As the world continues to evolve with technology, so too does the construction industry, albeit at a much slower rate. Looking back over the last 15 years, it is incredible to think about how much technology has changed in our daily lives. Smartphones weren’t very prevalent and the first generation of the iPhone had just been released. Businesses used fax machines instead of email to transmit information, very few people knew what the cloud was, and drones, as we know them today, didn’t exist.
As it relates to the construction industry, 15 years ago I can remember physically mailing sets of drawings out to people for them to bid jobs and waiting for their faxed bid to come through. People used an actual camera to take pictures, and submittals were wet stamped and mailed to the design team for their review.
All of the efficiencies gained through technology really are fascinating. To... Read More >
In today's construction world, more and more time and resources are spent on scheduling, and with good reason, too. With the high cost of construction loans and general conditions, contractors and developers alike can agree that the sooner we hand over a building the better for all those involved. Project milestones, proper sequencing, and task and crew logic are all scheduling terms that are thrown around on a weekly basis when discussing how we get the job done as soon as possible.
But what if I told you there was something else besides scheduling that can hold up progress on your project just as much as a missing drywall crew or bad schedule logic? Wouldn’t that be something we need to be cognizant of?
I am talking about inspections, of course. Inspections are a necessary step in the construction process to provide a third-party audit that the work meets all code requirements... Read More >
Some developers and investors are unsure about committing to new senior living developments amid rising construction costs and interest rates, while others remain bullish on building new communities figuring that demand will be outpacing supply for the foreseeable future. I have even heard from some clients that they really push to get new developments going in this environment when other potential new projects may be holding off which gives them a leg up in a given market.
One segment that continues to gain steam is active adult according to a recent article in Seniors Housing Business’ April Edition. Active adult communities target those 55 years old and older that are ready to rid themselves of all things associated with home ownership, but are young and healthy enough that they don’t require assistance with daily living activities. These communities are not as labor- or service-based as an assisted living community because they... Read More >
As we move into the rainy season, it’s important to revisit best practices of protecting wood from the elements during construction. Previously, we used to rely on just-in-time deliveries which would limit the amount of time our framing materials were subject to the weather prior to being covered up. With today’s market environment, we find ourselves ordering materials early and storing them on site so that we can be productive as we start building and not run out of material along the way. This has led to lumber being stored for longer periods than we are used to. It’s important that this is taken into consideration as we construct our projects and that we don’t allow deterioration of our building products to occur.
First, develop a plan early to deal with these issues in order to reduce the risk of mold and product deterioration. Ensure that your storage area is well... Read More >
I thought I’d write a blog about some good news, at least for multi-family developers. No, costs aren’t coming down, nor are interest rates. But rents for multifamily are going up! According to rent.com through April 2022 apartment rents nationwide for two bedroom apartments are up 22.8% in a twelve month period. In some areas that are close to us they are up even more. Orlando rents are up 38.2%. Cincinnati is 37.8%.
So while costs are up and interest rates are threatening to rise, rents in many areas more than make up for this, creating opportunity. Rent.com goes on to say that the shortage of supply coupled with increasing demand and increasing inability of people to purchase homes is causing this phenomenon.
Good news for multifamily developers.
... Read More >
Everywhere I go people are asking what’s going to happen with construction prices, and they are right to ask. I visited with a prospective client this month and he told me that construction prices on his prototype increased 46% in two years, which was shocking to him and a little surprising to me. We are tracking prices in our Florida office and our records indicate costs are up 30% in 14 months, 2% per month, so I guess I shouldn’t have been surprised. Everywhere we look subcontractors are backing out of quotes and/or raising prices, and even once under contract don’t always honor prices. Materials and labor availability is a whole other issue. It’s hard to believe these increases can continue, but I don’t see any signs of relief.
The above doesn’t make our jobs any easier or more enjoyable. We hate giving bad news to our clients on costs, but... Read More >
The multi-family market has certainly evolved over the last several years. From the types of amenities renters demand, to an influx of new single family build to rent communities. Not to mention the changing renter demographic. While millennials make up one of the largest rental cohorts, the age 55+ Baby Boomers are selling their homes and opting for a more convenient lifestyle.
According to Forbes, in the last decade, the multifamily market has experienced hyper growth. Even during the pandemic, 2020 saw a 50% increase in multifamily units, compared to that of 2019. Rents in multifamily housing markets have continued to climb. Yardi Matrix reported in February that year over year rent growth increased 15.4% and occupancy rates of 96.9%, surpassing the previous record of 96.5% in 2000.
Today’s renters are demanding more and different amenities. This includes everything from storage areas or lockers for packages, trash valet services, community dog parks... Read More >
Usually March is good for two things in the North, March Madness and spring weather. This spring is a little slower than years past as construction material pricing has been surging for some time and now oil pricing is also surging which is only adding more fuel to the fire. So just like my March Madness bracket, I am sure everyone’s budgets are busted right now which is leading to some project starts sliding.
While we have been dealing with the pricing fluctuations to the best of our ability for the past year, once we get past that hurdle we then have to overcome the supply chain issues. This is taking a lot more pre-project planning as some materials are simply just not available in the time frame in which we need them to meet the schedule. With being a traveling GC, we have been able to foster relationships in many... Read More >
There have been many challenges in the construction industry over the past 24 months, but one that has surprised many developers and builders is the unavailability of wood trusses. A problem that seemingly started to appear at the very end of 2021 has now shockingly escalated into lead times measured in months and even years. I’ve had truss and lumber vendors provide insights into how this situation came to be, and two reasons have been mentioned consistently. One cause was a shortage of truss gusset plates that caused a bottleneck to the production lines. The other, and likely the bigger contributor to the shortage, is that many truss manufacturers presold their production capacity to the homebuilders, who all have voluminous production targets for 2022. I have been advised that the truss vendors have configured their production lines to quickly and efficiently crank out single-family and townhome trusses and have little... Read More >
M.A. Mortenson (a very large construction company) says construction prices increased 19.2% last year. ROMAC (a very large building product supplier in Florida) says that on average, materials for a house from mid-December to mid-January went up 12%. Already subcontractors are telling us that they are booked for the year. Truss suppliers, who traditionally have had 2 to 4 weeks fab and deliver times, are out to October, making projects challenging to start and maintain continuous construction. The price of Ready-mix is up by $10 - $20 a cubic yard in the last couple of months, and drywall has been going up approximately 10% a month.
I am tired of delivering bad news. Everyone knows prices are going up, but it is shocking the extent they are going up. Our clients seem to be getting numb to increases, and they are no longer even asking what I expect in... Read More >
Herbert Spencer coined the phrase “survival of the fittest” to describe and broaden Charles Darwin’s famous evolution and natural selection theories. The term could undoubtedly be applied to today’s construction and development industries as the challenges of material and labor shortages, increased lead times, rising costs, and the likelihood of increased interest rates continue to take hold. How builders and developers deal with these challenges will likely determine their success and potential survival in the coming years.
There are several approaches that companies are exploring to leverage against the current supply chain challenges that include; developing strategic partnerships with material suppliers, committing multiple projects under a single agreement, pre-purchasing materials, and purchasing production slots months in anticipation of future demand. These approaches will certainly assist firms in ensuring materials are available when needed, but not without a significant investment and the associated financial risks.
Transitioning from 2021 into 2022, material prices have... Read More >
Remember when the pandemic hit, and everybody collected toilet paper? It’s happening today with subcontractors and vendors throughout the trades (not TP; material like rigid insulation, ductile iron pipe, copper pipe, drywall, lumber, metal studs, coiled steel, etc., etc.). Material price surges, a continuing supply chain roller coaster, and the omicron variant have us all guessing how long to receive and how much material will cost when it is finally installed on the job site. An extended construction duration and price increase pass through are deal breakers for us at The Douglas Company, so we are tested to come up with alternate methods to deal with the aforementioned challenges.
Our advanced procurement of construction materials and equipment soon after a contract is executed and well before the equipment or material is needed, is a sensible practice which assures that specified materials and equipment are available for installation or use in accordance... Read More >
The turn of the calendar has brought about an unfortunate turn for material pricing. At this point, it seems like nearly all materials have seen major increases. All of this is in line with some of the largest inflation increases ever. What’s going on?
While each material has its own nuances, the primary driving cause behind all of them is the same condition we’ve been dealing with for years: High demand supported by low-interest rates means a lot of construction is happening right now. Costs are up quite simply because projects continue to be built in spite of them. Subcontractor backlogs have been surveyed as being at some of the highest levels in recent history. And there doesn’t seem to be an end in sight.
The message now is to stay the course in spite of material cost increases. We... Read More >
Reflecting on this year, it sure has been one of the more chaotic and challenging years that I can recall in my career. Just this year, the construction industry has battled everything from record-high lumber prices, rapidly changing material price increases, supply chain issues, increase in labor shortages, and many other challenges. The old adage of Proper Planning Prevents Poor Performance, or the 5 P’s as they were introduced to me early in life, has been at the foundation of our successes for the year. Ben Franklin said it well “By failing to prepare, you are preparing to fail.”
Planning is woven into our DNA at The Douglas Company, many of our Associates have been through a form of personal productivity, where we learned to plan for the day, week, and month. In both our preconstruction and operations groups, our main planning tool... Read More >
Everyone knows that inflation right now is the highest it’s been in 30 years, which is shocking. Nearly all of my friends who run businesses can’t find workers, and they are paying dramatically more for those they find. The Toledo Blade picked up a story that showed one in five workers expect raises of 10% or more the first of the year, which is also shocking.
So what’s going on? We dealt with this with a wood pricing surge last year, but those prices came down significantly. But now it seems we are dealing with material shortages and price increases on nearly everything. Associated General Contractors reported that contractor costs rose 26.3% overall from June 2020 to June 2021, an astounding number. Mortenson reported that costs jumped 7.1% from September to October of 2021. Our clients are surprised and distressed at the price increases, and we don’t like them... Read More >
Earlier this month several of us from The Douglas Company attended the annual NIC Fall Conference, held this year in Houston, Texas. It was encouraging to see more than 2,500 senior living professionals in attendance (in person) and optimistic about the future of the Senior Living Industry post-COVID.
NIC has also released the 3rd Quarter 2021 NIC MAP Data, which shows that demand in the 3rd quarter rebounded with the strongest quarterly increase since NIC began reporting the data in 2005. Overall seniors housing occupancy increased to 80.1%. Still 7.3% below pre-pandemic occupancy, but finally trending in the right direction. Additionally, one statistic we heard is that the age cohort for senior living will double every 5 years between 2020 and 2040. That is a lot of new seniors who will need some type of senior housing!
One topic that seems to be on everyone’s mind is “Active Adult”. ... Read More >
It's a topic we seem to be answering daily, "Where are all the workers?". While it's an issue that spans more than just the construction industry, unlike those other industries, we've been trying to answer this question for decades. For those answers, we have to look at more than just the last 18 months.
Staffing issues in the trades can be traced back to the 1970s when college students increased nearly 25% from 1969-1979. That phenomenon would again repeat itself in the 1990s when that decade saw an increase of over 15%. (Source: Nation Center for Education Statistics). The nation's focus on higher education and white-collar professions set the trades up for inevitable challenges... Read More >
The disruptions and unpredictability of the current supply chain environment have been well documented, and unfortunately, the forecast is that these disruptions will remain with us for the foreseeable future. While there is no silver bullet to insulate a construction project from the potential impacts, strategies can be deployed to mitigate delays caused by this problematic supply chain market. For these strategies to be effective, though, they need to be planned early in preconstruction.
Your General Contractor should be surveying material and equipment lead times during the preconstruction process so the entire development team understands the risks and a plan to deal with them can be formulated. One way to build around the excessive and unprecedented long lead times the industry is currently facing is to procure the materials and equipment subject to excessive long lead times earlier than typical, even before execution of the construction contract. This will ensure... Read More >
"..white lace and promises, a kiss for luck, and we're on our way". Yes, that is the opening lyrics by Carpenters, but what a common association when most people hear the word DESIGN-BUILD. If done correctly, Design-Build can be all sunshine and rainbows; however, We've Only Just Begun!
DBIA forecasted that by 2025 design-build is anticipated to represent up to 47% of construction spending. The Douglas Company has found that our successful design-build projects have three common factors:
- Early Involvement with The Douglas Company
- Clear Definition of Expectations
- Alignment between Owner and Design-Build Team
These factors are critical to a clean, fast-paced process. Our ability to influence the project's design is most appreciated and provides the best value to the owner prior to construction and issuance of subcontracts and purchase orders. The industry's increased project complexity and fast-paced schedule demands align best with the benefits provided by our design-build teams. Utilizing design-build also creates... Read More >
Developers often think of the actual construction schedule when the word "schedule" comes to mind. But before that, it is just as crucial that a project has a solid pre-construction schedule to even have the feasibility of breaking ground when desired.
Of course, many things go into getting to that point of starting construction. Still, when there is an understanding of the start date goal, you can back into the schedule and plot a course from where you are today and the timelines of what needs to happen to be able to hit that goal.
One of the main goals during the pre-construction phase is to assess the plans as they develop to help mitigate risks while under construction. This requires regular communication between the owner, architect, and contractor.
The schedule holds each member of the development team accountable for their deliverables. Owners have to make decisions on everything from HVAC systems... Read More >