Density Capped by Construction Costs

Posted on May 21, 2012 by Tadd Miller

Mixed use projects in the Midwest are traditionally limited to wood frame construction because of market rents/pricing vs. construction costs. Take into account that 3 story, non-elevator, surfaced parked product costs +/- $65 pnrsf (15 - 22 units/acre), a midrise, underground parked, common corridor, elevatored building +/- $125 pnrsf (22 - 100 units/acre), further dwarfed by the previous example in steel/concrete at +/- $155 pnrsf (75+ units/acre).

Basically, for any residentially based steel/concrete frame product in a mid-market city, the market viability is a non-starter. There is absolutely no way to make an increase in density make up for the 30 - 100% construction cost increase! The argument is often made that increasing density increases value, therefore making it make sense, however this is like trying to make money in volume in a product that has no profit/margin to begin with. See the attached comparison of a project that we are currently analyzing that shows the difference between the three construction types on a specific site.

I would like to attach a spreadsheet from Andy that is like what we did on Anderson Birkla site that shows 3 story walkup, midrise construction, and add steel concrete. HOW DO I ATTACH THIS SO THEY CAN CLICK ON THIS

This entry was posted in Design, Finance, Housing

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