Development Market Conditions

Has the projected Fed rate increases impacted your underwriting? Have you seen increased interest rates with lenders? Has your firm slowed down on the pipeline for new development projects? How are you compensating for the increased financial costs? By increasing projected NOI growth? What does the market look like for development over the next several years?

 

in a major west coast market that was hit hard by covid, rent levels still haven’t fully recovered. We are getting aggressive on rent growth assumptions to make deals pencil, the underlying fundamentals are there and we’ve been able to show why it should happen, but ultimately need believers on the LP side. Construction costs are what they are, including insane amounts of contingency and escalation, which crushes the untrended YOC. If you’ve got a good basis and long term capital, deals can be done.

 

Rates haven't gone up much on our end... yet. We've been underwriting projected increases (Bank of Canada, I'm in the great white north) forever and forecasts through 2026 have only incrementally gone up from our lenders over the past year.

Rising construction costs are FAR more of an issue than rates. You can only reasonably push projected rent growth so far. Because of this, in pretty well every major market across Canada cost inflation has far outpaced rent and is making apartment development unfeasible. The vast majority of developers are pivoting towards condo on shorter-term projects. Really the only companies doing apartment deals right now are those with pension fund partners who are happy to build to a 4.5-5 cap at 12% IRR and those with long-term redevelopment projects that have a ton of future towers to go up.

 
Most Helpful

rates are still super low and interest carry has a marginal relative impact on development returns. Cost basis on deals is getting higher due to construction cost inflation in the 7-10% annualized range. Untrended yield on costs are probably 30-50 bps lower than they were 12 months ago, but cap rates have also moved lower in many sunbelt markets so the profit spread between projected exit caps and yield are maintained. General consensus is to build as fast as possible as cost inflation relief seems unlikely in the foreseeable future. 

 

Minima libero ut veritatis vel. Culpa excepturi consequatur voluptatem voluptatum quisquam aliquam hic. Porro ut praesentium sit ratione quis ut.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.8%
  • Goldman Sachs 18 98.3%
  • Harris Williams & Co. New 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (20) $385
  • Associates (91) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (68) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
CompBanker's picture
CompBanker
98.9
6
kanon's picture
kanon
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
Jamoldo's picture
Jamoldo
98.8
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”