Multifamily Developer: ‘There Will Be More Positive Conversations Towards the End of the Year’

Developers continue to be one of the most transformative areas of the multifamily landscape. From opportunities in redevelopment, mixed-use properties gaining traction, and the ever-popular BTR sector charging full steam ahead, the biggest challenge for developers is deciding just where to begin. 

But what are the emerging trends that are driving — or stalling — development activity, what are the continued hurdles developers are facing, and how are they responding to economic turmoil?

These questions will be addressed in a panel session taking place October 17 as part of the GlobeSt. Multifamily Fall 2023 conference in Los Angeles. 

Jimmy Holloway, chief investment officer and principal at Home Communities Company, will be among the speakers in the session titled ‘Lessons From the Trenches: The Full Scope of Multifamily Development’, and expects concerns over insurance, taxes and construction costs to come up as well as the “double negative” of cap rates and interest rates rises. 

Home Communities is a development and investment management company in Birmingham, AL, specializing in senior living, active adult, multifamily and mixed use developments across the Southeast. 

Insurance is not just an issue in Florida or around the Southeast, but elsewhere in places like the Northeast, which is experiencing a raft of fires, California. “There’s a lot of concern about the insurance cost and questioning whether these rates are sustainable. The answer when most people look at it is no because when you start looking at all these things collectively much less separately, we have not had and will not have rent increases to offset that from a return standpoint,” he says. “And that’s a big reason why on the development front you’re just not seeing deal flow. It’s really,really slowed down.”

The collapse of regional banks earlier in the year — who were the major lenders for multifamily — has also impacted dealflow.

Among developers, Holloway says, it is a case of slowdown and pause. “New deals, even though they might continue to go through with consultants, they are not working out right now because of financing. There are groups that are more economically able than others to continue to push through and then there’s a lot of groups that don’t have the deep pockets and they’re pulling back,” he says. “You already start to see a lot of property or parcels come back onto the market where deals are not getting done.”

Holloway expects things to remain slow for the next few months at least, but meanwhile his group has been focusing on infrastructure improvements. 

“We’ve continued on with the land in order to be in a position to be able to execute when vertical financing and pricing comes back around which we think will start to happen later this year,” he says. 

“My feeling is we will get into more positive conversations as we get toward the end of the year. Everybody can’t sit around and not do business forever because their business lines go out. Financing groups need to lend money and equity groups need to put their money to work.”

GlobeSt.com is holding its multifamily fall conference on October 16-17 in Los Angeles. For more information visit here.