When Will Building New Units Make Sense Again? Apartment Developers Remain Uncertain

Developers will likely delay starting new apartment projects until they see strong employment growth.

Some lucky multifamily developers will start work on new apartment projects at the perfect time, as the U.S. begins to recover from the economic crisis caused by the COVID pandemic.

They will likely pay far below last year’s prices for development sites. They should have an easy time negotiating with construction contractors. Their apartment units will open just as rents begin to rise again. That time—the right time to start new multifamily projects—is still months or even years in the future, according to many developers and economists.

“If I’m a developer, I am probably waiting untill the first part of next year to make a commitment,” says John Sebree, senior vice president and national director of the multi housing division with brokerage firm Marcus & Millichap. “Multifamily will come out of this in much better shape than the rest of the economy… But we’re going to be going through this for a while.”

The number of new apartments that developers will begin to build over the next few years might be less than half that of the years immediately prior to the pandemic, according Greg Willett, chief economist for RealPage Inc. a provider of property management software and services. “There’s certainly an interruption in development right in front of us,” he says.

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