How AI De-Risks with Multi-Family Feasibility Studies in a Market Slowdown

Following the surge during the early pandemic, we’re seeing a slowdown in the multi-family sector. National Association of Home Builders (NAHB) projected that multi-family starts will fall 20% this year. On top of a slower market, developers are also experiencing challenges like increased expenses, insurance costs, and higher-for-longer interest rates.

 But according to the Matrix Multifamily National Report - April 2024 by Yardi Matrix, there is still a modest increase in rent after seven consecutive months of decline, and demand for apartments is still consistent.

Developers are still looking to build but in a more cautious manner. To reduce risks in an uncertain market, real estate feasibility studies are now more important than ever.

The Critical Role of Feasibility Studies in Today’s Market

Feasibility studies, as part of the due diligence process, assess the 5 components of a real estate deal including capital, land, zoning, design, and construction.

For real estate developers, the key part of these studies is the project’s profitability, a critical measure for securing financing for building on a piece of land. This is especially important when interest rates are so high and financing from lenders is increasingly difficult.

The goal of a feasibility study is to analyze all the risks of a potential deal to avoid making expensive mistakes early on. Our developer clients tell us that their traditional comprehensive feasibility study without TestFit takes 2-3 months to complete, depending on how complex your project is and how many design schemes you have to consider.

To compete in a market where good lands are hard to come by, we need to conduct feasibility studies that are both quick and accurate to get to the right deal faster.

How TestFit Real-Time AI Streamlines Early Project Stages

New technologies like TestFit are helping multi-family developers save time on getting real estate deals done by 75% (TestFit 2023 ROI Report.)

For example, using real-time AI, TestFit can generate an optimized design layout by considering user-input parameters like parking ratio and unit mix, reducing time spent on drawings and revisions tremendously.

Instead of relying on traditional methods like spreadsheets, developers can use TestFit to get all the financial data including quantity takeoff and yield on cost, which dictates a project's viability and likelihood of being pursued.

Developments are risky and even more so in an uncertain market, but by reducing error-prone manual work, 83% of developers believe that using TestFit increases the accuracy of their feasibility studies.

The Growing Importance of AI in Multi-Family Development

In the current volatile environment of multi-family development, the risks are exceptionally high. Developers have to make sure the risks they’re taking are risks that are worth taking.

Leveraging AI technologies in real estate feasibility studies not only makes these assessments faster but also ensures that the projects, backed by solid data and accurate analysis, are more likely to succeed. For multi-family development, the integration of AI tools like TestFit will be crucial as the sector navigates through these turbulent times.

Need help implementing AI in feasibility studies? Get a consultation with the TestFit team today.