Contractor competition is up. Materials prices have stopped swinging. Neither has been enough to make apartment development pencil in markets where it didn’t a year ago.
That’s the read from multifamily developers surveyed by Multifamily Dive, and it complicates the story that a cooler construction market automatically reopens the pipeline.
Costs stabilized at a higher number
“We haven’t seen costs come down enough to suddenly make a lot of markets work that didn’t work six or 12 months ago,” said Patrick Kassin, senior vice president and regional development partner at Woodfield Development. Materials pricing is more predictable than it was a few years ago, Kassin said, but a lot of those costs settled at a level well above where they started before the early-2020s run-up.
Tommy Gallagher, head of construction at Middleburg Communities, has seen costs roughly flat this year with modest declines in specific markets. More competitive pricing from higher bid participation keeps getting offset by materials and commodities that went the other way.
Why contingency is eating the competition benefit
Matt Ritsko, president of construction at Nashville-based Southern Land Co., described the mechanism plainly. Fluctuating timelines, demand and prices for rebar and drywall have made contractors reluctant to sharpen labor rates, trim margins or hold material pricing. Instead they’re “building more contingency into their pricing to account for them.”
That’s the part owners underestimate. In a volatile input market, a competitive bid environment produces more bidders at similar numbers, not lower numbers, because every bidder is carrying risk they can’t lay off. The savings show up only once the underlying volatility drops, and tariffs are keeping it up.
What tariffs do to an 18-month underwriting horizon
Kassin flagged trade policy as a specific concern when Woodfield underwrites a deal that may not break ground for 12 to 18 months. A project starting construction in late 2027 has to carry an assumption about import costs that nobody can support today.
Multifamily and single-family production have been down since 2022, when rate increases drove up the cost of capital and cut investor demand, said Jay Hiemenz, chairman and CEO of Alliance Residential Co. Southern Land has kept building through it, with starts in Las Vegas and White Plains, New York. Developers with established market positions and patient capital are still moving. That is not the same as a recovery.
Watch permitting timelines and insurance next. Both have been quietly doing more damage to feasibility than hard cost has.