Property Type

By Taylor Williams Within the world of multifamily development, the “amenities arms race” has become a well-documented trend over the past decade, a contest to curate and deliver the most appealing combination of entertainment and wellness features and activities to woo prospective renters. In many instances, this approach was successful, and developers succeeded in capturing the hearts and wallets of renters who sought an “everything under one roof” approach to renting. The fervent movement to deliver more extensive and impressive amenity packages also worked for much of the last decade because interest rates were dirt cheap, even though costs of materials and labor needed to install these features were perpetually on the rise. But today’s market is different. Developers not only face stubbornly high construction costs, but also significantly higher interest rates. Spreads on construction loans in particular tend to be higher than on permanent loans simply because this phase of the project life cycle carries the most risk. Unlike with other asset classes such as retail and industrial, where preleasing is often a prerequisite to securing construction debt, it’s exceedingly rare for renters to commit to units that are still two-plus years away from being delivered. The absence of …