Multifamily housing investments are already more sustainable than other housing and commercial developments, but as this segment of the CRE market continues to outpace the rest in recovery, multifamily investors and developers are looking at ways to incorporate more green building practices into their new construction projects. These new environmentally friendly investment practices may have somewhat higher upfront costs, but these are more than offset by increases in the property’s income stream later on and make the development more attractive to both lenders and tenants.

With their smaller unit sizes, shared common spaces, and limited exterior exposure of individual units, the typical multifamily development already manages to conserve water and energy to some extent. To get the most out of your green development plans, it is crucial to round up a strong team with plenty of experience with green construction and design. For maximum benefits and minimum costs, environmentally friendly elements must be incorporated into the plans from the very beginning by the design team as well as contractor and subcontractors. Having an experienced team in place is essential to making determinations about which sustainable building practices can be feasibly implemented and capitalized on. Overall, adding sustainability features to a multifamily development project can increase the construction costs between 2 and 25 percent, so decisions must be made on an individual basis about which features will be valued by tenants and generate enough return for investors.

Perhaps the most significant cost to be weighed by investors and developers is whether to seek formal green certification. To qualify as affordable multifamily communities, some state agencies are now requiring green building certification because it reduces both costs for low-income residents and operating costs for the entire complex. Even for conventional multifamily complexes, sustainable building gives the property a competitive edge by giving residents the satisfaction of knowing they are positively impacting their environment by conserving resources and energy. If the certification is not required, the cost of completing the process can sometimes be prohibitive and unnecessary. Investors and developers can still incorporate sustainable initiatives following the guidelines established by the U.S. green building council and others to meet green standards and make their multifamily projects more sustainable even if official certification is not sought out.

Official certification is not necessarily required to make the property more appealing to tenants, which gives the illusion of promising a more steady stream of income for the life of the property. The illusion of consistent income is a key factor in securing financing.

Overbuilding is the “elephant in the room”.  Everyone knows it is there but no one wants to talk about it.  There are an unprecedented number of multifamily projects underway in the downtown corridor.  No one knows if they can be absorbed or not but the deep pocket investors all want to stake their claim in this rich lode and the search for land goes on. If the past is any guide to the future in a couple of years there will be significant buying opportunities in partly filled multifamily projects that can’t meet their rental projections throughout the downtown area.