Asked what Uncommon Developers seeks to bring about with its mixed-use and multifamily projects, co-founder Ryan Hekmat replied, “job creation.” More broadly, Hekmat told Connect CRE that the goal is to grow the local communities surrounding the projects. “Our focus is to create environments that strengthen communities economically and socially through housing, opportunity, public spaces, and experiences that elevate quality of life,” he said. 

Hekmat will be among the experts taking the stage for the “Development: Block by Block, Project by Project” panel discussion at Connect CRE Los Angeles 2026, scheduled for Thursday afternoon at the Intercontinental Los Angeles Downtown. As a preview of the panel, he provided insights into his company’s community-building approach. The company is a vertically integrated real estate platform that handles acquisition, entitlement, design, construction, and property management in-house across an LA–focused portfolio of multifamily, mixed-use, and large-scale development projects. 

A case in point is The 24, built on the site of a former Los Angeles Times printing facility in Chatsworth. “On the 24-acre campus, nearly five acres are dedicated to outdoor living, including dog parks, a community garden, four pools, walking paths, basketball and pickleball courts, a citrus grove, outdoor movie theater, and expansive community green spaces,” Hekmat said. “Every day, the campus comes alive with families gathering, neighbors connecting, and residents enjoying an active, vibrant lifestyle together.

“And the news gets even better—we are currently working on opening an on-campus preschool to truly offer a one-of-a-kind live, work, play, and grow experience,” he continued.

Beyond the outdoor amenities, The 24 offers elevated spaces for work, collaboration, and connection, including dedicated work lounges, conference rooms, and reservable event spaces designed for productivity, community, and modern living.

Development can require reserves of patience, fortitude and persistence, and it’s not a coincidence that both city and state governments have sought to streamline the approvals process in recent years. However, Hekmat believes such initiatives are undercut by red tape and a lack of coordination elsewhere in the system. “It’s not the straightforward things that these entitlement and new legislative rules account for; it’s the ancillary things that need to be dialed in,” he said. 

Take fee schedules, for example. “The changes in costs, like impact fees or the school fees, create instability and destroy underwriting for projects,” said Hekmat. “If we have that underwriting from the beginning of the project, we can see if the deal makes sense. But even a dollar-per-square-foot change in the school fees can destroy a project. So that stability is something that is tantamount to success” in a development project. 

Conversely, the company is positioned to capitalize on dislocations in the market. “We look at the turmoil and the difficulty in financing these projects and all the instability in local and state codes as an opportunity for us to grow,” Hekmat said. “We have been doing everything that we can to keep our eye on the markets and look for deals based on other people’s inability to make things work and we’re very disciplined. We’re able to take advantage of being vertically integrated and developing with modular [construction], which enables us to grow at a basis that makes sense even when there is turmoil in the market.” 

On May 28, Connect Los Angeles brings together 600+ high-level owners, investors, developers, brokers, and lenders shaping the region’s market for a full day of insights and networking. Be in the room with decision-makers driving deals across LA, SoCal and the nation—register now: www.connectLA26.com

Despite the uncertainty in the U.S. economy, commercial real estate remains largely resilient. The multifamily, retail and industrial sectors are all strong, and there are several strong investment opportunities in these markets, as well as in workforce housing, office and more. 

Of course, these opportunities aren’t worth much if investors don’t know how to take advantage of them properly. From selecting the wrong site to making zoning errors, several things can go wrong when looking to buy, sell, lease, finance or develop commercial real estate. 

This is why it is important to work with a CRE professional who fully understands the ins and outs of the industry. According to Steve Rich, Colliers Charlotte director of retail services, there are no more knowledgeable CRE professionals than those who have earned a Certified Commercial Investment Member Designation, or CCIM.

Rich is the global president of The CCIM Institute, and he said that to earn a CCIM Designation, a professional needs to not only have a vast portfolio of CRE experience but also take four designation classes, a negotiations class and pass a final exam. 

“It’s like earning a master’s in CRE while also proving that you have expertise and experience,” Rich said. “There are no easy deals in CRE, but CCIM professionals are people with a proven record who know how to successfully complete a transaction.” 

Rich said that research shows that, on average, CCIMs close 42% more transactions each year than those without the designation. He spoke with Bisnow about why people who are interested in making the most out of the CRE market should work with a CCIM.  

Benefiting From Education And Experience

The coursework needed to complete the designation includes a rigorous financial analysis course, which covers time, value, money, net present value, debt coverage ratio, discounted cash flows and evaluating hold-sell decisions. The market analysis course focuses on supply and demand and competitive positioning.

The user decision analysis course teaches how to identify key market drivers, such as labor force, customer access, regulatory environment, supply chains and whether to lease or own. The fourth class, investment analysis, brings everything together with lessons on forecasting future cash flows, appreciation, tax implications and more.  

All this knowledge sets CCIMs up to help their clients make the most informed decisions and avoid common pitfalls that can come with CRE transitions, Rich said.

Avoiding Pitfalls 

Rich said there are several common mistakes that CRE investors and developers can make that a CCIM can help them avoid. For example, selecting a bad location or site.   

“There are several things to consider when analyzing a site, including labor force, growth patterns, absorption, gap analysis and financial feasibility, to name a few,” he said. “A CCIM designee has this expertise.”       

Uncovering Opportunities 

Rich said that thanks to the tools he has access to and the knowledge he has gained as a CCIM, he can help clients unlock new, more lucrative opportunities. He spoke about a client who is a franchisee for a national sub sandwich chain who was looking to open a new shop. 

Rich conducted a retail market potential analysis of the trade area his client was looking at and discovered that 92% of the people had visited a fast-food restaurant in the last six months. While that number is typical in the U.S., he also discovered that 18% of people in the area had ordered delivery from a fast-food restaurant, which was 48% more than the U.S. average. He also discovered that within a mile of the space his client was considering, 35% more people than the national average were going to sub or deli-style restaurants.  

“This additional information allowed my client to better understand the location and potential success of his restaurant,” Rich said. “I am confident the information I provide him is why he has been a client of mine for over 20 years.”

He said that when analyzing the CRE market overall, he has noticed many national retail chains are reducing the size of the brick-and-mortar spaces and blending them with e-commerce and curbside pickup. He is also seeing a rise in experiential retail, where stores are implementing everything from pickleball courts and adventure courses to wedding venues in their spaces to draw in customers.  

Utilizing Proven Expertise 

The bottom line is that when clients work with a CCIM, they can feel confident that they are working with someone with proven expertise in CRE, Rich said. 

“A CCIM has the education and the experience in CRE to get complex deals done,” he said. “CCIMs don’t just complete more deals — they help their clients minimize risk and maximize value.”  

This article was produced in collaboration between Studio B and The CCIM Institute. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.  

Halstatt Real Estate Partners, along with Development Ventures Group and Ustler Development (Partnership), has sold UnionWest at Creative Village, a mixed-use student housing tower in Orlando, Fla. Provident Resources Group purchased the asset, which was funded through the offering of tax-exempt and taxable bonds underwritten by BofA Securities.

The partnership built the 15-story building, which includes 644 student housing beds, more than 100,000 square feet of academic space, 11,000 square feet of street-level retail, and a 600-space parking garage. The tower opened in August 2019. The University of Central Florida and Valencia College are nearby.

The UnionWest at Creative Village sale marked the second successful exit involving bond financing for Development Ventures Group, known as the Deven Group.

Located at the corner of W. Livingston Street and N. Terry Avenue, the $105 million UnionWest is part of Creative Village, a $1.5 billion mixed-use master redevelopment project in Downtown Orlando.

Provident Data Centers and American Real Estate Partners’ PowerHouse Data Centers have formed a joint venture to build a data center campus near Dallas slated to be one of the largest such complexes in the United States.

Provident and AREP’s PowerHouse Data Centers plan to build the hyperscale-focused campus on 768 acres between Dallas and Fort Worth in Grand Prairie, Texas. The multi-phase project will initially leverage about 500 megawatts of committed power, with the potential to scale up to 1.8 gigawatts at full build-out, according to Provident.

Construction on the site — which sits north of Route 67 and close to Google’s data center complex in neighboring Midlothian, Texas — is set to begin in the second quarter of 2025, with power delivery secured for May 2026. While neither party in the joint venture shared their total investment in the project, Provident touted at least $5B in direct construction impact over the course of the multi-year build-out. 

The nearly 2 gigawatts of capacity planned for Grand Prairie would place the campus among the largest in both the booming DFW data center market and nationally, even as the data center sector is increasingly dominated by massive projects serving tech giants like Amazon, Microsoft, Google and Meta.  

“We were motivated to form this partnership due to Provident’s extensive experience in large-scale infrastructure and deep Texas roots, combined with PowerHouse’s focus on hyperscale solutions,” Provident Principal Strategist Jack Backes said in an email to Bisnow. “This created a partnership uniquely positioned to deliver a facility that meets the growing needs of global hyperscalers with speed, scalability, and efficiency.”

The JV between Provident and PowerHouse brings together two firms pursuing aggressive growth in the hyperscale data center market.  

Dallas-based Provident’s data center footprint entails 50 buildings in six states, totaling 3.8 gigawatts of power. The firm’s portfolio is centered in Texas, with data centers in operation or being developed in seven cities across the state, according to the company’s website. 

Development plans include a seven-building data center campus in Burns Harbor, Indiana, which Provident first proposed in August. But Backes tells Bisnow its latest Texas project previews an upcoming push to expand its presence in the market, targeting the world’s largest tech firms.  

“This project is also part of Provident’s broader vision for hyperscale growth,” Backes said. “Provident is preparing to leverage its 30 years of experience to deliver future developments independently through vertical construction in the data center space.”

PowerHouse’s hyperscale expansion is already well underway. The Virginia-based company says it has 87 buildings and 25.5M SF in planning underway or completed, representing over 5.9 gigawatts of power across 6 U.S. markets. 

As with the planned campus in Grand Prairie, PowerHouse’s swollen development pipeline is being executed largely through joint ventures. 

The largest of these JVs, announced in August, is a partnership with fellow data center firm Chirisa and asset manager Blue Owl to build a series of data centers anchored by AI cloud provider CoreWeave that could ultimately deploy more than $5B. The JV’s initial buildout is slated for a campus near Richmond, Virginia, that could ultimately exceed a gigawatt of capacity, with further development expected in New Jersey, Pennsylvania, Texas, Kentucky and Nevada. 

Less than a month later, PowerHouse unveiled a separate JV with investment management firm Town Lane. The partnership acquired a 122-acre site in Charlotte, North Carolina, where it plans to offer 300 megawatts of capacity across five buildings by 2027. 

An earlier development joint venture between AREP and investment firm Harrison Street formed in late 2021 has also fueled much of PowerHouse’s growth trajectory. This year, the two firms broke ground on both the first phase of an 800-megawatt campus in Spotsylvania County, Virginia, and a 65-megawatt project in Reno, Nevada. The partners sold one of their co-developed data centers in Northern Virginia to CyrusOne last month.

The JV with Harrison Street has helped PowerHouse push into the DFW market, launching a 200-megawatt project on 50 acres in Irving, TX last spring.  

Amid a nationwide data center development boom, the DFW metroplex has remained one of the industry’s strongest growth markets. The region trails only Northern Virginia in leased critical IT Power with 776 megawatts, according to 451 Research. At the end of the second quarter of last year, JLL reported that Dallas ranked fourth in capacity planned or under construction with a pipeline exceeding 3000 megawatts. 

The data center industry’s growth across Texas has sparked growing concerns about the impact of gigawatt-scale campuses on the stability of the ERCOT power grid and power prices for consumers, with some politicians suggesting pumping the breaks on future development. But Provident’s Backes insists that the company’s project with PowerHouse in Grand Prairie is paired with energy infrastructure investments that, along with collaboration with utilities, will ensure these concerns don’t come to fruition.

“Our development is designed to enhance grid stability rather than strain it,” Backes said. “Provident has spent the past two years working closely with ERCOT and Oncor ensuring that the project not only avoids price increases for consumers but also strengthens grid resilience and reliability.”

A development team of Griffin Brothers Property Services and Quore Real Estate Advisors is trying to get the city of Charlotte to rezone 24 acres in Brookhill Village along Remount Road at the edge of South End. The zoning designation would give the firms the opportunity to plan and develop a mix of uses there that will likely include commercial, retail and additional multifamily.

The Charlotte Business Journal reports the Griffin Brothers and Quora spent the last 1.5 years clearing the site of vacant residential units and rehabilitating the remaining 100 units.

20 of the renovated units will be used as transitional housing for families and individuals experiencing risk of homelessness.

Brookhill Village is an affordable housing community owned by Brookhill Land Lease Ventures. A 99-year ground lease ends in 2049 when the property and everything on it reverts to original ownership. Griffin Brothers assumed ownership of the land lease in March 2022.

The landlord of a six-story office building near Perimeter Mall has sought approval to convert the space into 207 residential units for seniors. The 14-acre property, first developed in 1982, is known as Ashford Green (photo). Its office space is about 26% vacant. The proposal, fronted by Ashford Green Ventures, calls for five stories of new housing for residents ages 55 and older. Converting the office along Dunwoody Road to housing initially got the OK from Brookhaven’s planning commission. The Atlanta Business Chronicle reports the City Council has asked the developer to make changes before granting approval.

Another Brookhaven office development from the 1980s is also slated for more housing. The developer is focused on market-rate apartments.

Perimeter Summit, originally zoned in 1986, contains four office towers. Now, its owner, Spear Street Capital, has sold one of the few remaining undeveloped pieces to High Street Residential. Years ago, it would have been developed with office space. Now, High Street aims to build 350 apartments. High Street paid about $11.5 million to gain control of the 4-acre site.

Richmond has experienced faster population growth than Northern Virginia since the start of the pandemic, and several employers and developers are seeing the migration trends as a reason to expand in the market.

Bisnow/Chase Goff

Hirschler Law’s Matthew Roberts moderates a panel with Crescent Communities’ Brandon Wright, Greystar’s John Clarkson, Capital Square’s Whitson Huffman and Drucker + Falk’s Andrew Chisholm.

Developers and economic development officials speaking earlier this month at Bisnow’s Richmond State of the Market event said the city has a few key factors going for it: a talent pipeline stemming from nearby and local universities, business-friendly policies and a reduced cost of living.

“It seems to be, I hate to say ‘on fire,’ because I know that technically Richmond burned down at some point, but things are happening,” Greater Richmond Partnership President Jennifer Wakefield said at the event, held at the Richmond Marriott Downtown. 

Matan Cos., whose director of leasing spoke at the event, broke ground  in 2021 on Northlake II, a five-building, 655K SF industrial development half an hour south of the city’s downtown, and it delivered the first phase this month. The project marks a new expansion for the firm. 

“Richmond is our first ground-up development outside of our core market in D.C.,” Matan Director of Leasing JP Matan said. “We saw an opportunity to build speculative in this market, which is the norm in D.C., our market, which was not the case here.”

From 2020 to 2022, the Richmond area grew by 2.1%, or more than 27,000 people, according to a University of Virginia study. This outpaced Northern Virginia’s growth of 0.7% during that period.

Louis Rodgers, founder and CEO of Richmond-based developer Capital Square, said the Richmond area has benefited from Covid-era migration trends.

“The migration from the gateway cities has been going on for a long time, but the pandemic accelerated the migration,” he said.

The shift in many workplaces to remote work and a lower cost of living than many of the city’s neighbors are driving factors. 

“The cost of living discrepancy that Richmond still has — to this day to other markets like a Charlotte, like in Atlanta, obviously, D.C. that’s not even a question — that’s what’s driving a lot of this population,” Crescent Communities Managing Director Brandon Wright said. 

But population growth is also coming from within, panelists said: Students who come to the area’s colleges and universities are choosing to stay in place as more opportunities come to the region. 

“We are a talent attraction magnet because people are coming to school here and then more importantly, more where people are choosing to stay here once they finish their matriculation,” said Leonard Sledge, director of Richmond’s Department of Economic Development. 

Virginia Commonwealth University, University of Richmond and Virginia Union University are within the city proper, while schools like Virginia State University and Randolph Macon College are roughly a half-hour from downtown Richmond.

The economic calculation for those new graduates to stay local makes sense, Rodgers said.

“Those kids would have a pocket full of cash left over and they live in a nice place that’s less congested, very historic and pleasant and lovely to live in, or they could live in D.C. and have no money left over at the end of the year,” Rodgers said. 

Bisnow/Chase Goff

FGM Architects’ Ryn Burns (far right) moderates a panel with (from right to left) Divaris Real Estate’s Loretta Cataldi, City of Richmond’s Leonard Sledge, ARCO Design/Build’s Wes Patterson and Greater Richmond Partnership’s Jennifer Wakefield.

With that growing population, there are new public and private developments underway. The most prominent is the city’s project to develop a new neighborhood called the Diamond District.

Last month, Richmond announced RVA Diamond Partners won the bid to develop an 11-acre park, a Major League Baseball-standard stadium for the minor league Richmond Flying Squirrels, over 3,000 rental and for-sale housing units, including affordable housing, a hotel and retail at the 66.7-acre site.

Commercial real estate data firm CoStar is bringing a 750K SF research and technology hub to Gambles Hill, just outside downtown. The project broke ground in November 2022 and will cost $460M. The company has a goal of bringing 2,000 jobs to Richmond — it already has 1,500 employees working out of the city after it planted a flag there in 2016. 

In the suburbs, Lego announced last year it is building a 1.7M SF production facility in Chesterfield, roughly a half-hour south of downtown Richmond, and Amazon is bringing a robotics fulfillment center to Henrico. 

Wakefield said in recent months some of these $1B “megaprojects” they were competing for have gone to locations other than Richmond. 

“Within the active pipeline, right now we’re seeing a kind of a stabilizing-ness, but not a slowdown,” Wakefield said of the megaprojects. 

Greystar Managing Director John Clarkson said the firm signed 75 apartment leases in May at its 350-unit Otis project in Richmond’s Scott’s Addition neighborhood, which he said was a record-high pace for the national apartment giant. The building started leasing in January and is already 65% leased, he said. 

“We’ve been blown away with how well it’s done,” Clarkson said. 

As the population grows and job opportunities expand across the area, transportation is a hurdle for developers. Wright said that at Crescent Communities’ multifamily development under construction in the Scott’s Addition neighborhood, branded as Novel, parking is planned at 1.3 spaces per unit. 

“This is still a suburban office — a suburban working environment,” he said. “And so unfortunately, you’re going to need a car to commute until all those jobs do come back and are more urban-oriented. I think you’re unfortunately gonna need higher parking counts.”

Capital Square co-CEO Whitson Huffman agreed, arguing that the public transportation infrastructure isn’t there yet, but expressed hope, as did other panelists, that it will one day get there.

“I don’t think the adoption of things like Bus Rapid Transit is to a place yet where you could justify building a lot less parking,” he said. “But I would say that it isn’t a bad thing to have that flexibility because maybe someday we get there, and that’s already in place, you can go build less parking. And hopefully, someday people are working downtown and they’re taking the BRT, and they’re jumping off and running to CoStar. But that’s not where we are today.”

As utilities in major data center markets struggle to keep up with the industry’s energy consumption, data center developers are increasingly building far beyond the borders of the sector’s traditional hubs.

The rapid growth of the data center sector in North America has largely been concentrated in just a handful of markets: Northern Virginia, Silicon Valley, Dallas, Atlanta, Chicago and Phoenix.

But experts say a growing share of new development is happening outside the industry’s traditional boundaries, with second- and third-tier markets accounting for an increasingly large share of growth. Developers are launching a growing number of large-scale data center build-outs, often on spec, in markets like Reno, Nevada; Des Moines, Iowa; Austin, Texas; and Columbus, Ohio — and they’re finding tenants eager to snap up this new capacity.

Driving this surge in demand in secondary and tertiary markets is the sector’s voracious appetite for power, which is significantly outpacing the ability of utilities in the industry’s largest markets to provide it. Data center providers and their tenants are looking for readily available power anywhere they can find it, and that increasingly means going to markets that may not have been in the conversation just two years ago.

“Clearly, the demand conversation is becoming much more geographically diverse than it ever has been before,” said Chris Downie, CEO of colocation data center provider Flexential, speaking at Bisnow’s DICE East event last week at The Ritz-Carlton in Tysons, Virginia. “We’re seeing large-scale demand sets across markets like Hillsboro, Oregon, and Atlanta and Denver and then a ripple effect on Raleigh and Charlotte and in Nashville.”

Bisnow

Flexential CEO Chris Downie speaks at Bisnow’s DICE East. He is joined by Akerman’s James Grice, Credit Suisse’s Sami Badri, Sabey Data Centers’ Rob Rockwood and Cato Digital’s Dean Nelson.

This shift toward secondary and tertiary markets was reflected in first-quarter leasing numbers. A report released last month by industry analyst group Data Center Hawk showed absorption in North America increasingly spread over multiple markets instead of being concentrated almost entirely in the traditional hubs. 

“Demand has spread out with multiple markets representing a substantial portion of overall absorption,” the report states. “Some companies that were considering Northern Virginia for their requirements are now opting for alternative locations such as Atlanta or Columbus. Similarly, requirements in California are shifting towards cities like Las Vegas, Salt Lake City, or Denver.”

Experts attribute the trend to the fact that primary data center markets are running out of power.

In Northern Virginia, utility Dominion Energy had to delay power delivery to multiple projects in the heart of the industry’s largest market last year due to insufficient transmission infrastructure, while California’s Silicon Valley Power may not be able to energize new data center substations until 2029. Similar constraints are suddenly on the horizon even in newer data center hubs like Phoenix and Atlanta, while a recent CBRE report pointed to looming transmission problems across multiple markets, from Dallas to Central Washington. 

“Available capacity in all of these major Tier 1 markets is becoming strained: look at the Bay Area and Virginia,” said Dean Nelson, CEO of Cato Digital, speaking at DICE East. “There’s just constraints everywhere — and by the way, it’s about to get worse.”

One year ago, a lack of robust fiber connectivity or concerns about the local labor force in a smaller market might have been disqualifying. Now, as long as low-cost power is available, developers and their investors are increasingly willing to shoulder the added costs of addressing these issues to build new inventory on spec, confident the demand will be there.

“It’s just all about availability of power. That’s the first criteria before you go down to whether there is fiber nearby or if there’s a good pool of labor resources and all the other things that used to be higher up on the list from a site selection perspective,” said Ali Greenwood, executive director in Cushman & Wakefield’s data center group. “You hear about flight quality in office — you’re seeing flight to power here.” 

Although noncore markets are likely to see a growing share of development and demand, experts say that the industry’s central hubs aren’t going anywhere. Indeed, Northern Virginia added five times more inventory in 2022 than the fastest-growing secondary market, according to CBRE. 

Hyperscale tenants, in particular, will continue to place enormous value on clustering at least some of their computing infrastructure in dense primary markets, where closer proximity allows faster processing times needed for certain applications. So even as the data center landscape decentralizes, experts say these core markets will continue to grow as fast as the supply of power allows. 

“If you’re talking about cloud or very scaled customers, they probably really care about Tier 1 markets — those concentrations or densities, but if you’re talking about enterprise customers, they probably would like to be a bit more distributed in nature and they don’t need these very sensitive epicenters to do what they need to do with their workloads,” Credit Suisse Managing Director Sami Badri said at DICE East. “The significance of Northern Virginia obviously is going to be maintained, but the level of openness to expand to other markets has never been better.”

As the coronavirus storm clouds began to gather in March, CRG Managing Partner J.J. Smith was hired to help run the firm’s residential sector. In the first few weeks, he concentrated on developing a plan that leaned heavily on urban infill projects in high-density markets, the profitable strategy pursued by so many builders in the last decade. But after watching downtowns turn into ghost towns, Smith decided on another approach.

“I called it the pandemic pivot,” he said.

Dense urban cores now cause unease among many affluent renters, Smith noted, and even if vaccines tamp down the coronavirus pandemic, developers need a new product type that investors find appealing. When he ran the numbers, the answer seemed logical.

Courtesy of CRG

Broadway Chapter at 401 Hemphill St. in Fort Worth

Middle-class and workforce housing fared better during the 2020 downturn, especially in the suburbs, with rents and occupancy staying near pre-pandemic levels, Smith said. CRG, the real estate development arm of Chicago-based Clayco, took that data and in November committed $1B toward the development of Class-B workforce housing across the nation, mostly in first-tier and second-tier suburbs.

“You will still see urban living, of course, but in a more balanced state,” he said. 

The shift could provide a silver lining. Before the pandemic, the apartment industry got a bit too set in its ways, far too reliant on the same luxury-centric formulas, Smith said.

“Nobody had to innovate or think of a way to build a better mousetrap,” he said.

It is time to realize that workforce housing can also be a business that generates solid returns, he added. But it has to be done right, with an eye kept on controlling costs and making careful choices when it comes to location.

Other players in the multifamily market agree.

“I have always been a huge believer in investing in underserved communities, and if it’s done intelligently, you can get better returns,” Turner Impact Capital CEO Bobby Turner said.

His Santa Monica, California-based firm just closed its second workforce housing fund with $350M of committed capital, and it plans to leverage that into $1.25B of investments, acquiring up to 10,000 units in existing communities affordable to the working class.

Smith and CRG decided to focus on regions that enjoy the strongest job and population growth. That means favoring the Sun Belt over gateway cities like Chicago or coastal markets, Smith said. Metros such as Austin, Charlotte, Dallas, Nashville and Phoenix were among the most attractive, although a few high-growth standouts like Minneapolis, Denver and Salt Lake City will also be considered.   

A focus on each area’s respective suburbs was also an easy call. Smith said even in the Chicago region, which has recently experienced little or no population growth, new apartment developments in its affluent western suburbs like Naperville and Wheaton are opening with high levels of occupancy. That greatly increased CRG’s confidence in suburban Atlanta towns such as Alpharetta and Decatur.

“It directly lines up with where the institutional investor community is looking for product,” Smith said.

He anticipates the $1B the company plans to raise will fund about 10 new apartment communities over the next three years. Tax incentives or subsidies won’t be used, and residents will most likely earn between 80% and 120% of the area median income.     

CRG will debut its first project in June, when it opens Broadway Chapter, a five-story multifamily housing complex in Fort Worth, Texas. The 320K SF development isn’t suburban, but it is about 1 mile from downtown in the city’s Medical District, and Smith said the company has already seen great interest from local health care workers who can’t afford top-flight luxury housing.

Such strong demand convinced Smith other markets were aching for developments like Broadway Chapter — ones for renters with solid incomes, such as health care workers, teachers or police officers, but renters who can’t afford all the amenities of Class-A housing.

“It’s right down the middle of the fairway,” he said. “That’s always been a void in the market.”

That doesn’t mean every region is likely to see new workforce housing in the post-COVID-19 era. Developers in small Midwest markets still confront a dilemma. Rents in many of these markets just aren’t high enough to justify new construction of apartments targeted toward those with modest incomes, according to Hannah Ott, executive managing director of Cushman & Wakefield’s Indianapolis office.

“I’ve checked our pipeline in Indianapolis, and it is just about all luxury,” she said.

Courtesy of Turner Impact Capital

Portola Del Sol in Las Vegas

It’s been years since a large number of Class-B units were built in the city, even though the occupancy rate for this asset class is more than 94%, she added.

“I feel certain that if a new Class-B property was built, people would be very excited about it,” Ott said.

Similar conditions prevail in tertiary metros such as Cincinnati and Columbus. But with construction costs going up, bringing about change will be difficult.

“Without some sort of subsidy, it’s just hard to make it work,” Ott said.

Even in its vibrant Sun Belt markets, CRG plans a number of strategies to boost returns as it constructs apartments that charge modest rents, Smith said. Broadway Chapter’s wood-frame construction is just one way to utilize less expensive materials. In the future, builders in the space may also need to adjust unit sizes, perhaps use modular components created off-site, and leave out amenities such as stainless appliances or quartz countertops.

“All of these items are sure to come into play as we attempt to serve the middle-market segment,” Smith said.

Even before the pandemic, workforce housing was a solid performer, with relatively low vacancy rates and above-average rent growth, according to a 2018 CBRE study. Slow wage growth across much of the nation, which locked so many out of more expensive units, was part of the reason. But developers didn’t necessarily see it as an attractive business, and the sector lost about 100,000 units each year, many demolished to make way for high-end properties, CBRE said.

Turner said the industry needs to reverse that trend.

The pandemic is worsening the housing situation in the U.S. for so many, and even before COVID-19, millions of families were severely rent-burdened, paying more than 60% of their income toward housing costs, he added.

“We have so many people living in survival mode, and it’s not sustainable,” Turner said.

His company has been making money in the workforce housing sector for years. Its first affordable multifamily housing fund invested nearly $700M, acquiring 7,840 existing workforce units that housed more than 14,000 residents, Turner said. The second fund has already acquired seven multifamily communities and has an eighth under contract for a total of more than 3,000 units. The company also owns developments in the Atlanta, Austin, Dallas, Houston and Las Vegas metro regions, including Portola Del Sol, a 350-unit workforce housing community in Las Vegas it purchased one year ago.

Although Turner said he believes business can be a force for good, he also said this work isn’t philanthropy. There’s money to be made in preserving workforce housing, even where his company works, primarily in communities heavily populated by immigrants and people of color. But raising rents would defeat the goal of holding down costs for working families.

“The only other option is to reduce expenses, and the biggest expense is turnover,” he said.

Turner keeps apartments filled by also providing free employment assistance, community health facilities, homework help for local children and other services, sometimes through local community groups such as food banks or by building its own facilities.

The average rent throughout the Turner portfolio is $924 per unit, he added. But building managers rarely have to spend time and effort seeking out new renters for vacant units. That leaves enough money on the table to improve the properties without government subsidies and keep investors happy.    

“It’s not rocket science,” he said. “I do think of myself as being in the real estate business, but I also consider myself to be in the service industry. That’s why our tenants become sticky tenants.”