Densifying The Southeast: The Tricks To Building Infill Apartments

It's hard to remember, but before the last recession, the idea of denser urban areas — especially if it involved multifamily development — often inspired NIMBY. That's not as true now in Southeastern cities, including Nashville. Density's more in favor.

But infill urban development, even where it's accepted, has its challenges. We recently spoke with Beach Co CEO John Darby, who is at work on projects here and in other Southeast cities, about the challenges and rewards of density in this part of the country.

Bisnow: Are local governments really open to dense projects now?

Darby: More than before. Still, it’s important to get the pulse on the projects under development in any city. Some local governments welcome dense developments, while others still thwart development by holding up permits, requiring unrealistic design approvals or changing the zoning. Time is the only thing between getting a project planned, permitted, built and stabilized, so trusting the process is crucial.

An example of this is Cardinal Newman (rendered below), a project we're working on in Forest Acres, S.C., that has spurred the local government to make long-overdue infrastructure upgrades. The development will add roughly 250 apartments and about 45k SF of retail space on a 12-acre site. The city used the development as an opportunity to get a funding source to address some issues that need to be addressed, such as automating traffic signals.

City planners designated the area that includes the Newman project as a multi-county business park. The designation will allow the county to use the increased tax revenue over 10 years to directly pay back funds borrowed to make the infrastructure improvements.

Bisnow: How do you know a location is viable?

Darby: When assessing a location, a developer needs to look at rental markets and the difference between what a new building would rent for compared with a B or C product. If there's a big gap between the two, dig a little further. Then, look at what's proposed, what's under construction, how many units and how many square feet are coming online that cycle. If you can build your product and get absorbed and get the right rents, then that’s a good sign.

There will be unique challenges with any location, from rezoning to environmental issues. Because markets are so competitive now, companies must be selective when considering a location because renters have a lot of options.

Bisnow: Are investors still interested in multifamily?

Darby: Yes, but a developer needs to finds an area with investors who are interested in creating a presence in that city. Financial institutions spend a significant amount of time researching cities, and unless they view the city as a top investment spot, the project may not be financially viable.

In new markets, it’s critical for the developer to be straightforward with its plans for the site every step of the way. No one can predict the future, but you can do your best to deliver a project that will benefit a community for generations.