The post-pandemic construction boom has taken many forms. E-commerce and big box retailers are developing across the country, while at the same time, construction projects that were postponed during the pandemic have resumed. However, the lack of workforce at manufacturing facilities last year combined with the high demand for materials have led to price increases and lead-time delays.
In a session at CRE.Converge this week, a panel of experts led by Bill Finfrock, president, FINFROCK, shared some of the strategies used in construction to keep projects moving forward despite these challenges.
Finfrock was joined by Roger McCarron, president and CEO, Project Management Advisors, Inc.; Lee McNeil, business development and senior preconstruction manager, Williams Company Management Group; and Eric Wolf, president, Excel Construction of Florida.
Finfrock: How are lack of workers and materials delays impacting your projects?
Wolf: We are seeing major delays with roofing and steel, but we’re starting to figure out alternatives to get ahead of the game. We’re still turning our projects on time, but that’s because we’re just getting projects started earlier.
McNeil: For anything needed in big warehouse projects – roofing, dock doors and dock equipment – we’re having a terrible time getting that equipment in on time. I think the key is to get out ahead of it, still get competitive pricing but lock in subcontractors early.
McCarron: I think it is slightly overhyped in the media. I wouldn’t run for the hills. You just have to be diligent. When lumber prices took off, everyone wanted to talk about it. Now no one does. We’ve dealt with these issues before, but it’s just more talked about today. It’s not widespread and it’s not uniform.
Finfrock: What are the most volatile construction materials these days?
McCarron: Steel decking.
Wolf: Overhead doors. Anything metal related. Drywall studs.
McNeil: Roof insulation fasteners. Who would have thought? And until we get some relief on the supply side or on the demand side, the squeaky wheel is going to get the business.
Finfrock: Supply chain is so out of whack, while the demand has gone through the roof. As they say, the solution for high prices is high prices – because it will drive down demand and then drive prices back down.
Finfrock: How are your clients reacting to price increases or project delays?
McCarron: Our clients are more aware of these materials issues and are asking about how to strategize. If we’re all doing our jobs, our clients are often very insulated from the construction process. But in this case, it’s been helpful that our clients are aware.
Wolf: In many cases the clients know that call is coming; they’re understanding but also want to know if and how it is impacting the project schedule.
McNeil: Some owners are slow walking projects or working around some of the supply issues by moving into an existing building, which I’m seeing with a cold storage project I’m working on.
Finfrock: Any upsides you’re seeing?
McNeil: Money being cheap is really helping. If we see an increase in interest rates, that could cause a hiccup. Issues with China’s real estate market – if things cool off a bit – it could help the global supply market. We might see that in the next few months.
McCarron: Demand is still strong, our development clients are investing, and there’s a lot of interest in life sciences. The projects are not stopping and we continue to move forward.
Finfrock: Rents are up – they’re keeping pace for the most part with rising costs.
Finfrock: How’s the construction industry doing in terms of recruitment?
McCarron: it’s been brutal. Demand has increased year over year, but we have open positions for sometimes six months. And not just on the project side, it’s on the corporate side too. So, we look in multiple markets at the same time. We’ve reinvested more heavily at the entry level. We hire bright people and invest in them.
Wolf: One big thing we try to offer to employees and emphasis is work/life balance. Since we can’t do remote work, we try to moderate the traditionally six-day construction workweek.
Finfrock: When do you see material prices leveling?
McCarron: Anecdotally I hear people saying 6-9 months.
Wolf: There are a lot of outside forces – the container ships sitting off the coasts, the Texas freeze, the container shortage, labor shortage with trucking – that need to be figured out before costs can even out.
This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s CRE.Converge 2021. Learn more about JLL at www.us.jll.com or www.jll.ca.
