The March 2023 Quarterly Survey of Construction & Development Activity (Construction Quarterly Survey for short) was conducted from March 7 – 20, 2023 and received 43 responses from leading multifamily construction and development firms. Historical data from 2022 surveys for all questions are also available in a downloadable spreadsheet.
Average Materials Price Change in 1Q 2023
4%
Exterior Finishes & Roofing
9%
Electrical Components
7%
Appliances
3%
Insulation
5%
Lumber
During the March 2023 Construction Quarterly Survey, 79% of respondents reported experiencing construction delays over the last three months, indicating that delays are still a common feature of the current development environment. Yet, this also marks a continued improvement from the 84% of respondents who reported delays in December, 90% who reported delays in September and 97% who reported delays in June 2022.
Of those experiencing delays, 76% of respondents reported experiencing permitting delays, and 88% reported delays in starts.
Respondents experiencing delayed starts were mostly likely to cite project infeasibility as a cause (49% of respondents, up from 32% last quarter), followed by economic uncertainty (42% of respondents) and availability of construction financing (40%).
The labor market showed signs of easing this quarter, with just 7% of respondents citing staffing shortages as a cause of delayed starts, down from 18% in December and 31% in September. Thirty-seven percent of respondents blamed permitting, entitlement and professional services, down from 46% of respondents in December, 69% in September and 85% in June.
Finally, 21% of respondents attributed delays to materials sourcing and delivery, a decrease from 30% of respondents in December, 53% in September, 58% in June and 64% in March 2022.
Over the past three months, how long, on average, have municipalities reported it would take before you receive building permits?
| September 2022 | December 2022 | March 2023 | |
|---|---|---|---|
| Up to 2 Months | 2% | 12% | 12% |
| 3-4 Months | 29% | 36% | 33% |
| 5-6 Months | 24% | 22% | 21% |
| 7-8 Months | 7% | 7% | 7% |
| 9+ Months | 22% | 12% | 19% |
| N/A | 15% | 11% | 9% |
Thirty-five percent of respondents reported jurisdictions imposing additional project requirements unrelated to actual project construction, down from 38% in the previous quarter. Most notably, respondents mentioned affordability and environmental requirements.
Nearly half of respondents (47%) experienced deals repricing up over the past three months, down from 58% in December and 92% in March of last year. Conversely, 21% of respondents reported deals repricing down, up from 18% of respondents in December and 0% of respondents in March 2022.
Of those experiencing repricing (either up or down), respondents reported a 3% average increase over the last three months, down from 8% in the previous quarter.
Respondents reported an average drop in lumber prices for the fourth straight quarter, down 5% over the last three months. Prices for other essential products continued to increase, albeit at a slower rate. Over the last three months, respondents reported a 4% average increase in the price of exterior finishings and roofing (down from a 9% increase last quarter), a 9% increase in electrical components (down from 13% last quarter), a 7% increase in appliances (9% last quarter), and a 3% increase in insulation (9% last quarter).
To mitigate price increases and supply shortages for exterior finishes and roofing, more than half of respondents (56%) reported making design changes to their project, 49% used alternative products/material types, 40% used alternative brands or suppliers and 30% changed their purchasing schedules.
Respondents employed similar strategies to mitigate price increases and supply shortages for electrical components – 49% used alternative brands or suppliers, 44% changed their purchasing schedules, 40% used alternative products/material types while 35% reporting making design changes.
Using alternative brands or suppliers was by far the most popular mitigation strategy for appliance shortages (44% of respondents). Meanwhile, the plurality of respondents reported that mitigation strategies were not applicable for price increases/shortages for insulation (44% of respondents) as well as for lumber (56% of respondents), indicating that shortages are not as prevalent for these materials.
Focusing on escalation clauses and acceptance of higher escalations was the least popular mitigation strategy (except for lumber) – 21% of respondents reported using this strategy in response to exterior finishes and roofing shortages, 23% for electrical components, 5% for appliances, 9% for insulation and 9% for lumber.
More than half (56%) of respondents reported that it was not applicable to mitigate price increases/supply shortages for lumber – as did 44% of respondents for insulation – suggesting that these materials were relatively abundant and/or affordable.
Which of these approaches have you adopted to mitigate the price increases/supply shortages for each material? (multiple selection - totals will not equal 100%)
| Exterior Finishes and Roofing | Electrical components | Appliances | Insulation | Lumber | |
|---|---|---|---|---|---|
| Used alternative brands or suppliers | 40% | 49% | 44% | 21% | 2% |
| Used alternative product/material types | 49% | 40% | 19% | 14% | 7% |
| Made design changes | 56% | 35% | 12% | 9% | 9% |
| Changed purchasing schedules including pre-purchasing and/or warehousing products/materials | 30% | 44% | 23% | 16% | 14% |
| Given greater focus on escalation clauses and acceptance of higher escalations | 21% | 23% | 5% | 9% | 9% |
| N/A | 19% |
14% | 23% | 44% | 56% |
To gain further understanding of other materials of issue, respondents were asked about a more extensive list of common products and materials used in development, seen in the table below. As supply chains recover, respondents reported using fewer alterations for all products compared to last quarter except for copper and brass mill shapes and exterior finishes.
For which materials have you made alterations or used alternative products/materials? (multiple selection - totals will not equal 100%)
| September 2022 | December 2022 | March 2023 | |
|---|---|---|---|
| Lumber | 22% | 8% | 12% |
| Plywood | 15% | 8% | 9% |
| Interior wood trim | 17% | 6% | 14% |
| Copper and brass mill shapes | 2% | 3% | 9% |
| Steel mill products | 12% | 10% | 14% |
| Hardware - locks, door/window hardware, cabinet hardware | 32% | 30% | 28% |
| Lighting fixtures | 49% | 34% | 53% |
| Exterior Finishes | 29% | 32% | 30% |
| Electrical components - panels and items with chips | 32% | 31% | 51% |
| Roofing | 34% | 19% | 23% |
| Appliances | 32% | 31% | 30% |
| Insulation | 17% | 10% | 12% |
| Ready-mix concrete | 7% | 6% | 5% |
| Other | 5% | 2% | 5% |
Survey results indicate that the tight construction labor market is beginning to ease.
Only 10% of respondents reported construction labor to be less available compared to three months ago, down from 21% in September, while 19% of respondents reported construction labor to be more available, up from 10%. The remaining respondents (71%) reported construction labor availability to be roughly the same as it was three months ago.
Furthermore, nearly a quarter of respondents (24%) reported that labor costs did not increase at all over the past three months, up from 5% of respondents in December. Only 12% of respondents reported that labor costs increased more than expected, down from 36% of respondents last quarter. The majority of respondents saw labor costs increase as expected over the three-month period.
Given current challenges in the importation and transportation of goods, what are you doing to mitigate the negative impacts of these conditions? (multiple selection - totals will not equal 100%)
| September 2022 | December 2022 | March 2023 | |
|---|---|---|---|
| Sourcing more products/materials domestically | 33% | 30% | 39% |
| Sourcing more products/materials from Canada | 4% | 0% | 3% |
| Sourcing more products/materials locally or from specific domestic regions | 22% | 20% | 3% |
| Using alternative products/materials | 37% | 40% | 42% |
| Other | 4% | 9% | 14% |
About the NMHC Quarterly Survey of Apartment Construction & Development Activity
Given the invaluable support the NMHC COVID Construction Survey provided for our work on Capitol Hill as well as for our members throughout the pandemic, NMHC launched this new iteration of the survey to be more ongoing and branch beyond the obstacles of the pandemic. While the pandemic’s effect on health and safety has become better controlled, its effects on the construction industry persist with supply chain obstacles and ongoing delays related to issues with staffing to permitting and entitlement. Issues beginning to draw concern pre-pandemic in the industry are now continuous impediments to building that threaten to worsen the affordability crisis.
