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Despite economic headwinds, Southern Land Co. has continued to build.
The Nashville, Tenn.-based full-service developer has started projects in its established markets, including apartments las vegas i White plainsNew York, Matt Ritsko, president of construction for Southern Land Co., told Multifamily Dive.
But it hasn’t been easy. Fluctuating project timelines, demand and prices for labor and key materials such as rebar and drywall have caused confusion in the real estate construction industry, Ritsko said.
In this “constantly changing environment,” contractors have been reluctant to take risks in setting labor rates, providing efficiencies, cutting margins or pricing materials, Ritsko said. Rather, contractors “are building more contingency into their pricing to account for it.”
As Ritsko’s story shows, multifamily is still in the nascent stages of its construction recovery nearly half a decade after construction began to slow.
Production of multi-family and single-family housing has declined since 2022, when interest rates rose, raising the cost of capital and limiting investor demand, said Jay Hiemenz, president and CEO of Alliance Residential Co.
With the slowdown, contractors are competing for a limited number of apartment projects and material prices have moderated. But these trends have not necessarily translated into significantly lower construction costs and more opportunities to build.
Economic challenges persist
While increased contractor competition is encouraging, labor costs haven’t dropped enough to make development expand to more metro areas, said Patrick Kassin, senior vice president and regional development partner at Woodfield Development.
“We haven’t seen costs come down enough to suddenly make a lot of markets work that weren’t working six or 12 months ago,” Kassin said.
Tommy Gallagher, head of construction for Middleburg Communities, has seen construction costs remain relatively flat this year, with modest declines in specific markets. However, more competitive prices due to higher bid participation are being offset by some higher costs of materials and raw materials.
The price of materials has become more predictable than a few years ago, but many of those costs stabilized at a much higher level after the cost spikes in the early 2020s, according to Kassin.
“We’re hopeful that we’ll continue to see material costs normalize,” Kassin said. “The stabilization is good, but we really need costs to continue to come down.”
However, tariffs and uncertainty over the Trump administration’s trade policies have added to Woodfield’s concerns about prices, Kassin said. This is especially true when the company is trying to underwrite a development project that may not start for 12 to 18 months.
Beyond labor and material costs, permitting timelines and coordinating utilities have also slowed projects in some jurisdictions, Gallagher said. These delays have affected project schedules and profitability.
But these are not the most important inputs when determining the feasibility of building a new apartment community. “Interest rates, capital markets, the land base and achievable rents still determine whether most projects move forward,” Gallagher said.
Similar volume to 2025
While subscription remains a moving target, experienced and well-capitalized developers continue to move projects forward. as they see an opportunity to be first in the market.
With costs stable or declining in some areas and increased competition from contractors, Gallagher said he believes the current construction market presents an opportunity. Middleburg expects to start more projects in 2026 than in 2025, he said.
“Development cycles are long and waiting for every variable to line up can mean missing the window when construction pricing is most favorable,” Gallagher said. “For projects with strong fundamentals, we see real value in moving now, ahead of a supply pipeline that is expected to remain constrained.”
Alliance has seen costs come down enough to make development worthwhile in a few additional metros, where demand and market absorption are also right, Hiemenz said. The developer expects about the same number of multifamily projects to break ground by the end of 2026 as in 2025, he said.
Meanwhile, Woodfield is working to start several potential projects this year, but is being disciplined about which ones are moving forward, Kassin said.
“We’re not going to start a project just to maintain a certain level of volume,” Kassin said. “If we continue to see improvements in both capital markets and construction prices, I think you’ll see more projects moving forward.”
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