Multifamily developers are adjusting their strategies as a surge of new apartments enters the market, leading to stricter financial assessments, slower growth, and more precise operations.
At an industry summit in Tampa, executives outlined a sector undergoing significant change. Raised deliveries, tighter funding, and increasing operational expenses are driving a widespread shift. Some companies are reducing their projects, while others with strong financial backing are moving forward, viewing the downturn as an opportunity.
Supply surge reshapes the map
The influx of new units, particularly in the Sun Belt, is the primary factor behind these changes, panelists explained. Alan McMahon, vice president and development director at The Beach Company, described the situation as an uncertain phase that will require years to balance.
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Micah Conn, senior vice president at AvalonBay Communities, stated that the current imbalance was anticipated. “This moment is a necessary adjustment,” he said. While demand remains steady, the short-term impact of new completions is affecting performance. Another 12 to 18 months of deliveries are expected in some markets before conditions begin to normalize. In certain areas, absorption may take even longer.
The Sun Belt has seen the most activity, though outcomes differ based on property quality and location. High-end urban developments with premium amenities have performed better, even in markets facing heavy new construction. Austin serves as an example—top-tier properties are thriving despite broader softness.
Developers adapt, not retreat
Those still building are re-evaluating their approach, from site selection to construction techniques. Rob Paulsen, director at JPI, said the firm remains active but is pursuing new methods to enhance project efficiency.
“We’re looking to push innovation and bring innovation into the construction world as well to see if we can build better and faster and cheaper,” he said. JPI is also expanding selectively into new markets, including parts of Florida, where shifting conditions are creating entry points that were harder to access during the last expansion.
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Robert Martinson, president of The Garrett Companies, is adopting a countercyclical strategy. His firm continues to invest, seeing the disruption as a chance to advance. “We are seeing opportunities,” he said, highlighting the company’s construction capabilities as an advantage as costs and competition evolve.
The affordable housing sector faces distinct challenges. Jennifer Litwak, president and CEO of PEP Housing, noted that an expansion in available tax credit equity is helping more projects close funding gaps and move forward. Still, Litwak cautioned that the biggest risk in affordable housing is not development, but long-term operation.
The current cycle requires careful adjustment. Companies that manage supply absorption may emerge in a stronger position once the market stabilizes. For now, the priority is execution over expansion.
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