This was a great article in the Colorado RE Journal written by 2 officers at JLL Multifamily Capital Markets about the struggles of apartment developers. Builders’ biggest challenge is the soaring cost of labor and the authors point out this problem is not getting any better. Why? Just in Denver County there are $5.5 billion in new projects beginning this year from 2 big projects at DIA, CDOT’s expansion of I-70, and the $937 million that Denver voters approved last fall. Plus, there are tens of thousands of homes to be rebuilt in Houston, Florida, and CA from hurricanes and fires.
Next, according to Moody’s lumber prices have increased nearly 25% in the last year and some of this increase is due to the tariffs on Canadian lumber. Plus, steel costs are up 7% in the last year.
They said a “silver lining” with the construction delays facing builders is that it may take new apartments 3 years to be built instead of 2 years which will keep the vacancy rate from rising too fast. According to Apartment Insights there are 25k new market-rate apartments being built, but it will probably take 3 years for all of these units to be delivered.
Finally, they ended with this, “But it’s easy to see Denver a few years from now in a situation where NOT ENOUGH apartments are being built.” WOW!