Apartment Developers Hit the Pause Button


Developers collectively stopped for a moment of deep breathing when Covid-19 hit the US.  In the past few years, Dallas had led the nation on both permits and new construction.  First-quarter reports show apartment developers have now hit the pause button on many projects.

And Dallas is not alone. Nationwide, apartment builders have placed projects on hold. This resulted in a 40% drop in construction starts when compared to April of 2019.  But Dallas saw an 8.6% decrease in permitted units in the first quarter of 2020.  The Dallas area dropped to number four nationwide in new apartment construction. 

A look into the reasons

According to the Multi-Housing News, more than 53% of multifamily developers are still reporting delays.  These findings were a result of a recent survey conducted by the MHN by interviewing leading multifamily construction firms.  

The pause in apartment construction is not solely based on developers’ caution.  There are other factors involved in the slow-down.  One factor to consider is state-mandated construction restrictions.  

The website Engineering News Record has a great interactive map on its website showing state by state the status of both state-mandated construction restrictions and stay-at-home orders.

Source: Engineering News-Record

According to Multi-Housing News, another reason for a pause in construction is caused by waiting on permits.  Their survey showed 85% of the companies surveyed reporting waiting on permits.  

And a third reason could be a delay in receiving construction materials.  However, the number of those reporting waiting on materials was only 29%.  So, this is definitely not one of the top reasons why construction has been delayed.

And the good news

Some good news – the availability of the labor force remains strong.  Of the developers surveyed, 70 percent stated they had no problems securing the labor needed for current projects.  

Another bright spot is student-housing.  According to an article by National Real-Estate Investor, students are still opting to live on-campus even when universities are choosing online classes.  They want to experience the full college experience and that means living there.  

So, while apartment developers have hit the pause button, there is hope. As states begin their re-opening phases things developers will look at resuming their projects.  But, things will be different.  Construction workers and developers will need to consider how to provide safe working conditions while the virus is still an active part of our lives.  

Kurz Group, Inc. is a Dallas-based property tax consulting firm. Find out more information here.

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