To Win Big in 2023 Multifamily Developers Must Adapt to 'New Normal'

As global economic instability weighs on commercial real estate, opportunities are still out there for favored sectors – but developers have to be ready to meet the “new normal.”

“Market factors continue to disrupt developers who are not disciplined in their underwriting standards and, as a result, have gotten a little bit over their skis,” Anand Kannan, president, CPP, tells us in advance of the GlobeSt Multifamily Spring conference in Florida, where he’ll serve on a panel breaking down hot-button issues for the sector. “Towards the end of 2022 and through the beginning of 2023, pricing was different, tenant demand was different, rents were different, cap rates were different and projected returns were different. This type of uncertainty can impact developers who are unprepared and unwilling to adapt.”

As for rate increases, Kannan says they’re “one number that we plug into a model, and developers always have an ability to adjust” to changing numbers. The bigger concerns, he says, are macroeconomic factors and how they may impact a potential recession as well as a potential shift in job centers.

Despite that, however, “opportunities are always there” for multifamily developers, especially affordable housing developers like CPP.  

“Even though housing and construction costs are softening slightly, there is still a widening housing gap and a huge barrier for many families and seniors to find affordable places to call home,” Kannan says. “The country’s affordability crisis is not getting any better. As a result, we continue to eye markets where we can make the biggest impact, and preserve and create as many affordable housing units as possible.”

Check back soon for more insights from Anand Kannan and panelists at this year’s upcoming GlobeSt Multifamily Spring conference.