Construction Insights from NMHC: The Future of Multifamily Renovation & Development

One clear takeaway: renovation and repositioning strategies are becoming the primary focus for investors and developers. With the current financing landscape, many are choosing value-add renovations over new construction, looking for ways to enhance existing properties while keeping costs under control. These trends directly align with what we’re seeing at Smart Build, where our focus has always been on delivering high-quality, cost-effective multifamily renovations.

Here are some key construction-related takeaways from NMHC:

1. Market Conditions & Outlook for Multifamily Construction
   
   

   · Renovation is Taking Center Stage – With interest rate uncertainty, many investors are prioritizing upgrades to existing assets over ground-up development. The ability to enhance property value while avoiding the complexities of new construction is an appealing strategy in today’s market.

   · Material Costs Have Stabilized, But Labor is Tight – After years of supply chain disruptions, pricing on materials has evened out. However, skilled labor shortages remain a challenge, making experienced construction partners more valuable than ever.

   · Regional Shifts in Development – Investors are moving away from high-regulation markets like NYC and LA, instead targeting Sun Belt cities and suburban areas, where demand for high-quality multifamily properties remains strong.

2. Financing & Capital Allocation in Construction
   
   

   · Lenders Favor Proactive Renovation Plans – Banks and agency lenders (Fannie Mae, Freddie Mac) are becoming more selective about funding projects. Having a clear capital improvement strategy is crucial for securing financing.

   · Increased Federal Support for Multifamily Housing – The FHFA increased multifamily loan purchase caps to $73 billion per agency in 2025, signaling stronger financing opportunities for renovations and value-add projects.

   · Equity is Flowing Toward Value-Add Projects – While ground-up development is still a challenge, private equity firms are actively investing in renovation projects, particularly in high-demand, supply-constrained areas.

3. Key Trends Shaping Multifamily Renovations & Development
   
   

   · Retrofitting Aging Properties – With construction costs remaining high, investors are choosing renovations and repositioning over new builds, a trend we’ve already been addressing at Smart Build.

   · Sustainability & Smart Upgrades – Many investors are making energy-efficient improvements and incorporating smart building technology to meet tenant expectations and long-term cost savings.

   · Regulatory Shifts Impacting Project Viability – Developers and investors are being more selective with markets, choosing business-friendly locations with fewer permitting hurdles and regulatory risks.

4. Construction Efficiency & Cost-Saving Strategies
   
   

   · Labor & Workforce Planning – With skilled labor shortages persisting, partnering with experienced contractors who can streamline projects and optimize workforce planning is more important than ever.

   · AI & Technology in Construction – Many developers and contractors are turning to AI-powered project management tools to improve scheduling, cost estimation, and efficiency.

    

   · Insurance & Risk Mitigation – While insurance rates have stabilized, there’s still uncertainty about disaster-related costs, making proactive maintenance and risk mitigation strategies critical.