How Much Does It Cost to Build an Apartment Complex?
For real estate investors, property owners, and contractors, the question “how much does it cost to build an apartment complex?” is certainly worth pondering. According to data from the National Multifamily Housing Council (NMHC), rent and occupancy rates have been on an upward trend since 2009. This data supports the notion that apartments and multi-family residential buildings are excellent investments.
How Much Does It Cost to Build an Apartment Complex? Cost Estimations For U.S. Apartments
The cost of building an apartment complex is typically calculated based on the cost per square footage. Real estate resource site Fixr estimates that the national costs for building an apartment complex range from $90 to $430 per square foot, averaging at $270 per square foot. This means an average studio unit costs $127,440 to build, while the average one-bedroom apartment costs $192,780 per unit.
Based on the average cost per unit, a small apartment complex with 10 rentable studio spaces will have an estimated cost of at least $1.2 million. However, other factors still come into play when determining the actual cost of the entire complex. These include direct costs such as the size and type of building to construct, number of units, and amenities, as well as ‘soft costs’ like the cost of design, quality of materials, and delivery.
Factors That Impact Cost
As mentioned above, many different variables are involved in determining the cost of building an apartment complex. Below are some of the most important factors to account for, as these can have the most impact.
Finding the best location is always the key to good real estate since it can influence rent. However, it can also directly impact the cost of construction and is arguably the biggest contributing factor to the total cost, often accounting for 10-20% of the entire project budget.
The quality of a location, determined by accessibility, appearance, development, and availability, directly influences the price of land, which in turn affects the construction cost. For instance, an apartment complex built in an urban environment will undoubtedly cost more to construct than in a small town. Likewise, the same apartment complex will also be more expensive to build in New York than in Portland.
Type of Construction
The type of apartment building to be built also directly impacts the total cost of a construction project, especially on the cost per square foot. For example, a luxury apartment building will cost more to build than affordable housing. Additionally, larger buildings will also require more materials and differ in building methods, which increases the cost considerably.
Below are some general figures provided by Fixr on the average cost of construction for various building types:
- Infill. A term for stick-built apartment buildings composed of up to six apartments, the average cost per square foot ranges from $90 to $190.
- Low-Rise Apartment. A low-rise apartment typically has four or fewer stories and can have anywhere from 5 – 50 units. They have an average cost of $156 to $240 per square foot, depending on the materials used.
- Mid-Rise Apartment. Typical mid-sized apartments can have up to 12 stories with a total of 50 to 200 units in the building. These can cost between $185 to $270 per square foot to build.
- High-Rise Apartment. High-rises can be more than 12 stories high, with many having more than 20 stories. At such a great height, they have to be built in a special way to be able to withstand strong winds and earthquakes. Cost for building high-rise apartment complexes can range from $235 to $450+ per square foot.
Material and Labor Considerations
Considerations for materials and labor also have to be made as they make up a majority of the construction budget. Even in a healthy economy, they require a healthy budget as the cost of materials and labor continues to rise. But at the height of the pandemic, material costs shot up by 23.1%, while labor cost was up 7.6%.
Although this trend eventually slowed down, market price changes will inevitably continue. According to data supplied by the National Association of Home Builders (NAHB), building materials prices have increased by 4.9% since the start of 2022.
Other Costs and Factors to Consider
Aside from the hard costs, other factors can also impact the construction cost. These include:
- Soft costs such as taxes, professional fees for design, inspection, and engineering, permits, and others not directly related to the actual construction of the complex.
- Finance costs include interest on borrowed funds, origination fees, and finance charges.
- Long-term costs include maintenance, utilities, and other monthly expenses.
- Waste, which refers to other essential parts of the complex that do not produce income but contribute directly to construction costs, such as gyms, hallways, elevators, lobbies, mail areas, and staff space.
A Reliable Construction Partner
Knowing the cost of building an apartment complex is essential, especially if you want to plan ahead while setting a budget for this significant undertaking. However, finding a reliable construction partner is just as important to ensure your construction budget is used efficiently.
JNT Construction exceeds expectations as a reputable construction company in the Dallas area. We go above and beyond to ensure that our clients get the service they require. Contact us today for a free estimate!