The State of Multifamily Construction

student housing

 

Higher construction and labor costs continue to challenge the housing industry, prompting newer strategies to build multifamily and student housing communities within budget and on schedule.

Since the apartment boom launched a few years ago, developers and builders have battled a lack in skilled labor. In the last couple of years, materials prices – namely lumber – have zoomed upward as construction demands increased.

Global trade of softwood lumber reached a 10-year high in 2015, and prices climbed to $338.70 per 1,000 board feet. This year, the U.S. has tapped more into the Canadian market, upping purchases 20 percent.

Prices actually stabilized in September, according to latest numbers from Bureau of Labor Statistics’ Producer Price Index. In August, prices jumped 1.5 percent but were down 1.4 percent in September.

Labor market starting to pick up pace

Labor has been another story. The recession in 2008 and fallout in construction is blamed for depleting skilled labor pools; many workers found other jobs and haven’t returned very quickly. Subsequently, labor prices have been tilting upward: Average hourly earnings of all construction employees has steadily increased, climbing 11 percent since 2012, based on wages reported in September to the Bureau Labor Statistics.

student housing

The good news is that construction employment has been on the rise in recent months. In August, U.S. construction employment was up 3.13 percent to 6.7 million workers, according to the National Association of Home Builders. The largest construction job gains were in California, Florida and Colorado, where apartment building activity is flourishing.

Denver and Southern California are leaders among activity in multifamily housing, according to MPF Research. In an October webcast, MPF reported that the Denver/Boulder area ranks fourth among new construction markets for multifamily housing in inventory growth at 6.4 percent. Latest employment figures show that Colorado added 16,800 construction jobs to keep pace.

Meanwhile, in August the Los Angeles-Long Beach-Anaheim markets issued 2,488 permits, up 61 percent from the previous year, to rank second among top metros. San Diego issued 1,044 permits at No. 5.

Pre-built components improving quality, speed of building product

The one-two punch of higher lumber and labor has some builders and architects turning to pre-fabricated wall systems.

Pre-fab systems are built in factories and delivered to job sites, ready to erect, at lower prices. Labor cost is cheaper because skilled labor is not needed like at the jobsite. Also, the walls are built perfectly with no waste at the job site, say building experts, and go up quickly once they arrive. Cranes move walls into place, much like trusses.

Pre-fabricated steel walls are typically more expensive but they can mean that a project gets done faster and ultimately help save in other areas of construction.

BKV Group, a multifamily and student housing architectural firm, is bucking traditional design practices that shied from pre-fab construction and designing structures with components built offsite to meet budget and delivery schedules. The firm is not an advocate of using proprietary, cookie-cutter systems but recognizes a benefit to having elements like framing pre-built and delivered to the site.

A big advantage is a better building compared to working with the grade of today’s skilled laborers.

“The quality of onsite framers is drastically reduced because there is so much work out there and so little labor supply,” said BKV Group partner Jack Boarman. “With steel-fabricated, factory-based product, you have inherently better quality control, better delivery control.”

Greg Faulkner, President of Humphreys and Partners Architects, LP, said light steel is being used to frame many of the Dallas-based firm’s student and multifamily housing projects. At recent projects in Fayetteville, Ark., and at Texas A&M, the company found steel to be a better option to meet client needs and timing.

“We’re still really suffering from lack of trades, lack of framers, even lack of steel laborers in a lot of markets,” he said. “Everybody is busy.”

Moving money out of building multifamily construction into amenities

Like Boarman, Faulkner isn’t an advocate of proprietary pre-fabricated systems because of limited design capability and fears that a delivery delay can severely hamper the product’s move-in schedule.

“You’re under such intense timing to deliver these things, that if you miss a tinker toy, it’s a mess.”

Boarman says more pre-fabricated builders are in the market, which is keeping prices in check. Also, pre-fab walls can be used without compromising designs and enable developers to build more attractive housing. It’s just a matter of getting the builder and architect on the same page.

“The concept of developing pre-fab building elements, promoting as much as possible to get your architect and contractor to look at fabrication and building systems – and encourage your architect to like them – is not restricting design creativity,” he said. “It’s just giving them one more tool. That means you can move money out of the building construction system onto the countertops and the furniture.”

 


Contributing Editor, Property Management Insider
President, Ballpark Impressions, LLC

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Tim Blackwell is a long-time publishing and printing executive in the Dallas/Fort Worth area who writes about the multifamily housing and transportation industries. He has contributed numerous articles to Property Management Insider, and worked as a newspaper reporter in the D/FW area. Blackwell is president of Ballpark Impressions, and publishes the Cowcatcher Magazine. He is a member of the Fort Worth Chapter/Society of Professional Journalists.

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