When CRE Looks Like Shaky Ground, Build Multifamily Assets: Q&A

After a successful career in commercial development, Barry Wurzel is now pivoting to multifamily construction. Here’s why and how he’s doing it.

The peak of the pandemic is behind us but the world and, implicitly, the construction industry is still dealing with the aftermath. While the number of COVID-19 cases is declining, other numbers are rising—inflation and interest rates. Construction companies have to adapt their strategies to make profits in an economic landscape that is bracing for a downturn.

Multi-Housing News talked to Wurzel Builders Founder Barry Wurzel. His company, headquartered in flourishing Austin, has made a name for itself in the commercial real estate industry, mainly health-care and retail construction. Recently, Wurzel decided to broaden the company’s expertise and tap into multifamily construction. Why and how is he doing it, find out in our discussion below.

What stands behind your decision to make your debut on the multifamily stage?

Wurzel: Wurzel Builders has been building in a variety of sectors over the past two decades, including health care, hospitality, industrial, retail and fuel. Multifamily is a growing market with a lot of potential. We decided to add multifamily to our focus because we have quite a bit of hospitality experience under our belts, and hospitality and multifamily are complementary to one another.

We want to become experts as a company in the space moving forward. The demand is there for new projects in the Greater Austin area.

What is your focus in real estate development today compared with when you started off in CRE?

Wurzel: When we first started the business in 1998, our projects were mainly retail work for institutional clients like Mervyns and Target. A lot of the big-box projects are repetitive work, building on a pad with a very specific footprint. As we became more experienced, we expanded into hospitality, medical and private developer work, with clients including QuikTrip, Family Hospital and Hotel Indigo.

At the beginning, most of our work was renovations, these days it’s a mix of renovations and ground-up development. We work on the entirety of the project, including parking lots and sidewalks and a lot more work handling the entire project, not just building on a pad. We love the projects that allow us to expand our skillset and challenge our team with design and overall aesthetics.

Tell us more about your first residential project. Also, do you intend to extend to other multifamily markets?

Wurzel: We have always been focused on the Texas market, and our debut is a mixed-use retail and condominium project in Maynard. The project will offer retail space on the ground floor of a four-level building with three floors of condos above. It is called The Lexington and comprises 24 units.

We are continuously in search of new projects across the state. While we are based in Austin, we have completed and underway construction projects throughout the state—from Dallas all the way down the Interstate 35 corridor to San Antonio and in other states, including Nebraska.

How do you find building for the multifamily industry compared to building for the commercial sector?

Wurzel: From a client standpoint, it really depends on the owner. The supplier base in hospitality and multifamily are not the same—it’s both a different subcontractor and vendor base, as well as a different product base. With larger commercial projects, the building process consists of mostly concrete and metal framing, while multifamily construction deals more with wood framing.

Hospitality and multifamily projects are more unique and trendier. Industrial is a bit more sterile with less variety and, while we appreciate the structure of the projects, the creativity of other types of projects is invigorating.

I have a passion for vacation and entertainment spaces like wedding venues, and hotels with rooftop bars. It’s a different feeling to be a part of something outside the big box or industrial projects, something vibey and cool. When customer experience and design come into play and there’s more creative design and more attention to clever details it’s really fun to work on.

What are the main challenges of multifamily construction today?

Wurzel: With current construction challenges related to workforce and supply chain issues, there are similar challenges in every sector. It has been this way since the pandemic hit in 2020.

In addition, most construction projects come with design approval challenges. Dealing with municipalities is also tricky, approvals are taking a longer time, and getting responses to design reviews can be an arduous process. Governmental approval is sometimes a process that requires patience and diligence. Partial orders of equipment and supplies can also cause delays. These are the top issues facing all commercial construction projects these days.

How is the current economic landscape impacting multifamily construction?

Wurzel: Construction in some sectors is slowing down, and developers are slowing down specific projects due to inflation. Construction costs have increased 30 percent or more over the past two years. The expenses sometimes have developers questioning projects, wondering if consumers will support the project due to the rising costs. It’s something developers are keeping a watchful eye on for now.