Location Ventures CEO Rishi Kapoor was recently featured in South Florida Business Journal article weighing in on rising construction costs in real estate development in South Florida.

From the article:

When it comes to housing in South Florida, homebuyers and renters aren’t the only ones grappling with sticker shock.

Developers often face construction costs that are 20% to 30% higher than a year ago – a trend that’s already stalled some projects at a time when local residents struggle to secure housing.

That means builders have to weigh whether to accept smaller profit margins, eschew some projects altogether or, in the case of affordable housing, seek more money from public funding sources to complete those jobs.

Ray Mazzie, managing director of Fort Lauderdale-based Southern Waters Capital, said he aims to build apartments or single-family home rentals for people who earn about $65,000 a year. But that’s become a formidable challenge in this region, given the high cost of construction and land.

“In South Florida, you need to be west of I-95 to get a site that doesn’t require structured parking,” Mazzie said, noting that he’s in Ocala, where land is cheaper and it’s easier to build less-costly garden-style units.

The tri-county region has become one of the most expensive U.S. metropolitan areas to live in due to the heated demand for housing and shortage of developable land. Much of that stems from the influx of out-of-state residents who flocked to the area in record numbers during the Covid-19 pandemic.

The rising cost of materials such as lumber, steel, fuel and iron, as well as tariffs, trade issues and surging labor costs have also driven up construction costs, resulting in higher rents for residential and commercial properties. And rising interest rates also are bringing down some sale prices, which impacts developers’ profit margins.

The spike in construction costs has led some developers to question the viability of taking on certain projects. For example, if construction estimates for condos come in too high, it may not make financial sense to build them, industry insiders say.

Developers and contractors must budget for construction cost increases and prepare for shortages in the supply chain. Items such as concrete, appliances, glass and steel are just some of the necessary staples that can delay the completion of the buildings.

Rishi Kapoor isn’t in the warehouse business. But his Coral Gables-based Location Ventures sought out warehouse space to house construction materials it needed for upcoming residential and mixed-use projects.

Materials for the developer’s Villa Valencia condominium in Coral Gables were stuck at the port for weeks or months. So he’s not taking any chances with his Urbin co-living and coworking projects in Coconut Grove and Miami Beach by stockpiling items such as flooring and millwork. In some cases, Kapoor’s also looked for less costly substitute building materials, without sacrificing quality.

“We need to make sure the buildings are built on a budget to hit an accessible price point,” he said.

Read more from the South Florida Business Journal article HERE