Multifamily construction is booming despite the slow economic recovery for commercial and single-family markets, but it is a very different market than it was 10 years ago. Like other segments of construction, the increasing number of firms in multifamily has driven profit margins down. As a result, bidding errors or unanticipated project costs, which were once part of doing business and could be absorbed within the contract price, can now wipe out all profits on a project and even threaten a company's overall financial strength.
Multifamily's healthy backlog of work has attracted firms from both residential and commercial backgrounds. The residential firms likely have the skills to build a multifamily project, but the scale may be more than they or their subcontractors are prepared to handle. Commercial builders may find that contracting practices of project owners differ in the owners' attention to detail and sophistication, even on large multifamily projects. In addition, multifamily work has drawn on all levels new companies that may be inexperienced with respect to construction practices as a whole.