Months after most construction sites were allowed to reopen, the multifamily sector is still struggling with delays.
From raw building materials like lumber and steel to interior appliances, the global supply chain is still not back to pre-coronavirus pandemic levels of production or distribution, WealthManagement.com reports. Workplace capacity restrictions and the ongoing effects of the mass shutdown in the spring meant that when the homebuilding market exploded back to life in the summer, suppliers could not ramp back up as quickly or as completely as they needed to.
Over half of respondents to the National Multifamily Housing Council's survey released in November have experienced construction delays, and over 80% said their projects have been "impacted" in some way by the lack of materials. Over 80% of multifamily construction firms reported price increases for materials in that survey, quadruple the rate surveyed in November 2019 and a twentyfold increase from the 4% of respondents surveyed in April.
Contractors and builders have not yet passed on the higher cost of materials to developers, as bid prices remained flat from April through the end of 2020, according to the Associated General Contractors of America and reported by WealthManagement. Over the same period, materials increased in price by 8%, AGC chief economist Ken Simonson told WealthManagement.
That is likely a function of the drastically increased competition contractors face for each project, which is itself a result of the delays that drained jobs from the construction industry. The squeeze doesn't look to be letting up, either: Steel prices hit record highs in January, Simonson said, and lumber prices ended the year 33% higher than at the start of 2020, according to the National Association of Home Builders.
As recently as August, sentiment around the commercial real estate industry was that construction prices would end the year slightly lower than in 2019, a JLL survey reported at the time. But so many firms reacted to the initial supply bottleneck by placing orders months in advance that factories and ports have not been able to catch up, Simonson said.
