With soaring construction costs and tightening margins, traditional multifamily development is becoming increasingly difficult to justify even under the best of circumstances. In fact, some industry insiders suggest in today’s market that even if the land were free, developing new apartment projects still wouldn’t pencil out. This article offers insights into one innovative approach that may be changing the game: modular housing.
Why Traditional Apartment Development No Longer Adds Up
Construction costs have surged, driven by labor shortages, supply chain issues, and inflation. Developers are finding that the numbers simply don’t work for new multifamily projects. Even major players in the space are acknowledging that the return on investment is no longer viable. As a result, many are pausing new projects or seeking alternatives to traditional development methods.
Modular Housing as an Emerging Solution
Several premier apartment developers, long known for their presence in Class A multifamily housing, are beginning to experiment with modular construction. Rather than building every component on-site, modular housing involves constructing units in a factory and then transporting and assembling them at the development site. This approach drastically reduces costs associated with labor, materials, and on-site logistics.
The modular model can make new development feasible even in challenging markets. By controlling costs and increasing efficiency, developers can bring new housing to market at a lower price point while still achieving profitability.
Opportunity for Smaller Developers
This shift toward modular construction isn’t limited to large institutional players. Smaller and mid-sized developers are also beginning to explore this model as a way to stay competitive and deliver attainable housing. With the right planning, modular housing can provide a realistic path forward for those struggling to make traditional development work.
As this trend continues, modular housing could become a critical component in solving housing shortages and keeping real estate development moving forward in an otherwise constrained market.