Apartment developers are recalibrating their strategies as a surge of new supply reshapes the multifamily landscape, forcing tougher underwriting, more selective expansion and a sharper focus on execution.
At the GlobeSt. Multifamily Owners Summit in Tampa, industry leaders described a market in transition, where elevated deliveries, capital market constraints and operational pressures are driving a broad reset across the sector. While some developers are pulling back, others—particularly well-capitalized firms—are leaning in, using the current environment to pursue new opportunities.
During the session "Building Through the Cycle: Development, Supply & Strategy in Today's Multifamily Market," panelists said the wave of new supply hitting many markets, especially across the Sun Belt, is the primary force behind today's strategic shift.
"There is uncertainty in the market and we are resetting in terms of supply," said Alan McMahon, VP and Director of Development at The Beach Company. "It will take a few more years to reset."
That reset follows several years of aggressive development, according to Micah Conn, Senior Vice President at AvalonBay Communities, who said the current supply-demand imbalance was largely expected.
"This moment in time is a reset for us," Conn said. "It was needed."
Even so, Conn emphasized that the underlying fundamentals remain intact, with demand continuing to support the sector despite short-term pressure from new deliveries.
"There are opportunities out there in multifamily," he said. "The fundamentals are strong."
The challenge is timing. Conn said many markets are still working through a significant pipeline of new units, with another 12 to 18 months of deliveries expected in some regions before conditions begin to normalize. In certain metros, absorption could take even longer.
That supply surge has been most visible in the Sun Belt, though performance varies widely depending on asset quality and location. Highly amenitized, well-located urban properties have generally proven more resilient, even in markets facing heavy new construction.
"Austin is a prime example," Conn said, pointing to strong performance among top-tier assets despite broader softness.
For developers continuing to build, recalibration has meant rethinking not just where to invest, but how projects are designed, financed and delivered.
Rob Paulsen, Director at JPI, said the firm remains active in ground-up development but is placing greater emphasis on innovation to improve project economics in a more challenging environment.
"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," Paulsen said.
At the same time, JPI is using the current cycle to expand selectively into new markets, including parts of Florida, where shifting conditions are creating entry points that were harder to access during the last expansion.
"We are looking in active submarkets," he said. "We are looking for partnerships. We are being selective and you have to look for diamonds in the rough."
Other firms are taking an even more countercyclical approach. Robert Martinson, President of The Garrett Companies, said his firm continues to deploy capital despite broader industry caution, viewing the current disruption as an opportunity to gain ground.
"We are seeing opportunities," Martinson said, adding that the company's construction capabilities provide an advantage as costs and competition evolve.
In the affordable housing sector, the recalibration is being shaped less by oversupply and more by changes in financing. Jennifer Litwak, President and CEO of PEP Housing, said an expansion in available tax credit equity is helping more projects close funding gaps and move forward.
"The pool of tax credits to be invested as equity has been expanded," she said.
Still, Litwak cautioned that the biggest risk in affordable housing is not development, but long-term operations—an issue that becomes more critical as projects move from construction into stabilization.
"The most underestimated risk is long-term operational sustainability," she said.
With rents capped, operators must carefully manage future costs and long-term asset performance.
"You have to be very dialed in on your long-term operational sustainability," Litwak said.
Despite the challenges, demand across the sector remains strong, reinforcing why many developers are staying active even as they adjust their strategies.
"There isn't a single county in the U.S. where you can make minimum wage and afford market rent," Litwak said.
Check back with GlobeSt.com for more from this panel and event.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.