The March 2024 Quarterly Survey of Construction & Development Activity (Construction Quarterly Survey for short) was conducted from March 5 – 19, 2024 and received 48 responses from leading multifamily construction and development firms. Historical data from 2022 and 2023 surveys for all questions, as well as from this year’s first quarter, are also available in a downloadable spreadsheet.
Average Materials Price Change in 1Q 2024
1%
Exterior Finishes & Roofing
4%
Electrical Components
1%
Appliances
2%
Insulation
0%
Lumber
In the March 2024 Construction Quarterly Survey, 81% of respondents reported experiencing construction delays over the last three months. This is the third consecutive quarter of decline in reported delays (down from 90% in June, 88% in September and 84% in December), suggesting an improving environment but one in which construction delays are still highly expected.
Of those experiencing delays, 79% reported delays in permitting, slightly lower than in December (81%). Reported delays in starts fell to 87% of respondents, from 92% in December and 79% in September.
Seventy-four percent of respondents cited economic feasibility as a cause for the delays in starts (up from 71% last quarter). A large share of respondents also attributed these delays to the availability of construction financing (68% of respondents, down from 79% last quarter), permitting, entitlement, and professional services (53% of respondents, up from 50% last quarter) and economic uncertainty (62% of respondents, down from 83% last quarter).
There were no respondents who cited staffing shortages as a cause of delayed starts, falling from 10% in June and 4% in both September and December.
Lastly, the share of respondents attributing delayed starts to materials sourcing and delivery increased from 8% in December to 15% this round, still down from the 30% of respondents who cited materials sourcing and delivery issues in September.
Over the past three months, how long, on average, have municipalities reported it would take before you receive building permits?
| September 2023 | December 2023 | March 2024 | |
|---|---|---|---|
| Up to 2 Months | 12% | 10% | 15% |
| 3-4 Months | 30% | 17% | 31% |
| 5-6 Months | 12% | 27% | 21% |
| 7-8 Months | 21% | 20% | 8% |
| 9+ Months | 21% | 20% | 23% |
| N/A | 3% | 7% | 2% |
Fifty-two percent of respondents this quarter reported additional project requirements unrelated to actual construction being imposed by their jurisdictions, up slightly from last quarter (48%). For those reporting additional project requirements, affordability requirements were mentioned frequently as well as solar energy / green building requirements and additional infrastructure contributions.
The share of respondents who reported deals being repriced up continued to fall, reaching 13% this quarter (from 48% in September and 23% in December). Conversely, the share of respondents who saw deals repriced down doubled (52% of respondents, from 26% in December). Twenty-seven percent of respondents reported no repricing of deals (from 32% three months ago).
Those who saw deals repriced, in either direction, reported an average -1% change, down from 9% in June, 10% in September and 9% in December.
Price increases moderated for all materials tracked, apart from lumber. Respondents reported a 1% average increase over the last three months in both the price of exterior finished and roofing (down from a 4% increase reported in December) and appliances (7% in December). Respondents reported a 4% average increase in the price of electrical components (down from 11% in December) and a 2% average increase in the price of insulation (4% in December).
Lumber prices were flat this quarter, according to respondents, after having fallen for the preceding seven quarters.
To mitigate price increases and design changes for exterior finishes and roofing, 48% of respondents reported using alternative brands or suppliers, 46% reported using alternative product/material types and 44% reported making design changes.
Making design changes was again the most popular strategy for electrical components (48% of respondents), followed by changing purchasing schedules (46%) and using alternative brands or suppliers (44%).
The share of respondents who reported either using alternative product/material types or changing their purchasing schedules to mitigate price increases or supply shortages increased for all essential materials apart from insulation.
For three essential materials, greater focus on escalation clauses and acceptance of higher escalations was the least preferred mitigation strategy for supply shortages or higher prices—8% of respondents for exterior finishes and roofing, 13% for electrical components, and 2% for appliances.
For four of the five essential materials this quarter, the share of respondents who said approaches taken to mitigate price increases and supply shortages was not applicable increased. It was the most common response for appliances (52%), insulation (63%) and lumber (56%), indicating a lesser prevalence of shortages/unaffordability for these materials specifically as well as improving conditions generally.
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 | 48% | 44% | 23% | 15% | 4% |
| Used alternative product/material types | 46% | 40% | 19% | 8% | 8% |
| Made design changes | 44% | 48% | 8% | 4% | 8% |
| Changed purchasing schedules including pre-purchasing and/or warehousing products/materials | 31% |
46% | 13% | 6% | 19% |
| Given greater focus on escalation clauses and acceptance of higher escalations | 8% | 13% | 2% | 6% | 8% |
| N/A | 29% | 23% | 52% | 63% | 56% |
To gain further understanding of other materials, respondents were asked about a more extensive list of common products and materials used in development, seen in the table below. Notable changes in the share of respondents using alternative products/materials or alterations were seen for interior wood trim—moving from 0%in December to 10% this quarter—and electrical components, decreasing from 61% of respondents in September to 16% in December and 44% this quarter.
For which materials have you made alterations or used alternative products/materials? (multiple selection - totals will not equal 100%)
| September 2023 | December 2023 | March 2024 | |
|---|---|---|---|
| Lumber | 6% | 6% | 6% |
| Plywood | 9% | 10% | 6% |
| Interior wood trim | 9% | 0% | 10% |
| Copper and brass mill shapes | 15% | 6% | 2% |
| Steel mill products | 15% | 6% | 10% |
| Hardware - locks, door/window hardware, cabinet hardware | 24% | 23% | 31% |
| Lighting fixtures | 48% | 39% | 42% |
| Exterior Finishes | 42% | 29% | 38% |
| Electrical components - panels and items with chips | 61% | 16% | 44% |
| Roofing | 27% | 16% | 23% |
| Appliances | 42% | 26% | 23% |
| Insulation | 9% | 3% | 10% |
| Ready-mix concrete | 6% | 10% | 10% |
| Other | 3% | 13% | 8% |
Survey results strongly suggest that the construction labor market has loosened in the last three months.
The share of respondents who reported construction labor to be more available jumped from 19% in December to 40% this quarter, while the majority (56% of respondents) thought that the availability of construction labor was unchanged from three months ago, and no respondents thought labor was less available.
Similarly, the share of respondents who thought labor costs increased more than expected to fell from 20% in December to just 2% this round. The share of respondents who thought labor costs increased less than expected held fairly constant at 9% (from 10% last quarter and 18% in both September and June), as did the share of respondents who reported costs increasing as expected (29%, from 30% in December and 42% in September). Fifty-one percent of respondents reported no increase in labor costs.
| September 2023 | December 2023 | March 2024 | |
|---|---|---|---|
| Sourcing more products/materials domestically | 38% | 52% | 40% |
| Sourcing more products/materials from Canada | 3% | 0% | 0% |
| Sourcing more products/materials locally or from specific domestic regions | 24% | 10% | 12% |
| Using alternative products/materials | 17% | 34% | 36% |
| Other | 17% | 3% | 12% |
