In the past year, costs have continued to quickly rise in all areas of our economy – construction materials, home prices, typical commodities, you name it! In this month’s blog, we’re focusing on the impact that these rising construction costs and home prices have had on the multifamily industry and how we, as interior designers, can help.
STATE OF THE MULTIFAMILY MARKET
According to a recent Washington Post article, a whopping 214,000 housing units were completed in buildings of 50 units or more in 2021 (the highest number than any year on record!). What makes this number especially impressive is that this growth occurred despite a hellacious year for builders that consisted of a combination of factors – rapidly rising material costs, labor shortages, and, of course, inflation.
Despite these added challenges, the multifamily building sector is still thriving and showing no signs of stopping. In fact, multifamily rental demands may climb even higher due to the raised mortgage-interest rates that are dampening the consumer appetite for single-family homes.
So far, our multifamily clients have compensated for rising construction and labor costs by increasing rents, but we’re reaching a point where many markets in the Southeast are hitting a ceiling. Developers and owners are increasing rents to cover the costs but how much higher can they really go?
HOW TO DESIGN TO BEAT THE COMPETITION
So, the BIG question is how do we design a product that beats the property next door that was completed two years ago? We are creative and design outside the box to create a space on a budget that still feels and looks amazing! Creating efficient floor plans and programs along with amenities that speak to quality over quantity. We design innovative and flexible spaces that will stay competitive for years to come! Get the biggest bang for your buck by how we dress the spaces up. How do we afford the same tile as last year? We bundle specs, buy in quantity, and negotiate the best pricing through our in-house agency, Red Pen Procurement. Through Red Pen, we can leverage our partnerships with our trusted vendors that we have built strong relationships with to get the best pricing.
We must ban together now more than ever! It’s time to get creative, and no one does it better than Banko Design and Red Pen Procurement. Banko and Red Pen take ownership of the entire process. We save owners money and time by doing it with less hands and in less time. Between the two of us, we do – branding, interior design, FF&E specifications, FF&E and materials procurement, we OWN our warehouses, we inventory manage, we own and manage trucks, AND we install. It’s a one-stop shop! Who else can do all of that in one company structure?
WE CAN SAVE YOUR PRO FORMA!
Our clients are always looking for ways to deliver the best product at the best cost but even more so in the past couple of years. As we mentioned, raising rents is one solution, but another common option is value engineering. Unfortunately, value engineering a project has become the new normal as pro formas increasingly get thrown off by continued construction cost creep. Our clients are constantly telling us, “We’re getting hit with costs from all sides!” And we get it, but we’ll let you in on a little secret- you’re not going to regain a $3MM deal by eliminating the amenity carpet!
Candidly, as designers we get a little sensitive when this topic is broached not because we don’t want to help our clients navigate this process but because the value engineering conversation largely happens without an interior designer in the room. Unsurprisingly, the interiors and FF&E package are often the first big ticket items to get pulled apart, which is a shame because the interior aesthetics of an apartment building can be a HUGE differentiator and may be the key decision-making factor for a potential resident. We want to do right by our clients and that’s why we’re advocating for letting interiors to be part of this conversation. We’ve been able to save the day (and the pro forma!) while designing smart, sexy interiors on a budget!
We recognize that rising construction costs have led to multifamily rent increases that many would argue have been pushed to their max. So how can we, as designers and architects, help you in a market with rising construction costs? Spec smart, leverage partnerships, and be the PROJECT’s biggest advocate!
Let us help you ensure your new development stays competitive to the market for years to come! Reach out to us by emailing firstname.lastname@example.org.