The outlook for apartment construction is showing tentative signs of improvement, though developers remain cautious about rising costs and continued delays. According to the National Multifamily Housing Council’s third-quarter survey, business sentiment for apartment development edged slightly higher, but concerns tied to labor, permitting and future expenses continue to weigh on the industry.
NMHC’s market conditions index registered 51 in the third quarter, up from 47 in June. About 18 percent of survey respondents said they expect conditions to improve over the next three months, compared with 16 percent who anticipate a decline and 64 percent who believe conditions will remain stable. In June, just 11 percent forecasted near-term improvement. Looking further out, optimism extends into the six- to 12-month horizon, where 61 percent of respondents said they expect conditions to improve, compared with 11 percent predicting declines.
Construction pricing remained a mixed picture. Of projects put on hold in recent months, 26 percent had to be repriced upward, while 41 percent were repriced downward. The median adjustment was a 3 percent shift, with the average change totaling 5 percent, according to NMHC.
Expectations for construction costs were split. Over the next three months, 48 percent of respondents anticipated stability, while 30 percent expected costs to fall and 23 percent expected them to rise. Sentiment shifted as the time horizon extended, as 49 percent of respondents projected costs would increase in six to 12 months.
Financing conditions showed a gradual improvement in confidence. In the near term, just 11 percent of participants expect equity financing to become more available, while 15 percent predict tighter availability and 70 percent see no change. However, that outlook brightens in the longer term, with 68 percent of respondents anticipating greater availability of equity financing within the next six to 12 months. Debt financing sentiment was stronger, with more than a quarter of respondents expecting improvement in the next three months and 60 percent expecting greater access over the next year.
Labor availability remains a concern. In the next three months, 23 percent of respondents said they expected more workers to become available, while 27 percent projected less availability and nearly half see conditions staying the same. Six to 12 months out, 43 percent expect labor availability to decline. For materials, the short-term outlook was more balanced, with most respondents expecting stable availability or modest improvement, though 27 percent anticipate worsening conditions a year out. About 18 percent of respondents reported recent material delays, while 68 percent said they had not experienced disruptions.
Construction delays remain widespread. Forty-six percent of respondents reported project delays this quarter, slightly higher than in June. Of those with disruptions, permitting was cited as the most common source, with three out of four developers identifying it as the key bottleneck. Permit timelines also remain lengthy, as 26 percent of builders reported a three-to-four-month wait, 20 percent cited five-to-six months, while 13 percent said obtaining permits required at least nine months.
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