The June 2022 Quarterly Survey of Apartment Construction & Development Activity (Construction Quarterly Survey for short) was conducted from June 6 – 23, 2022 and received 30 responses from leading multifamily construction and development firms. Data from all questions are also available in a downloadable spreadsheet.
Average Materials Price Change in 2Q 2022
11%
Exterior Finishes & Roofing
12%
Electrical Components
5%
Appliances
10%
Insulation
5%
Lumber
During the June 2022 Construction Quarterly Survey, nearly all respondents reported experiencing construction delays (97%) and of those experiencing overall delays, 83% of respondents reported delays in permitting, while 93% reported delays in starts. As indicated previously in the NMHC COVID Construction Survey, delays in starts and permitting were persistent throughout the pandemic, and the results of this survey have been no different since beginning in March, indicating that delays may continue for the foreseeable future.
There are a wide range of reasons for delayed starts, some of which have more readily available solutions than others.Similar to the previous quarter, those respondents experiencing delayed starts cited the largest contributing factors to be permitting, entitlement, and professional services (85%) and materials sourcing/delivery (58%). Respondents reporting projects to not being economically feasible at the time (38%) increased 20 percentage points over last quarter. However, for the second quarter in a row, not a single respondent indicated health and safety concerns were the cause of delays.
Over the past three months, how long, on average, have municipalities reported it would take before you receive building permits?
| March 2022 | June 2022 | |
|---|---|---|
| Up to 2 Months | 13% | 13% |
| 3-4 Months | 32% | 23% |
| 5-6 Months | 26% | 37% |
| 7-8 Months | 5% | 10% |
| 9+ Months | 13% | 10% |
| N/A | 11% | 7% |
43% of respondents reported jurisdictions are actually imposing additional project requirements unrelated to actual project construction. Specific requirements mentioned by respondents include aspects such as impact fees, sustainability requirements, affordability requirements, and public infrastructure initiatives.
A majority of respondents (83%) reported that deals have been repriced up over the past three months. Those experiencing deals being repriced reported increases of 11% on average over the same period, down from the 25% average increase reported during the March 2022 Survey.
In a reversal from the pressure reported around lumber sourcing in the previous round of the survey, the average respondent reported a 5% decrease in lumber prices over the past three months. The average respondent also reported a 12% increase in the price of electrical components over the past three months, an 11% increase in prices for exterior finishes and roofing, a 10% increase in prices for insulation, and a 5% increase in prices for appliances.
Many survey respondents reported changing purchasing schedules to mitigate price increases for exterior finishes and roofing(72%) of respondents, electrical components (66%) and appliances (62%). Insulation and lumber are not easily substituted and therefore had other more cited mitigation techniques, or potentially fewer possible mitigation options, indicated by those reporting “not applicable.”
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% | 66% | 62% | 24% | 4% |
| Used alternative product/material types | 52% | 52% | 46% | 28% | 11% |
| Made design changes | 48% | 45% | 15% | 8% | 15% |
| Changed purchasing schedules including pre-purchasing and/or warehousing products/materials | 72% | 66% | 62% | 36% | 48% |
| Given greater focus on escalation clauses and acceptance of higher escalations | 66% | 55% | 38% | 40% | 33% |
| N/A | 7% | 14% | 19% | 44% | 37% |
While these five materials have been pain points for some construction and development firms, they are not the only materials and products that have faced price increases or supply chain shortages. To gain a better understanding of other materials of issue, respondents were asked about a more extensive list of common materials and products, seen in the table below. Concerns around wood and lumber-based products appear to have eased up since the March Survey, though a greater share of respondents reported making adjustments around hardware and electrical components.
For which materials have you made alterations or used alternative products/materials? (multiple selection - totals will not equal 100%)
| March 2022 | June 2022 | |
|---|---|---|
| Lumber | 37% | 20% |
| Plywood | 34% | 13% |
| Interior wood trim | 37% | 23% |
| Copper and brass mill shapes | 13% | 10% |
| Steel mill products | 13% | 17% |
| Hardware - locks, door/window hardware, cabinet hardware | 26% | 43% |
| Lighting fixtures | 47% | 43% |
| Exterior Finishes | 42% | 43% |
| Electrical components - panels and items with chips | 21% | 33% |
| Roofing | 37% | 13% |
| Appliances | 45% | 40% |
| Insulation | 26% | 10% |
| Ready-mix concrete | 5% | 3% |
| Other | 5% | 7% |
Labor availability and logistics/transportation remain obstacles to nearly every industry, apartment construction included. Roughly half of survey respondents (53%) reported that labor costs increased as expected over the last three months, while an additional 40% believed labor costs increased more than expected. Half (50%) of respondents saw labor availability as roughly the same compared to three months ago, while 40% of respondents believed construction labor to be less available over the same period. Just 7% of respondents saw labor to be more available.
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%)
| March 2022 | June 2022 | |
|---|---|---|
| Sourcing more products/materials domestically | 34% | 33% |
| Sourcing more products/materials from Canada | 3% | 4% |
| Sourcing more products/materials locally or from specific domestic regions | 17% | 11% |
| Using alternative products/materials | 37% | 41% |
| Other | 9% | 11% |
Some respondents (23%)indicated that they are seeking out more construction projects in the Southeast (e.g., Atlanta, Charlotte, and Orlando) due to fewer issues in the region related to sourcing labor and delays in permitting and entitlement, up from the 13% of respondents indicating the same for this region in March 2022. 20% of respondents also indicated seeking out more construction projects in Texas (e.g., Dallas, Houston, Austin) for the same reasons.
Meanwhile, a handful of respondents (10%) reported that they are no longer seeking out projects in South Florida due to greater obstacles in those markets related to permitting and entitlement processes and labor availability. 7% of respondents also indicated they are no longer seeking out projects in either the N. West Coast (e.g., San Francisco and Seattle) or the S. West Coast (e.g., Los Angeles and San Diego). However, the majority (70% for leaving jurisdictions and 60% for seeking out jurisdictions) of survey respondents reported the question was not applicable, indicating these movements are not yet a widespread phenomenon.
