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Apartment developers gear up for tariffs
This story was originally published on Multifamily Dive. To receive daily news and insights, subscribe to our free daily Multifamily Dive newsletter. As executives at Houston-based Camden Property Trust underwrite their apartment developments with tariffs on the horizon, they're only figuring in a 2% to 3% increase in construction costs. With the ever-changing threat of tariffs from President Donald Trump, that number may appear suspiciously low. But it's not a mistake, according to Camden CEO Ric Campo. 'The reason it's not more is that we've been to this movie before,' Campo said on the REIT's first-quarter earnings call last month. 'Under the [Trump] administration 1.0, there were tariffs and there were issues, and COVID created a lot of interesting supply chain issues, as we all know.' That tariff and pandemic experience created a practice run for apartment developers, setting them up to meet 2025's challenges. 'What a lot of folks have done, including the apartment industry and construction industry, is we have tried to get our supply chain closer to our projects, and a lot of effort has gone into getting supply chains that are not as vulnerable as Asian supply chains,' Campo said. Though those experiences have helped apartment developers plan for tariffs 2.0, there are still challenges this time around. There is a universal 10% tariff on all imports this time, and uncertainty lingers, with the timing and scale of Trump's levies remaining a moving target. Then there's the issue of legality. With the U.S. Court of International Trade striking down April's 'Liberation Day' tariffs on Canada, Mexico and China last week, questions linger about whether the trade war will end before shots are really even fired. A day later, the U.S. Court of Appeals for the Federal Circuit stayed that ruling. But even with the ground shifting beneath them, apartment developers have to plan for the worst, which includes high prices and potential shortages for the materials and products they need to complete their projects. Here is how they're preparing. Count Rene Bello, founder and CEO of Miami-based real estate investment and development firm BLDG Ventures, among those dusting off his playbook from the first Trump administration. 'Because we have had experience with this before, we're looking at retooling on some of the strategies we use,' Bello told Multifamily Dive. For Bello, preparing ahead means cutting out the middleman for price-sensitive materials. He went directly to vendors to order 75,000 square feet of flooring for an entire building, for example, six to 10 months ahead of time. 'We can buy in large quantities, well in advance,' he said. In other cases, Bello is flying to other countries to line up materials. During the winter, he met with his Colombia-based glazing manufacturer. 'We knew that we need to get ahead of that, and then we just had a very clear and honest conversation with our contractors and our suppliers about how can we effectively get on their books well in advance rather than waiting six to nine months down the pipeline and then having to absorb the full run on these tariffs,' Bello said. Bello isn't the only executive buying more than he currently needs before he needs it. Cameron Gunter, co-CEO of PEG, a Provo, Utah-based owner, operator and developer of multifamily, hospitality and build-to-rent properties, has two multifamily projects currently in development, with one in Tucson, Arizona, slated to open later this year. 'We bought a bunch of our cabinets out of China,' Gunter told Multifamily Dive. 'So we took our first shipment as we started to see this issue on tariffs. We haven't installed it, but it's all stored on property.' With Trump's May 90-day pause on Chinese tariffs to allow for time to negotiate with different countries, Gunter expects to get his second shipment before the levies kick in. 'We'll be able to get those here in the next 90 days,' he said in May. Bello isn't just ordering ahead to try to beat tariffs. He's putting his projects through a value-engineering process to avoid countries with the highest tariffs. 'We're not buying things from the Asian markets,' Bello said. 'We should see a higher pricing and tariff on those materials coming from those parts of the globe.' But so far, the cost increases haven't hit all products in the same way. 'We're seeing, on average, between 3% and 5% increases for trades like glazing, electrical [and] raw materials,' Bello said. 'With fixtures and lighting, you'll definitely see an increase between 10% and 20%. We're also seeing lead times extended.' Bello is also opening the door to American-made products, like paints and bath fixtures. In May, he was on a call with an architect deciding between two options for toilets — German-made Toto and American Standard made in the U.S. The choice was easy, even if it wasn't what he wanted. 'As much as I'd love to put in a beautiful Toto bath fixture, we said, 'Look, American Standard is American made,'' Bello said. 'We know that there won't be any tariffs implemented on those American-made fixtures. So we'll go in that direction.' PEG also builds hotels, which require it to purchase furniture, fixtures and equipment. With many of those products, the firm is sourcing from new countries. 'We shifted from China to Vietnam or Taiwan,' Gunter said. But Gunter said there are limits, specifically related to costs, to buying what is produced in America. 'We're finding some ways around it,' Gunter said. 'I don't think the answer is sourcing stuff out of the U.S., unless rents really climb or AI takes [manufacturing] jobs because it's just tough [to make the numbers work].' With about 4,500 units in annual starts, Tysons Corner, Virginia-based owner, manager and developer Middleburg Communities can lock in purchasing agreements with suppliers and vendors. So far, CEO Chris Finlay, who has seen tariffs push up costs roughly 3%, said his subcontractors are basically eating the costs of the increases as construction starts have fallen. 'Work is just more scarce now,' Finlay told Multifamily Dive. 'If you're a subcontractor, you're trying to win the business. Taking some tariff risk to win the deal is what I think a lot of people are doing.' For PEG's Gunter, the goal is to share the burden of price hikes. 'I can create contingencies where they have it as part of their [guaranteed maximum price] and we use that contingency to cover any tariffs based on the general contractor piece,' he said. 'If it goes over that, there's a responsibility. If it comes under that, there's a shared savings clause.' Still, Gunter said there are some questions about whether general contractors are willing to take those risks going forward, even if work is more scarce. However, even if subs are reluctant to eat the additional tariffs, general savings in labor prices may help developers offset the additional burden of tariffs. On AvalonBay Communities' first-quarter earnings call last month, Chief Investment Officer Matthew Birenbaum said materials costs are generally 25% to 30% of the Arlington, Virginia-based REIT's overall hard costs and 20% of total project costs. While tariffs could push overall costs by 3% to 4%, a reduction in labor prices could offset some of that. 'On those jobs we are actively bidding today, our phones are ringing off the hook with deeper bid coverage and stronger subcontractor availability than we have seen in years,' Birenbaum said. Brad Hill, CEO of Memphis-based REIT MAA, said his development team is getting the same calls. 'Given the reduction in the new starts and the supply pipeline, we're getting better pricing at the moment from many of our GCs and development partners,' he said on the REIT's first-quarter earnings call last month. 'Margins are tightening up a bit, and they're getting a little bit hungrier for new starts.'
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a day ago
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Investors warming up to build-to-rent
This story was originally published on Multifamily Dive. To receive daily news and insights, subscribe to our free daily Multifamily Dive newsletter. Following a string of successful years, the build-to-rent sector has maintained its frenzied activity pace through 2024 and into 2025. A significant amount of new build-to-rent supply has come online in the past 12 months, according to Jordan LaMarche, vice president of Bethesda, Maryland-based real estate consultancy RCLCO — a trend likely to continue for the next six months. Still, despite 2024 representing the peak of new supply, BTR still makes up only 6%-7% of total rental deliveries. 'We … think this is still very short of the potential demand for the product type overall,' La Marche said during a recent RCLCO webinar on the current state of the BTR market. Given this increase in supply, rent growth has been stagnant in BTR year over year, according to LaMarche. However, BTR has a 0.5% higher occupancy rate than multifamily overall, and weakening starts may lead to declining vacancies over the course of the year, according to LaMarche. While build-to-rent is still a newer asset class, investors have a greater understanding of BTR and their exposure to it than they did in the past, and are trying to figure out where it fits in their portfolio, according to Rick Pollack, managing director of RCLCO Fund Advisors. 'They really want to understand the fundamentals of how it works,' Pollack said. 'How does it lease? How does it operate? How can they be smarter about their investments going forward … [and] what does the end of the investment look like?' LaMarche noted that even within the confines of a single-family rental home or townhome, developers are experimenting with product type and how different features might appeal to customers or reduce costs. For instance, even within the same submarket, two BTR properties may vary widely in terms of style, unit size and garage arrangement. 'There isn't a silver bullet yet to get the exact right renter segmentation,' LaMarche said. 'But there is plenty of room for customization to potentially meet higher price points.' Pollack believes that the sector is in 'the second to third inning' of its development, but will need more time to mature completely. Currently, there are very few transactions in the BTR sector for investors to build their predictions on; as more occur, more players may enter the space as they get a better idea of the numbers involved. 'From the institutional investor standpoint, [what] gets us further along in the game is more stabilized communities and more stabilized communities that trade,' Pollack said. 'A lot of the capital market space is based on core transactions and then folks adjust their risk and return expectations on core transactions.' Based on interactions with owners and investors, LaMarche's suggestions for the single-family rental sector include: Investing in the education and marketing processes early. Because build-to-rent is a relatively small product type, renters, investors and municipalities often need more information on what it is and how it works, especially in new markets. Know your demographics. Cottage-style homes tend to attract older residents or those without children, while townhomes appeal more to families. Be strategic about amenities. Pools, fitness centers and dog parks are very valuable to renters — 'but stop there,' LaMarche said. 'Other amenities don't drive a significant premium and smaller versions do just as well as the larger ones.' Prioritize delivering amenities with the first units, in order to attract renters. However, limit the first residents' exposure to construction as much as possible. Add fences to yards. Regardless of yard size, fenced yards drive a high rent premium as spaces for kids and pets. Size driveways and garages for larger cars. Since many single-family renters are young families, they may have larger cars than the average renter and will value easy parking.
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2 days ago
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EQR to purchase 8 apartment properties for $535M
This story was originally published on Multifamily Dive. To receive daily news and insights, subscribe to our free daily Multifamily Dive newsletter. Number of properties: 8 Buyer: Equity Residential Seller: Withheld Property type: Garden style Units: 2,064 Location: Atlanta Total purchase price: $535 million Equity Residential recently agreed to purchase eight properties, totaling 2,064 units, in Atlanta for $535 million, according to an investor update released by the Chicago-based REIT last week. 'These well-located suburban assets complement our existing Atlanta portfolio and will allow us to achieve scale and diversification in the market,' EQR said in the update. The REIT funded the purchase, which is expected to close this quarter, by selling older assets in its existing coastal markets. 'We would expect these assets to be accretive to normalized [funds from operations] per share beginning in year two of our ownership period due to favorable supply/demand characteristics expected in Atlanta, along with realization of various operating initiatives,' EQR said in the update. EQR, like Arlington, Virginia-based AvalonBay Communities, has been focused on selling older assets in its coastal markets and redeploying the capital in high-growth Sun Belt metros of Atlanta, Dallas and Austin, Texas. 'We think our best opportunity [versus buying back stock and developing] continues to be investing in existing assets in these primary acquisition markets of Dallas, Denver and Atlanta,' CEO Mark Parrell said on EQR's earnings call in late April. 'We're still interested in Austin, but there's such a glut of supply, it's probably a little bit later for us to complete our portfolio there.' In the first quarter, Atlanta, Dallas and Austin performed as expected 'given the challenging operating conditions' caused by new supply, EQR Chief Operating Officer Michael Manelis said on the REIT's earnings call in late April. 'Denver's overall demand felt a little weaker than we would have expected in the quarter, which resulted in less pricing power,' Manelis said. EQR expects $1.5 billion of acquisitions and $1 billion of dispositions in 2025. 'When we gave guidance, we expected to transact very little in the first quarter, and that was the case,' Parrell said. Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.
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2 days ago
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Mesa Capital Partners breaks ground in Tallahassee, Florida
This story was originally published on Multifamily Dive. To receive daily news and insights, subscribe to our free daily Multifamily Dive newsletter. Property: The Bradbury at Bannerman Village Developer: Mesa Capital Partners Architect: The Coursey Group Location: Bradfordville, Florida Units: 256 Cost: Withheld Atlanta-based developer Mesa Capital Partners is underway on the multifamily section of the Bannerman Village master-planned community in Bradfordville, Florida, set to add 256 units to a 14-acre site, according to a news release shared with Multifamily Dive. The Bradbury at Bannerman Village will offer a mix of two-story carriage homes and garden-style units in three-story walk-up buildings. Property amenities will include a clubhouse, a fitness center, a market, a resort-style pool, grilling stations and a dog park. EV charging stations and garage parking will be available for residents. Bannerman Village consists of a Publix-anchored shopping center within walking distance of the Bradbury site, developed by Clearwater, Florida-based Boos Development Group, and the Landon Hills for-sale home development by Tallahassee, Florida-based Premier Fine Homes. Located north of downtown Tallahassee, Bradfordville and the surrounding area are among the most affluent sections of the Tallahassee market, with an average family income of over $155,709 within a 3-mile radius of the retail center, according to Boos Development Group. Just over 37,000 people live within 5 miles of the site. 'Bradfordville is a premier residential submarket with strong demand for quality rental housing,' Jeff Tucker, CEO and managing partner of Mesa Capital Partners, said in the release. Other tenants at the Bannerman Village shopping center include Starbucks, a Tex-Mex restaurant, a dental office, a nail salon and an ice cream parlor. Many more shops and restaurants are located in downtown Bradfordville to the southeast. Leasing is expected to begin at The Bradbury in mid-2026, with full completion by early 2027, according to the release. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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3 days ago
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Home365 settles with Pennsylvania attorney general over maintenance delays
This story was originally published on Multifamily Dive. To receive daily news and insights, subscribe to our free daily Multifamily Dive newsletter. Pennsylvania Attorney General Dave Sunday has reached a settlement with Lancaster, Pennsylvania-based Home365 LLC, regarding its management platform and alleged delayed responses to maintenance requests, according to a news release from Sunday's office on May 27. Home365 LLC is an ownership entity associated with San Jose, California-based multifamily property manager and investment broker Home365. The company uses a proprietary artificial intelligence-based platform to automate property and investment management, including maintenance requests and assignments, according to the company website. The attorney general said that consumers have complained that Home365's platform was responsible for delays responding to maintenance requests and for leasing properties that had not been inspected and were unsafe, according to the release. It alleged that the company violated the state's Unfair Trade Practices and Consumer Protection Law by failing to provide safe habitation to customers, according to the settlement, filed in the Allegheny County Court of Common Pleas on May 22. These include utility services, such as heat and water, and timely repairs. It also claims that the company failed to return tenants' security deposits in violation of Pennsylvania's Landlord and Tenant Act, according to the settlement. 'As artificial intelligence finds its way into many aspects of modern society, it is imperative that those choosing to use this new technology ensure it is working effectively,' Sunday said in the release. 'This company left many tenants waiting for fixes to water and sewage leaks and structural flaws, and failed to return security deposits to others.' Under the terms of the settlement, signed by Home365 CEO Daniel Shaked, the company must pay $45,000 to the attorney general's office, including $30,000 in restitution to its renters and $15,000 in additional costs, set aside for public protection and educational purposes, according to the settlement. These refund checks will range from $375 to $10,450, according to the attorney general. In addition to this fee, Home365 must also: Fully comply with the Consumer Protection Law and Landlord Tenant Act. Inspect properties it plans to lease before making them available to customers and ensure they are approved for occupancy by local authorities. Maintain its properties in a safe and habitable condition. Provide and staff an email and telephone number for maintenance requests. Respond to emergency requests within 24 hours. Return security deposits in accordance with the law. Home365 is currently active in 18 cities across nine states, including nine Pennsylvania metropolitan areas, according to the company website. Approximately 6,000 of its properties are in Pennsylvania, following the company's acquisition of Lancaster-based SlateHouse Property Management and Realty in 2021, according to court documents. The company did not respond to a request for comment from Multifamily Dive. Sign in to access your portfolio
