Apartment Construction Costs in 2025: Calculator & Investor Guide
Easily understand potential multifamily construction costs in 2025 with our calculator and guide, whether you're building a four- or 20-units apartment complex.
- Apartment Complex Construction Calculator
- Multifamily Construction Costs: The Basics
- Why Apartment Complex Construction Costs Are Rising
- How Construction and Development Costs Are Estimated
- Hard vs. Soft Costs for Multifamily Construction
- How Much Does Multifamily Development Actually Cost?
- Architects’ Role in Multifamily Development
- Contractors’ Role in Multifamily Development
- The Importance of Understanding Multifamily Construction Costs
- Related Questions
- Get Financing
Apartment Complex Construction Calculator
Here you can calculate the cost to build an apartment complex based on the number of units and the average unit size:
Multifamily Construction Costs: The Basics
For multifamily developers, construction costs are of the utmost importance throughout any project's timeline. They can be a big source of pain: Costs rose astronomically in 2020 and 2021, thanks to pandemic-related delays, worker shortages, and distribution challenges.
In 2023, the National Multifamily Housing Council expected construction costs to keep rising, but — thankfully — at a much slower pace. And this trend has continued into 2024, with costs still expanding. As we get into 2025, keep in mind that while labor costs may remain on the same trajectory, materials costs could increase, particularly if expected tariffs go into place on foreign goods.
Still, with construction costs difficult to pin down (and potentially running up significantly during a project), it's critical to get a good estimate to understand exactly how much you need to allocate in your construction budget.
Why Apartment Complex Construction Costs Are Rising
The multifamily construction industry is grappling with significant challenges, primarily driven by unexpectedly high interest rates and surging construction costs. Especially affected is the affordable housing sector, which has seen an average cost increase of around 30%. Projects that previously secured low-income housing tax credits since 2019 have found themselves facing unexpected financial shortfalls, leading many to seek additional funding sources to bridge these gaps.
Developers have reacted to these headwinds with caution, becoming more selective in their ventures. In response to the growing costs, there's been a notable shift towards collaborations and partnerships, especially with municipalities offering soft financing. However, even with some state Housing Finance Agencies (HFAs) offering additional credits or soft funding, the support often doesn't fully address the budgetary challenges, emphasizing the industry's need for adaptability and innovative solutions.
How Construction and Development Costs Are Estimated
In the initial stages of a project, multifamily and commercial developers will typically utilize historical data from previous development projects, attempting to account for similarities and differences in their estimate (much like an appraiser might look at other properties using the sales comparison approach). However, due to constantly changing economic factors, it can be difficult to determine an exact budget, at least at first.
This is partially because, in the early stages of a development project, developers, contractors, and architects often rely on simplified, DIY cost estimation methods. In fact, simple “plug and play” excel construction cost estimate templates can easily be found online. These can usually give developers a good ballpark cost estimate, provided they input accurate information. While DIY spreadsheets are great for estimation, the vast majority of larger projects will bring in a professional construction cost estimator later on in the process. Though this can be expensive, getting an accurate budget estimation before breaking ground can often save developers thousands of dollars in the long run.
Hard vs. Soft Costs for Multifamily Construction
If you’re trying to estimate or analyze multifamily construction costs, it’s essential to understand the difference between hard and soft costs. Hard costs include all costs related to the physical construction of a building, including laying foundations, roofing, landscaping, appliances, and the like. Soft costs are typically intangibles, and include expenses such as permit fees, architectural costs, legal fees, construction loan interest and fees, and other similar expenses. On average, about 37% of a property’s development costs are hard construction costs, 24% are soft costs, and 19% can be attributed to land acquisition costs (and demolition costs, if necessary). The remaining 25% goes the investors in the form of equity returns.
In many cases, developers manage apartment and condo construction projects for a certain fee, but do not provide the majority of the capital. Instead, they usually partner with a group of investors who finance much of the development. Developer fees can vary significantly, but they are often set at 5% of soft and hard development costs. If the developer also acquired the land for the project, they might charge an additional acquisition fee of 1-2% of the purchase price.
How Much Does Multifamily Development Actually Cost?
The cost of multifamily development can vary significantly depending on the location, size, and amenities of the property. However, the average construction cost for a multifamily property in the United States in 2023 was $350 per square foot. This means that a 100-unit apartment complex with an average unit size of 1,000 square feet would cost about $35 million to build.
Of course, location is everything. Check the table below for a more accurate estimation.
Location | Average Cost |
|---|---|
National Average | $350 per square foot |
Major Primary Markets (Manhattan, San Francisco, etc.) | $450+ per square foot |
Secondary Markets (Phoenix, Orlando, etc.) | $300 to $350 per square foot |
Tertiary/Rural Markets | $250 to $300 per square foot |
Do remember that, when calculating your square footage, you also should include unusable square footage.
Unusuable space is space in the property that isn't rentable (or is even completely unusable). This figure could encompass amenity spaces, lobbies, elevator shafts and stairwells, and so on. Typically, around 15% of the space in a multifamily building falls into this category, but consult your development plans to get the precise figure.
To get a good idea of what construction costs can look like for an entire apartment building, consider the table below. These figures represent averages across the country — for construction projects in major primary markets like Manhattan, San Francisco, Seattle, and others, expect these costs to rise significantly higher.
Apartment Complex Size | Estimated Construction Cost |
|---|---|
4 units | $1.2 to $1.6 million |
8 units | $2.4 to $3.2 million |
10 units | $3 to $4 million |
12 units | $3.6 to $4.8 million |
20 units | $6 to $8 million |
50 units | $15 to $20 million |
200 units | $50 to $100 million |
To calculate the estimate for different number of units – Try Our Construction Calculator →
Architects’ Role in Multifamily Development
While contractors are responsible for supervising and hiring workers to physically build out a property, architects are responsible for creating detailed plans for the entire development. In many ways, a building is only as good as its plan, so choosing a quality architect is of the utmost importance. The responsibilities of an architectural firm include:
Create an initial plan and budget for the project
Create a work list and plan outline
Draft schematic designs and floor plans
Help developer review contractor bids and select a contractor
Review architectural plans with relevant agencies, and obtain needed permits, including general construction permits (some permits may later become the responsibility of the contractor)
Collaborate with structural engineers and planning agencies
Monitor the contractor’s progress and payment requests
Sourcing and purchasing all materials and services to build the property, start to finish
Obtaining all relevant construction and utility permits
Advising the owner/developer and the architect on the best ways to decrease costs and reduce project timelines (while maintaining or improving quality)
Selecting, hiring, and supervising subcontractors
Cleaning the entire property after construction is complete
Bath fixtures, plumbing fixtures, plumbing rough-in and connection
Cabinets, countertops, and built-in appliances
HVAC and insulation for building and individual units
Carpets and flooring
Exterior finishes and trim
Insurance and site/property cleanup
Permits, utility work, providing plans and specs for permitting
Lighting fixtures, painting, interior wall finish
Doors, windows, roofing and wiring
Rough/finish carpentry and hardware
Property excavation, foundation, piers, and flatwork
How much does it cost to build an apartment complex?
- The cost to build an apartment complex can vary significantly depending on the size and location of the project. On average, construction costs are $350 per square foot as of 2023.
What are hard costs and soft costs in multifamily construction?
- Hard costs include all costs related to the physical construction of a building, including laying foundations, roofing, landscaping, appliances, and the like. Soft costs are typically intangibles, and include expenses such as permit fees, architectural costs, legal fees, construction loan interest and fees, and other similar expenses.
What are the most important factors to consider when calculating construction costs for an apartment complex?
When calculating construction costs for an apartment complex, there are several important factors to consider. These include the cost of labor, materials, and subcontractors; the cost of architects and engineers; and the cost of permits and fees. Additionally, it is important to factor in the cost of any unexpected expenses that may arise during the construction process.
According to the Multifamily Construction Costs: An Investor Guide, labor costs are typically the largest expense for multifamily construction projects. This includes the cost of contractors, subcontractors, and any other labor costs associated with the project. Materials costs are also a major factor, and can include the cost of lumber, drywall, and other materials needed for the project. Additionally, the cost of architects and engineers should be taken into account, as well as the cost of permits and fees. Finally, it is important to factor in the cost of any unexpected expenses that may arise during the construction process.
What are the best ways to finance an apartment complex construction project?
The best ways to finance an apartment complex construction project depend on the size and scope of the project. For light improvement work, such as fixing holes in the roof and doing landscaping, you may not need to tap into additional financing. However, if you're doing more extensive work, such as upgrading HVAC systems or replacing windows, flooring, and appliances, it may be best to take out a loan or look into a line of credit. Bank, credit union, life company, or CMBS loans could be ideal for financing your renovations. Refinancing on an asset's appreciated value may also provide sufficient capital for your needs.
What are the tax implications of investing in an apartment complex construction project?
Investing in an apartment complex construction project can have a variety of tax implications. The most important of these is capital gains tax, which is paid whenever a taxpayer generates a profit from disposing of an asset such as commercial real estate. Capital gains taxes do not apply to ordinary personal and business income or the sale of an individual’s primary residence. Additionally, multifamily real estate is an ideal investment from a tax perspective. Not only can investors take substantial mortgage interest and depreciation deductions, but they can also often deduct travel and utility costs, as well as other expenses. For more information, please consult a tax professional.
What are the risks associated with investing in an apartment complex construction project?
There are a few risks to consider before investing in an apartment complex construction project. Construction costs have risen dramatically over the past few years, and this can impact renovation work as well as ground-up development projects. Make sure you do your research and plan ahead with a strong budget before beginning apartment renovations to avoid any nasty surprises. Construction delays are also an unfortunate fact of life, and due to supply chain issues, some cannot be avoided. It may be best to take a very conservative approach in terms of your project timeline. Additionally, your renovation work may simply not be enough to get the investment outcome you’re looking for. You may invest a lot of capital to add the highest-end luxury amenities to a property built in the 1980s, but if potential renters are looking for a newer building, you may not see much of an uptick in occupancy or rental revenue.
For more information, please see How to Renovate Your Apartment Complex and What are the Pros and Cons of Owning an Apartment Complex?.
What are the best strategies for minimizing construction costs for an apartment complex?
The best strategies for minimizing construction costs for an apartment complex include:
- Hiring experienced contractors and subcontractors who are familiar with the local market and can provide competitive bids.
- Using cost-effective materials and supplies that meet the project's quality standards.
- Negotiating with suppliers to get the best prices.
- Working with an experienced architect who can help you design a cost-effective building.
- Creating a detailed budget and timeline for the project and sticking to it.
- Using a construction loan to finance the project, which can help you manage costs and cash flow.
For more information, please see Multifamily Construction Costs: An Investor Guide.
Contractors’ Role in Multifamily Development
Choosing the right contractor is essential, as they’re responsible for the day-to-day management of the construction site. Choose a good contractor and your project will likely go smoothly, and, assuming your initial construction cost estimate was accurate, within budget. Choose poorly, and you may find yourself well behind schedule and over budget-- which can be disastrous, especially since most multifamily development projects are financed with construction loans, which must generally be repaid within a limited timeline.
Overall, the responsibilities of a contractor generally include:
Contractors are typically responsible for sourcing and installing all building elements, as well as taking care of certain administrative functions. These responsibilities generally include:
The Importance of Understanding Multifamily Construction Costs
Whether you want to get your hands dirty with a massive real estate development project, or you simply want to passively invest in apartment construction or rehabilitation, understanding multifamily construction costs is essential.
Though costs vary significantly by area, understanding national and local cost averages for contractors, subcontractors, architects, materials, and other expenses can help you ensure that you aren’t grossly overpaying for any part of your project. Perhaps just as importantly, you can make sure you aren’t investing with a developer who doesn’t place a priority on effective budgeting.