Many agents are wondering what’s holding up new construction in 2016. What is currently your biggest obstacle to building?

The two biggest challenges to building more units are land prices and rapidly rising construction costs. Land has risen dramatically over the past 36 months, driven largely by valuations for multi-unit rental buildings. Developers building rental properties can often pay more than developers intending to build condominiums (a new trend no doubt).  Construction costs have also risen dramatically over the same period, but more specifically over the past year. The combination has produced an environment where it is near impossible to bring any product to the market that is less than $400/sf on the sales end, if not higher.
–Zev Salomon, Principal, Ranquist Development

Overcoming the difference in property taxes seems to be a hurdle for our primary audience of move-up homebuyers coming from an existing home of many years. Our challenge is demonstrating how the energy and maintenance savings of a new home, along with the advantages of a better location and new infrastructure, offset any tax increase.
–Chris Nickel, Vice President, Toll Brothers Chicago Division

The Chicago-area residential market continues to lag behind the rest of the country. Illinois is losing population and its job growth is not where it needs to be, with political and fiscal distress as contributing factors. This is the context in which homebuilders have to convince lenders, investors and buyers that residential investment is worthwhile. A healthier state, fiscally and politically, will restore confidence that Illinois is a good place to start a business, raise a family and make a long-term investment like buying a home. That, in turn, will raise prices and free up current owners to sell, trade up or trade down into empty-nester housing. In short, it’s not industry specific factors – such as lots, labor and interest rates – that are the biggest impediments to a resurgence in new construction. To be clear, however, the only real strength in the market is at price points that are too expensive for most first-time buyers. That reflects the fact that the most viable locations for new communities are infill locations where land is more expensive.
–Jerry James, President, Edward R. James Companies, Inc.

Our biggest obstacle in 2016 will continue to be locating sites that are priced right and can be entitled.
–Elizabeth Brooks, Vice President of Sales and Marketing – Managing Broker, Belgravia

It is still a very difficult environment to finance new construction buildings.  Banks have been very hesitant to get back in the condo lending business.  Additionally, end users will have a difficult time securing a mortgage for a brand new building.
–Jim Letchinger, President and Founder, JDL Development

Actually, there are many exciting new construction projects underway, with several more that are in the pre-sale phase.  In the last few years, we saw many luxury rental buildings deliver successfully. The demand, economics, lower risk factors and finance-ability of building a rental project resulted in this trend. However, we are starting to see some ultra-luxury boutique projects come to market. Many of these projects are adaptive reuse or mixed use. Demand seems to be there and the price levels required to justify a for-sale project are finally a reality.
–David Wolf, President – Development Marketing Division and SVP Chicago Region at Coldwell Banker