This is NMHC’s fifth installment in a series of surveys aimed to help the industry stay on top of changing construction market conditions during the COVID-19 pandemic.
Here are the major takeaways. (Click here to view full survey results.)
More Than Half of Respondents Are Still Experiencing Construction Delays
The fifth round of the survey revealed that more than half (57 percent) of respondents are currently experiencing construction delays in jurisdictions where they operate, consistent with results from prior rounds. Specifically, 55 percent reported delays in round one, 56 percent in round two, 53 percent in round three and 57 percent in round four. Of this group, 90 percent reported experiencing delays in permitting, the highest share since this survey’s inception. Seventy-seven percent of those experiencing construction delays are experiencing delays in starts, up from the 71 percent that reported the same delays in round four.
Respondents Give Update on Delays in Starts Due to COVID-19
Beginning in round four of the survey, we asked several new questions to better understand how the ongoing pandemic is impacting multifamily construction. For example, respondents who reported delays in starts were asked what they see as the cause of the delays. When asked this question as part of the fifth survey, two-thirds (67 percent) cited permitting, entitlement and professional services as the cause of their delays, up from 56 percent in the fourth round. Economic uncertainty was the second-most common response at 58 percent (52 percent in round four), followed by availability of construction financing (46 percent this round/48 percent in round four), projects that are not economically feasible at this time (38 percent this round/16 percent in round four) and health and safety concerns (13 percent this round/28 percent in round four).
When asked to estimate the length of their delays in starts, the majority of respondents reported a year or less, with 63 percent indicating less than six months – up from 52 percent last round. In contrast, only 21 percent of respondents reported 6 to 12 month delays, which is down from 44 percent last round. In addition, some respondents (four percent) reported experiencing delays lasting 13 to 18 months this round – a timeframe that no respondents reported on during the last round. An additional 13 percent of respondents selected an “other” option for their estimated delays, many of whom commented that the duration of their construction delays is largely dependent upon the stabilization of rents and materials costs.
Only One-Third of Respondents Have Not Paused or Canceled Projects Due to COVID
The majority of respondents reported pausing at least one construction project since mid-March — 26 percent reported that they’ve paused projects but will definitely resume (23 percent in round four), nine percent have paused projects with uncertainty around resuming (18 percent in round four) and an additional 31 percent paused operations earlier in the pandemic but have since resumed, a positive improvement from the 18 percent who reported resuming projects last round. One-third (33 percent) indicated they have not paused or canceled operation at this point, similar to the 36 percent of respondents in round four.
Vast Majority of Respondents Are Affected by a Lack of Materials
More than three-quarters (80 percent) of respondents reported a lack of materials impacting their construction operations, the highest share recorded since we began conducting the survey in late March (compared to 36 percent in round four, 29 percent in round three, 28 percent in round two and 24 percent in round one).
When those respondents affected by a lack of materials were asked to cite specific areas of issue, the top responses were appliances (60 percent in this round/41 percent in round four), electrical components (21 percent this round/23 percent in round four), cabinets and countertops (19 percent in this round/36 percent in round four), doors and windows (19 percent in this round), fixtures (16 percent in this round/23 percent in round four) and AC/condenser units (9 percent in this round /14 percent in round four). Notably, half (49 percent) of respondents affected by a lack of materials specifically cited issues with lumber during this round of the survey, compared to none in the last round.
Share of Respondents Seeing Increases in the Price of Materials Soars
In this round of the survey, 82 percent of respondents indicated seeing price increases in construction materials, a drastic increase from the levels seen in any of the previous rounds. While only a handful of respondents reported price increases in the first two iterations of this survey (five percent and four percent, respectively), the third round saw that share jump slightly to 17 percent of respondents – where it remained relatively consistent in round four (18 percent).
When asked to cite the specific materials where price increases have occurred, the overwhelming majority of respondents indicated lumber (86 percent this round, up from 55 percent in the previous round). However, smaller shares cited increases in PVC (polyvinyl chloride) (10 percent of respondents) and other structural materials (7 percent this round/18 percent last round) such as concrete, steel, or trusses. Lastly, ten percent of respondents reported that they have seen price increases in most materials.
Respondents who indicated seeing price increases for materials were also asked to specify the magnitude of these increases for those materials most impacted. Roughly one-quarter (23 percent) of respondents reported price increases of zero to five percent, 18 percent reported price increases of six to 10 percent and an additional 18 percent reported increases of 11 to 15 percent. And while just five percent saw material prices increase 16 to 20 percent, 38 percent of respondents reported price increases of greater than 20 percent.
Respondents Seeing Less Stress on Labor Availability
The majority of respondents were not facing issues with labor availability in the most recent round of the survey, with the share of those reporting impacts to labor coming in at 20 percent— the smallest share seen over the five rounds. The share of respondents that indicated they are still facing labor constraints decreased 19 percentage points during this round of the survey, from 39 percent to 20 percent. This compares to 25 percent in round three, 44 percent in round two and 41 percent in round one.
Firms Continue to Implement New Strategies to Deal with Current Hurdles
Over half of respondents (60 percent) indicated they have implemented new strategies to deal with the hurdles formed by the virus’s continued presence. This compares to 52 percent in the last round, 59 percent in round three, 75 percent in the second round and 73 percent in the first round – with many of those firms indicating they have implemented more than one strategy.
The most popular strategies implemented by respondents include sourcing materials from alternative locations (80 percent this round/56 percent in round four), staggering shifts to reduce on-site exposure (37 percent this round/59 percent in round four) and using technology to replace in-person transactions like inspections and approvals (50 percent this round/47 percent in round four).
Other strategies reported include sourcing alternative building materials (57 percent this round/28 percent in round four) or offering workforce incentives or other benefits (23 percent this round/22 percent in round four). Those sourcing alternative building materials increased 29 percentage points during this round, while those sourcing materials from alternative locations also increased 24 percentage points during this round of the survey – both of which are in line with the stress respondents have indicated experiencing on availability and prices of materials.
Background
This survey was open from October 6 to October 27, 2020 and received 54 responses from leading multifamily construction firms. Results will be compared with each of the four previous surveys, the first of which was conducted March 27-April 1, 2020, and the most recent from July 6-15, 2020.
