experts in the field, including Kim Bucklew of Alliance Residential Co., Bob Flannery of CA Residential, Cliff Nash of Greystar, and Leonard Wood Jr. of Trammell Crow Residential. The common theme among the panelists was simplification and stripping down the cost of complexity in their products.
In response to Adler asking how the panelists keep their costs low, Flannery said that how the consumer is perceived—in addition to the investment itself—is exceedingly important in this stage of the cycle. “Consumers are very cost-conscious, so we’re focusing more on amenities that lower their cost, such as a gym,” he said. CA Residential looks for something that’s both efficient repeatable, while also thinking about innovation, Flannery added.
Bucklew agreed, stating that Alliance is focusing more on the product itself and the finishes, for example—instead of all of the extra add-ons—to help keep costs down. “Amenities are amazing, but rarely get used by residents, so we’re thinking more about what the consumer really wants. The key to 2019 will be creativity,” she said.
“We’re listening to our operators who can give us valuable advice from the ground,” said Nash. In addition to that, dissecting the hard costs to figure out what can and what cannot be controlled is also useful, in Wood’s opinion.
The sentiment among panelists was that as development costs are increasing, finding ways to do things faster and cheaper will be the key to success in 2019. While innovation is still important for residents, technology will increasingly be looked at with the angle of keeping development costs as low as possible.
