2023 Notice on the Construction Industry
For the last few years, construction costs rose due to several issues. The pandemic led to shortages of supplies, followed by supply chain and labor issues, and compounded by housing shortages. This led to significant price increases for the construction industry, and further increases are projected for 2023, with roughly 14% increases being seen for most commercial apartment complex builds. Duplexes and other smaller homes are still tracking at around 4% increases over the last year, while luxury, high-rise, and multi-family units in some areas are up nearly 50% in costs over the beginning of 2022. It is predicted that costs will fall or level off near or in 2024, but for the present, costs continue climbing. Despite all of this, apartment construction will continue as homeownership rate increases have stalled following the pandemic buying frenzy.
When building an apartment building, multiple cost factors form the final total. One of these is the construction cost, which is usually calculated per square foot. This cost does not include the finishing, architect or contractor fees, land purchase, landscaping, parking lots, and many of the interior and “soft” costs like designing, material selection, and delivery.
Numerous factors influence the final cost of constructing an apartment building. These include the unit sizes, number of units, structure size, materials used, availability of labor and materials, and many additional factors. Apartment construction costs per square foot vary by location and structure type. Small apartment buildings with five or fewer units have lower construction costs per foot than mid-rise buildings, which have lower costs per square foot than high-rise apartments.
There is some overlap and variation, depending on whether this is a luxury, mid-range, or builder-grade apartment building. The total price range to build an apartment building is between $95 and $645 a sq.ft., with an average price of $310 a sq.ft.
Apartment Building Cost by Type
The apartment building type you construct has an impact on the total costs, mostly on the cost per square foot for construction. Larger buildings use different building methods that increase costs. Some apartments have mixed uses. They may include offices or storefronts, and many offer areas like pools, gyms, social areas, and lobbies, impacting building costs.
Apartment buildings come in many shapes and sizes, also impacting costs. The more corners and shapes a building has, the higher the construction price. The number of units and building size also influence the price. Below are some of the most common apartment buildings and their average cost per square foot.
| Apartment Building Type | Cost per Sq.Ft. |
|---|
| Infill | $95 - $205 |
| Low-Rise | $180 - $275 |
| Mid-Rise | $210 - $310 |
| High-Rise | $270 - $675 |
Infill Cost
The price of an infill apartment building is $95 to $205 per sq.ft. An infill apartment building is a general term for stick-built apartment homes, including duplexes, triplexes, six-packs, and walk-up apartments. These apartment buildings typically resemble single-family homes in architecture and style and are timber-built. They can have up to 6 apartments in one building, but the average is 2 to 4. Because these apartment buildings resemble single-family homes, their costs are often closer to single-family homes. However, they often tend to be lower because materials are often builder grade.
Low-Rise Apartment Building Cost
The cost to build a low-rise apartment building averages $180 to $275 a sq.ft., depending on the material. A low-rise apartment building usually has 4 or fewer stories and is usually made of wood construction. It is sometimes called a 3-over-1 style building. This describes how the building is laid out - three stories of apartments over a single level that may include apartments, shops, amenities, or other uses. It can have 5 to 50 units and usually has elevators, two stairwells, and a double-sided corridor. These apartments are common in suburbs.
Cost to Build a Mid-Rise Apartment Building
The cost to build a mid-rise apartment building averages $210 to $310 a sq.ft. Mid-rise apartment buildings are larger and usually made of wood on concrete or with a steel podium. They can be up to 12 stories, but most are 10 or under. They have 50 to 200 units, with double-sided corridors, elevators, and multiple egresses. It is not uncommon for these apartment complexes to have an apartment gym, concierge, and other amenities. They may also have mixed uses, with retail stores on the lower level.
High-Rise Apartment Building Cost
The price to build a high-rise apartment building ranges from $270 to $675 a sq.ft. High-rise apartment buildings are subject to zoning laws, which dictate exactly how high they can be. They have a tower footprint 1 and are built of concrete and steel. They are always over 12 stories, and many are 20, 30, or 40 stories high. They can have 4 to 20 units per floor, usually a mix of studios, 1 bedrooms, and 2 bedrooms. They often have gyms, pools, concierge, and other amenities. Due to their height, it is important for high-rise buildings to be designed to resist the lateral forces inflicted by strong winds and potential earthquakes. Roughly every 10 stories increases the cost to build.
Multi-Family Apartment Construction Cost per Story
Apartment buildings typically become more expensive to build the larger they get. This is partly because the number of units that fit per story increases with the building size, but the materials also change. There is no one per-story price or range, but rather different costs per square foot and total ranges based on the approximate size of the finished building.
These costs rise with each story size for various reasons. Each story allows the building to have more units, so the cost to build a 5-story apartment building is higher than the cost to build a 4-story building because more materials and units are involved. However, once the buildings reach high-rise level, the materials change, driving the costs higher. Rather than wood, the buildings are now framed in steel, so costs compound with the number of units and the building’s structure. Below is a general idea of costs based on the number of stories. These numbers are an approximate average range, and the actual figures vary depending on multiple factors.
| Number of Stories | Cost per Square Foot | Total Cost |
|---|
| 3 Stories | $95 - $275 | $3.4M - $3.9M |
| 4 Stories | $178 - $275 | $5M - $6.7M |
| 5 Stories | $210 - $310 | $8.3M - $15.3M |
| 6 Stories | $210 - $310 | $10M - $17.7M |
| 10 Stories | $210 - $310 | $12.4M - $20M |
| 15 Stories | $270 - $675 | $23.7M - $56.25M |
| 20 Stories | $270 - $675 | $29.6M - $80.25M |
| 30 Stories | $270 - $675 | $41.6M - $120M |
| 40 Stories | $270 - $675 | $59.3M - $240.75M |
| 50 Stories | $270 - $675 | $89M - $401.25M |
Apartment Building Cost by Number of Units
Apartment buildings can have a wide range of units, which vary in size and scale. It is common for one building to have a mixture of studio, one-bedroom, and two-bedroom apartments of different sizes. Therefore, the number of units can often be a poor measurement of the total price of an apartment building. A large building can have fewer luxury apartments that are all two bedrooms and cost a lot more than a much smaller building with the same number of units that are a mix of studio and one-bedroom units that are mid-range in finish. Therefore, the cost range per number of units in a building can be enormous. Below is the average range for apartment buildings by unit. This is a very broad range, so you need more parameters to narrow this down.
| Number of Units | Building Cost |
|---|
| 4 Units | $1.2M - $4.2M |
| 6 Units | $3.6M - $17.7M |
| 8 Units | $3.6M - $18.9M |
| 12 Units | $3.6M - $20M |
| 16 Units | $3.6M - $22M |
| 20 Units | $3.6M - $24.4M |
| 24 Units | $3.6M - $30.5M |
| 50 Units | $8.3M - $80.3M |
| 100 Units | $23.8M - $240.8M |
Cost to Build a 4-Unit Apartment Building
A 4-unit apartment building costs between $1.2 and $4.2 million. A 4-unit building could have 1 to 4 stories, depending on how it is laid out. Buildings of this size can be built as a single unit. They can also be built in multiples within a larger complex. This is common for apartment complexes designed for seniors and families. Buildings of this size also commonly use materials seen in single-family homes, so they can have lower costs per square foot than other buildings. However, due to the many ways they can be organized, their costs range from one building to another.
Cost to Build a 6-Unit Apartment Building
The price of a 6-unit apartment building averages $3.6 to $17.7 million. A 6-unit building typically has at least 3 floors but could have more, depending on the apartment sizes and how luxurious the building is. Buildings of this size can also be built as stand-alone apartment buildings or included in larger complexes. This is a common building size for many smaller complexes that may have the apartments somewhat spread out. This size can also be built as a six-pack, resembling a large single-family home from the outside. This can mean a wide range of costs for buildings of this size, depending on the materials and layout.
8-Unit Apartment Building Cost
The price to build an 8-unit apartment building is between $3.6 and $18.9 million. An apartment building of this size could have 3 to 6 stories. It is common to start mixing various sizes of apartments on each floor at this size. This is another building size that may be included in complexes with multiple buildings. In areas with high occupation and housing needs, larger units per building can increase the number of tenants over the property. These buildings may still use similar building materials to single-family homes, but it becomes less common. You are more likely to start using steel frames and brick exteriors as the building size increases.
Cost to Build a 12-Unit Apartment Building
A 12-unit building could have 3 to 6 stories and cost between $3.6 and $20 million, depending on the scope, scale, and materials. Buildings of this size usually have a good mix of unit sizes. It is common with these to include studio units mixed with single and two-bedroom units. If the building is long rather than tall, you may still use building materials common in single-family homes at this size. However, if the building begins to rise in height to accommodate the extra units, costs can be higher.
Cost to Build a 16-Unit Apartment Complex
A 16-unit apartment building costs between $3.6 and $22 million. Units of this size may have between 4 and 10 stories. They also usually have a mix of apartment sizes and some luxury units. Depending on how many floors the building has, you may have some 16-unit buildings inside a larger complex that includes buildings of other sizes and occupancies. Costs to build a complex of this size vary by the number of floors. A 4-story building has lower costs to build than a 10-story building, even if the number of units remains the same.
Cost to Build a 20-Unit Apartment Building
20-unit buildings are 4 to 10 stories, making their average price range between $3.6 and $24.4 million. Like 16-unit buildings, it is common for buildings of this size to have a mix of apartment sizes. You might also want to add one or more luxury units. It is also common in buildings of this size to include more amenities, such as communal lobbies and other spaces. Expect costs to climb with the building height. Building 4 to 6 stories has lower costs than building 8 to 10.
Cost to Build a 24-Unit Apartment Building
A building that houses this many units could be from 4 to 10 stories, giving it a cost range of $3.6 to $30.5 million. 24-unit apartment buildings have a wider range of apartment sizes. Some buildings may even have 3 or 4-bedroom units on the top floors. Amenities become more common, with some buildings having game rooms or gyms. Amenities become a larger part of the total costs in buildings of this size. Because they are often expected, their inclusion raises the costs per square foot, especially for taller buildings.
Cost to Build a 50-Unit Apartment Building
50-unit apartment buildings have costs ranging from $8.3 to $80.3 million. At 50 units, you are officially in a mid-rise apartment building, so your costs increase. If this is a luxury building, it could be more than 12 stories, making it a high-rise. At this point, you definitely have more costs tied to the building’s structure. This is particularly true once you hit the high-rise bracket. Mid-rise buildings have higher costs than smaller buildings, but high-rise costs increase costs dramatically over smaller buildings. You should also have amenities in the building, impacting costs.
Cost to Build a 100-Unit Apartment Building
The price for a 100-unit apartment building is between $23.8 and $240.8 million. A 100-unit building can be many sizes, from a mid-rise of 5 floors to a luxury high-rise apartment complex. Most costs vary depending on the building’s height, luxuries, and amenities. High-rise apartments have higher costs, and amenities like pools, gyms, and lounges are more common for a building with 100 units. If the high-rise building is located in an urban area, expect costs to be much higher. Luxury and high-rise apartment buildings are sought after in some areas, driving costs because certain amenities are expected.
Prefab Apartment Building Cost
Given the popularity of high-rise apartment complexes in urban areas, many construction firms turn to modular or prefab building to cut costs. This can be a much less expensive method of building, lowering the construction cost per square foot and reducing many of the additional soft costs like designer fees. Expect the average price per square foot for a prefab apartment building to range from $150 to $400 per sq.ft. This also applies to high-rise buildings, making them much more affordable.
Prefab building or modular construction means many parts are constructed off-site. The various components are transported to the building site to be assembled. Because most of the construction happens in a controlled environment, there are fewer delays for weather. Computer-aided building technology makes construction much faster and more streamlined, lowering costs while allowing your building to go up quickly.
Apartment Building Construction Cost Breakdown
Many variables determine the overall cost of an apartment building, including materials and labor and the cost of an architect, general contractor or builder, and structural engineer. Costs vary by location, material types, and building style. High rises require more material in total and for the structure, so you have higher total material costs.
Every project is different, but you can get a general idea of how a large-scale project like an apartment building breaks down in costs. This includes the labor and materials for each section as a percentage of the total project cost. Architect, designer, and builder fees are in addition to the total cost to build.
Maintenance
There is a wide range of maintenance costs for apartment complexes. The materials used, number of units, and unit type impact how much maintenance costs. Monthly maintenance fees range from $50 to $1,000 for each building, and many have varying monthly costs depending on the building’s needs. This can also vary by location and tenant type. Urban areas and luxury buildings may have different maintenance needs than apartments in other areas.
Cost of Owning an Apartment Complex
There is also a wide range of costs associated with owning an apartment complex. The building size, number of occupants, conditions, materials, and location impact the ownership cost. Owning an apartment complex is considered a source of income. Meaning that rather than paying out each month, you take in money that is over your operating expenses and the price to purchase the building, assuming a competitive loan rate. The price of owning the complex should be between about 20% and 50% of the money brought in by the complex. However, this can cut into the bottom line of a developer or owner in profits with increasing construction costs.
Single-Family vs Multi-Family Investment
When building or purchasing an apartment or rental property as an investment, consider the investment costs of a single-family versus a multi-family residence. With a single-family investment, you purchase a house that you rent to others. If the tenants leave and you have difficulty rerenting it, you will not see a return on your investment during that time, but you still have the maintenance and ownership costs.
With a multi-family investment, you have multiple renters, so if a unit is vacant or a tenant is late with their rent, you take in enough income to cover the property expenses. Single-family investments usually involve less money upfront but are also less likely to be easily financed. Multi-family investments cost more upfront, but because of the multiple income streams, most banks front the costs more readily.
Enhancement and Improvement Costs
Cost to Build Luxury Apartments
A luxury apartment is a high-end apartment that includes everything one could ever want or need. They are large, spacious, and located in great locations. They have first-class appliances and equipment, a concierge, on-site parking, and numerous amenities, like movie theaters, fitness centers, or spas. The price to build a luxury apartment starts at $550 to $650 per sq.ft., with some in urban areas having even higher costs.
Cost to Build a Parking Garage
Most apartment buildings have above-ground parking, with lot sizes that allow for a minimum of one car per unit. Some may have lots that allow two or more cars per unit. Costs per space are between $14,000 and $30,000 for most parking garages, while surface lot costs can be lower at $1,500 to $10,000 per space.
Additional Considerations and Costs
- Location. It is difficult to provide absolute numbers for apartment buildings because there are varying costs based on location as well as size and material. Areas with housing booms also have higher costs.
- Comparisons. To get a good estimate, developers look for similarities and differences in their estimate to other projects of the same relative scale to ensure their numbers align with local averages. Therefore, it can be hard to come up with an absolute budget quickly.
- Research. Understand the needs of the area before building, including vacancy rates, rents, and your competitors.
- Real estate management. You do not need a real estate license to own an apartment building, but you may need to hire a manager to oversee the property.
- 2% rule. The 2% rule in real estate recommends that the rent from a property be equal to 2% of its total cost.
- Amenities. Pay attention to the amenities you plan on including and the return on investment. Consider the trends of your potential tenants and what they expect to be included based on the rent cost. Amenities require space and maintenance, so you will need to make sure they provide the return you are looking for.
FAQs
- Is an apartment building a good investment?
In most cases, yes, having multiple income streams can produce a very high return on investment.
- Do apartments hold their value?
As long as they are kept in good condition, they hold and increase in value.
- Why do apartment prices fluctuate daily?
This is mostly due to market demand. The more renters in a market, the higher the cost, while the fewer renters, the lower the cost.
- How much does it cost to build a studio apartment?
Average costs to build a single apartment unit start at $77,000. Studio apartments may cost less, depending on the size and location. Some very small studio apartments may be built for less, but luxury studios may cost more.
- How many units are in an apartment complex on average?
This will vary tremendously based on the size of the complex, and the size of the units. It’s not uncommon for a complex to have a mix of differently sized apartments. A small complex may have 10 apartments, while a large complex could have 100 or more apartments spread throughout multiple buildings.
- What is a good size for a 2-bedroom apartment?
The most common size for a 2-bedroom apartment is 800 sq.ft. A large 2-bedroom apartment is around 900 sq.ft. or above.
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