Developers Are FINALLY Accepting LOWER Profits
Why It Matters
Lowered return targets compress developer margins, prompting faster sales cycles and influencing pricing dynamics across the condo market.
Key Takeaways
- •Developers are cutting target returns from 15‑22% to 8‑10%
- •Lower expectations aim to accelerate absorption and redeploy capital quickly
- •Market sentiment, not pricing, now drives pre‑construction demand
- •Around 90 condo projects remain on hold, reflecting cautious investors
- •Developers accepting modest profits to avoid interest‑rate exposure on idle land
Summary
The video discusses a growing trend among a subset of real‑estate developers who are voluntarily lowering the internal rate of return they target on new projects.
Historically, developers aimed for 15‑22% returns, but a handful now accept 8‑10% in exchange for rapid absorption and the ability to pull capital into the next site. The shift is driven more by sentiment—buyers now view pre‑construction as attractive again—than by outright price cuts. Rising interest rates and mortgage costs also pressure developers to avoid holding inventory.
One speaker cited a developer who “went back to the table” and reset expectations, while another noted that about 90 condo buildings are currently on hold in the Blackline software database. The conversation highlighted that developers who can’t wait for a slow sell‑out are willing to sacrifice profit margins.
For investors and builders, the trend signals a tighter market where speed outweighs margin, potentially leading to more discounts for buyers but also higher risk of stalled projects if sentiment reverses.
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