Major Real Estate Developer Says Meeting Customer Demands Starts With How Apartments are Built and Managed
FOREST LAKE, MN / ACCESSWIRE / November 17, 2022 / Rising inflation and a chronic housing shortage is forcing would-be homebuyers to stay in the rental market much longer than desired according to Realtor.com. Rising homeownership costs, including near-double mortgage expenses, have created an even greater demand for new apartments. In a recent report published by RentCafe, an estimated 420,000 new apartment rental units are projected to be completed this year, pushing apartment construction to a historic 50-year peak. This construction boom has been driven by increasing demand for apartments nationwide.
And while it is true that U.S. rent prices have fallen in key markets, the long-term outlook suggests that those prices will rise again as demand for apartment units continues to increase. "By and large, apartment developers have picked up the pace in both 2021 and 2022, almost unexpectedly exceeding even the most optimistic projections for the post-pandemic multifamily landscape," the report says.
Despite the apartment construction boom, millions more units are needed, according to a report by the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) which states "demographic growth is expected to generate demand for another 3.7 million new rental properties with 5 or more units through 2035."
Mike Kaeding, real estate developer and CEO of Norhart, says that in order to transform America's housing shortage, the industry has to first transform the way apartments are built and managed.
"In the past 60 years the labor productivity has improved by 230 percent," Kaeding says. "Manufacturing has improved by 760 percent. During the same time construction has only improved by 10 percent. What this suggests is that we should apply the innovations discovered in other industries to construction. By doing this, we can incorporate technologies and efficiencies and speed up production to meet the demand."
Kaeding admits that when he took over his parent's business almost a decade ago, he had no preconceived notion of "the ways things are done." His father had passed away unexpectedly and he had to lead the business. "I just naively started to solve problems and that was the magic," he says. "We began changing the way construction is done. "Starting with an attractive culture unique to the construction industry, we hired the best talent. Together, we solved chronic construction inefficiencies, applied techniques from manufacturing, and integrated traditionally unaffiliated trades. This resulted in higher quality and lower cost projects."
According to a McKinsey & Company report, the construction industry does poorly completing megaprojects on time, on budget, and to specifications. Their research estimates that 98 percent of megaprojects suffer cost overruns of more than 30 percent; 77 percent are at least 40 percent late.
Kaeding says by moving to a manufacturing-style production system, a 5-10 times productivity boost is possible which would help complete apartment units that are much needed. "There was no way we could have foreseen the global pandemic," he says. "This impacted the housing market and caused an unprecedented housing shortage. But by changing how we approach and solve this issue is going to make all the difference to improving the way we all live."
ABOUT NORHART
Founded by Mike Kaeding, Norhart is a residential real estate construction and management company located in Lake Forest, Minnesota, that is transforming the way apartments are built by incorporating technologies and techniques that have revolutionized other industries. Voted Top Place to Work in Minnesota by The Star Tribune and Best Real Estate Company by Finance & Commerce, Norhart is known for thinking outside the box, analyzing data and creating award-winning innovative apartment buildings. To learn more, visit https://www.norhart.com. For additional information, visit Norhart on LinkedIn, Facebook, or Instagram.
CONTACT
Mike Kaeding
[email protected]
(651) 689-4830
SOURCE: Norhart