2016 Multifamily Is Shaping Up – Q&A with Tocci Building Companies’ Bud LaRosa
- Mar 01, 2016
Apart from a few possible clouds in the distance, the multifamily market prospects for 2016 are already shaping up in an optimistic direction, and developers are looking forward to another bright year. MHN spoke with Bud LaRosa, Chief Business Performance Officer with Massachusetts-based Tocci Building Companies, a leading construction and project management company specializing in Integrated Project Delivery and Virtual Design and Construction.
With over 90 years of building experience, Tocci holds a recent portfolio covering many niches, including residential, commercial, healthcare, hospitality, retail, and senior living, operating mainly in Massachusetts and the New Jersey area.
As Chief Business Performance Officer, Bud LaRosa oversees the implementation and execution of all performance metrics and strategic initiatives. He is also responsible for financial reporting and risk management.
MHN: From a developer’s point of view, what is your multifamily outlook for 2016?
LaRosa: The multifamily market will continue to lead construction growth, especially as the 20-34 age demographic (the typical renter) is growing. Many regions throughout the United States are experiencing significant growth due to low vacancy rates, particularly in cities where preference for urban living is adding to demand, and the subsequent growth in overall rents.
Multifamily project kick-offs were unprecedented in 2015, and there is a high likelihood that this trend will continue throughout 2016. We can expect growth to remain at 17-20 percent, as rental demand is consistently rising and does not appear to be slowing.
MHN: Is there anything particular happening with the condo market in the Northeast or does it go hand in hand with national multifamily trends?
LaRosa: Condominium development has not been as significant in the Northeast, but activity has been ramping up over the last two years. If you were to ask any buyer, they would insist that developers build more condos and do so very quickly. There is a lack of available housing for purchase, and demographics indicate that this trend is not about to change in the near future.
MHN: What are your thoughts on specialty sectors, such as student or senior housing?
LaRosa: Both student and senior housing construction activity is on the rise. Of an estimated 75 million baby boomers, 60 percent are over the age 65, showing the evident need for additional senior housing. The same goes for student housing–Millennials are now the largest demographic and as our population continues to grow, the number of young adults attending college is increasing.
Higher education institutions in most metro areas are lacking residential space and are therefore actively engaging contractors to build residence halls so more students can attend their school. Notably, schools are spending more and more on residence hall amenities to attract and retain top-notch students. In addition, private developers are also building a significant amount of student housing adjacent to colleges and universities. In 2015, student living project starts reached $6.9 billion, up from pre-recession levels of $5.8 billion. Tocci is projecting residence facilities to grow at nearly a 7 percent rate in 2016.
MHN: Does modular building have a chance of cutting deeper into the multifamily market share? Why?
LaRosa: Modular construction is a real viable option for multifamily projects–especially in urban landscapes with minimal laydown area. There are many benefits to modular construction, with one clearly being that the majority of construction is completed off-site. Other benefits include the ability to construct in a controlled environment, such as a warehouse, where weather will not delay the schedule.
Also, the controlled environment ensures construction of a more consistent quality. Tocci recently completed a modular multifamily project in Cambridge, where all 76 units were outfitted with wiring and HVAC systems prior to delivery and installation. Through the utilization of modular construction methods, it took just five days to complete the project from the day of the first unit’s delivery. This allows for far less disruption to surrounding neighborhoods and roadways, as the project’s duration and space requirements are significantly reduced.
MHN: What about modular building in the hospitality sector?
Modular construction methods have been utilized and very effectively in numerous sectors including multifamily, healthcare, retail, and office construction. Given the proven track record in these and other sectors, this type of building has been slowly gaining traction in the hospitality market, but is still in the early stages of implementation. It is too early to tell how common (or not) modular will be in the hospitality sector. What we do know is that the hospitality industry experienced intense growth throughout 2015, with an increase of nearly 21,000 units over 2014 for extended-stay rooms. Additionally, hotel occupancy rates have been skyrocketing, reaching over 65 percent.
MHN: Anything special to look out for in the Boston area? Are there any surprise submarkets that we should keep a closer eye on?
LaRosa: So far, there has not been much traction in micro-unit construction, but this could change with development occurring near start-ups and incubators. Employees at these locations want to be within walking/biking distance of their homes and/or public transportation. For example, there is currently a high demand for housing in the Alewife area of Cambridge, MA, due to its easy access by bike or public transit to Kendall Square where many of them work in the quickly-growing life sciences sector.
MHN: As far as multifamily goes, can you tell us a little about Tocci’s plans for the next couple of years?
LaRosa: Tocci Building Companies opened 90 years ago as a single-family construction company, and has since evolved and expanded to work on more complex projects in several key market sectors including multifamily, office, hospitality, healthcare, commercial warehouses, education facilities, and retail developments. Changes we’ve recently seen in multifamily construction include higher end amenities. We are seeing a trend toward the installation of such amenities within units, as well as in shared spaces including rooftop balconies and decks, gyms, and shared event space.
Mirroring construction industry trends, Tocci has seen recent growth in the number of multi-unit projects it is undertaking, and anticipates that this demand will continue throughout the foreseeable future.
Images courtesy of Tocci Building Companies