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<\/figure><\/div>\n\n\n\n\u201cIt\u2019s been a crazy year for commodities, we\u2019re definitely seeing those spikes,\u201d says John Bowden, senior vice president for the Mid-Florida division of Moss, a major general contractor building the Kolter Group\u2019s luxury Ritz-Carlton Residences in Sarasota and other Gulf Coast projects.<\/p>\n\n\n\n
Although some price increases are expected within the industry at the beginning of each year, Bowden and others say the 2021 hikes exceed the norm and could impact severely projects going forward.<\/p>\n\n\n\n
\u201cThis is more than the normal inflation,\u201d Bowden says. \u201cThis year feels different. Over the last five years, there have been price increases, naturally, but we\u2019ve largely been able to mitigate the impact with conversions to other materials or through other means.<\/p>\n\n\n\n
\u201cWhat we\u2019re seeing now in our planning and budgeting are some pretty significant jumps that could affect the overall projects.\u201d<\/p>\n\n\n\n
Like many economic changes that have taken place over the past year, Bowden and others blame COVID-19\u2019s impact on domestic and international supply chains, the ability to distribute materials and a lack of workers for production.<\/p>\n\n\n\n
\u201cA lot of the increases we\u2019re seeing now are COVID-19 related, with plants that had to shut down or decrease their workloads, and those things are just now coming to the surface,\u201d Bowden says.<\/p>\n\n\n\n
Earlier this month, the Associated General Contractors of America, a leading construction industry trade group, released its annual outlook for construction for 2021. In its forecast, AGC expects a more \u201cpessimistic\u201d 2021 in the U.S. as a shortage of materials, rising labor costs and other factors infringe on building.<\/p>\n\n\n\n
Florida is likely to fair better than many states, the group projects from a comprehensive survey of firms nationwide, but the Sunshine State will also likely be negatively impacted.<\/p>\n\n\n\n
\u201cIt will be interesting to see what happens in the second half of the new year,\u201d Klingensmith says. \u201cThere are some folks who are bullish and believe construction will be status quo, but I\u2019ve heard from others who say it\u2019s going to depend largely on the supply chain. It\u2019s definitely something that\u2019s on our radar.\u201d<\/p>\n\n\n\n
Not all major construction commodities are poised to rise in cost, however.<\/p>\n\n\n\n
Both glass and concrete prices have remained steady and are expected to continue that way well into 2021, a boon for high-rise and urban projects.<\/p>\n\n\n\n
But the future of lumber costs remains a daunting question.<\/p>\n\n\n\n
Beginning in April, when the pandemic took hold across the U.S., and continuing through August, lumber prices rose by 110%, according to National Association of Home Builders stats. In September, they rose again, by another 28%, according to some formulations, to $950 per thousand board before retreating below $600 per thousand.<\/p>\n\n\n\n
\u201cOn a typically stick-built project, the hike absolutely could affect the overall pricing of an apartment project because the jump was so extreme in such a relatively short period of time,\u201d Bowden says of lumber costs.<\/p>\n\n\n\n
Franklin Street\u2019s Sanfilippo agrees.<\/p>\n\n\n\n
\u201cI have stacks of letters on my desk from subcontractors about lumber cost increases,\u201d he says.<\/p>\n\n\n\n
Little wonder, then, that a National Multifamily Housing Council survey in mid-December found that many are concerned about materials.<\/p>\n\n\n\n
In the survey, 82% of council respondents say they experienced price increases in necessary materials during 2020, and 58% say that their business was being impacted by material shortages.<\/p>\n\n\n\n
That reversed the findings of the group\u2019s previous annual survey, in late 2019, when only 18% of those responding indicated that they were facing commodity price increases.<\/p>\n\n\n\n
At least for now, that impact hasn\u2019t trickled down to multifamily rental housing development or interest in the sector along the Gulf Coast.<\/p>\n\n\n\n
But experts warn new apartment deals could be more difficult to complete because of material costs, availability of quality sites, labor, existing inventory and other factors.<\/p>\n\n\n\n
\u201cThere\u2019s no doubt that multifamily deals are getting harder, in part, because the costs associated with completing those projects are climbing at a high rate,\u201d says Nancy Surak, head of commercial real estate brokerage Land Advisors Organization in Tampa and throughout Central Florida.<\/p>\n\n\n\n
\u201cThat said, we\u2019re still seeing a lot of demand, though.\u201d<\/p>\n\n\n\n