I had lunch today with a friend (from school) who runs a multifamily development company in South Florida. His business is very similar to the apartment strategy that we are now working on in Toronto, in that he builds a repeatable apartment product (garden style apartments). In fact, he was telling me that he now has a dedicated design & QA/QC team within the company. Their job is to focus on continuous optimization and on reducing construction inefficiencies.
This is the way!
But each market is obviously unique. His rents are in the US$3 - 3.25 psf range (call it ~C$4.15 - 4.50 psf), whereas in Toronto you need something closer to C$5 psf to have a feasible project. Our yields are also lower on average. It's hard work to get to an untrended yield-to-cost of 5% here. But for him, he can't raise capital with anything less than 6.5%, which represents a development spread of at least 150 bps over where multifamily cap rates are today in his market (~5%).
Juicy by comparison.

This week I saw it reported that in this decade alone, the Seattle area is set to deliver more new rental apartments than it did in the prior 50 years combined.
And as a result, the sentiment is that new housing supply is finally starting to keep pace with demand and put downward pressure on rents.
Do you remember who was the crane capital of the US a year ago? They may still have that title.
In some of the most desirable neighborhoods of Seattle – where much of the new supply is coming online – rents dropped 6% compared to the prior quarter. At the county level, this last quarter was by far the biggest drop of the decade according to the Seattle Times.

