Of course, the labor shortage remains a serious problem for the industry. The shortage has driven up pricing and expanded the timeline for development projects. “Skilled labor is also more expensive now. At the end of 2018, construction costs had risen 23.6% since 2004, largely due to higher labor costs,” says Lara. “This is mostly caused by a labor shortage: unemployment is at record lows across the country, so following the supply-and-demand dynamic, skilled labor costs more as wages have skyrocketed.”

To combat these challenges, developers are working closely with contractors during pre-development to identify materials costs and find ways to replace some materials with lower cost options. Finding solutions to labor shortages also requires a close relationship with a contractor. “Developers should ask about the longevity of a contractor's relationships,” says Lara. “Those of us with a long-term network of subcontractors are more likely to be able to ensure that a macro-level skilled labor shortage does not negatively impact the projects we work on.”

Lara says that more developers are also taking on some of the tasks originally allocated to the contractor. “Self-performing work is another way to combat continuous price increases,” he says. “Developers who hire a GC to self-perform much of the construction work will benefit from time savings and reduced costs, since self-performing contractors already know how to do the work and can get it done efficiently.”

Looking ahead, Lara expects prices to continue to rise, especially with the announcement of new tariffs. “That said, increasingly advancing technology has the potential to make construction less costly, and smart general contractors are developing innovative construction methods to help offset rising costs for their clients,” says Lara. “For example, our team at RAAM continues to implement new strategies and technologies to value engineer and budget for multifamily construction projects throughout California.”

Overall, flexibility has become imperative to multifamily developers facing rising cost challenge. “As all involved become savvier about the challenges and solutions to rising costs, the multifamily development sector as a whole grows increasingly nimble in the face of these costs,” says Lara.