Development capital has been the biggest hurdle to bringing more housing online this year. 2025 is trending to be a similar environment, albeit with some late relief. Alex Pollack, VP of Partnerships, notes:
“Investor confidence will primarily depend on cap rate compression, driven by steady rent growth. As rents increase to meet demand, a trend we expect to take off in late 2025, cap rates should compress, improving yields and making new developments more attractive.”
Heading into the new year, we’re sharing strategies to help get more BTR developments to pencil.
In this issue, we discuss:
1. 3 tips for BTR developers to get the most of their money
2. How engaging with trades can lower your costs
3 BTR MONEY STRATEGIES FOR 2025
In 2025, bringing more supply online requires developers to navigate the high cost of long-term financing. We asked our team what strategies can help them get the most of their money.
1. "Work with your GC and trades to reduce the biggest line item in your proforma. Construction makes up 60% of an average development deal and waiting until capital is in place before entering into a contract with the GC increases schedules and reduces cost saving VE opportunities." -Alex Pollack
2. "Simplify your product plans even further to lower complexity and control costs. This will also lend itself to more efficient construction timelines." - Paul Erhardt, COO
3. "Exploring new ways of approaching your deals could get more across the line. Increase chances for VE. Work with your trades. Reconsider assumptions in your product designs." - Salman Ahmad, CEO
TRADES ARE (AND HAVE ALWAYS BEEN) THE KEY TO UNLOCKING BETTER CAP RATES
Roughly 80% of new construction costs are attributable to subcontractors (NAHB).
At our Fall Trade Leadership Council, we uncovered three money saving outcomes of early trade engagement:
Engineering reviews improve constructability in the field.
Specification reviews ensure materials are readily available within each market, advancing the inevitable VE exercise that delays project starts.
Information sharing eliminates time-consuming requests that take too much time and cause unnecessary headaches.
The bottom line? Bringing a GC and their established trades into the project fold sooner will reduce costs and accelerate project deliveries before material costs are incurred.
And if your plans are finalized faster, you’ll get better pricing and engagement from trades when you go out to bid (the first time).
FIELD NOTES
Avilla Palomino
Avilla Palomino is officially leasing with first unit turnovers completed on November 1st.