Why Do Podium Projects Cost So Much?
In the residential arena, it would seem that most of the house construction consists of 2-story wood framing on some type of standard foundation, with a 2-car attached garage. Generally considered to be the least expensive form of construction, the costs have been rising significantly over the last few years. I am not sure exactly how much is due to materials, but I keep hearing that the shortage of skilled labor (framing, plumbing, electrical) has been the major factor in these cost increases.
But where I have noticed the larger cost increases is with projects that require a concrete garage structure that allows for the parking of high-density projects. In podium projects, which I would describe as those with subterranean garage structures, the costs have risen so high that these projects would seem to be feasible only in affluent, high-priced submarkets. In the mid-2000’s, I worked on a podium project when we would underwrite the direct construction costs at somewhere between $125 – $150 per square foot. Today, I am told by builders that the costs are well over $300 per foot. It doesn’t take much financial analysis to conclude that you need some high home prices to cover these costs.
I have noticed that today’s podium product may be more dense, having more stories and garage levels that could drive up the costs. Instead of seeing “3 over 1”, which means 3 stories over one level of garage, I am hearing more about 5 stories over 2 levels of garage, which I would think adds to the costs. But again, at $300 per square foot, the condo units need to sell at quite a high price to justify the direct construction costs, land prices, site work, and all the soft costs.
In the apartment industry, I also hear that the 4-story and 5-story wrap product that utilizes a concrete garage structure is also experiencing huge cost spikes. So maybe the concrete construction is the major factor?
If you have some recent experience with these high-density products, we welcome you to share your thoughts below.