At the 2017 NMHC Spring Board of Directors Meeting, a panel of experts identified a number of areas where the design and construction landscape is rapidly evolving, changing the way multifamily companies approach developing new apartment communities.
Panel participants included Rohit Anand, a principal at KTGY Architecture + Planning; Brice Leconte, founder of iUnit; Mike Schlegel, president of Bozzuto Construction Company; and Ken Simonson, chief economist at the Associated General Contractors of America (AGC).
Here are their top three.
In some markets, apartment builders have real difficulty finding the necessary tradesmen to get their buildings built. Labor shortages, especially for key trades, are leading to project delays and cost overruns.
According to AGC’s Simonson, the number of unemployed construction workers has shrunk from 2 million in 2010 to approximately 700,000 in 2016; as a result, construction firms are not only having trouble filling key positions but also paying higher wages for positions they can fill. An AGC survey from August 2016 showed 69 percent of respondent firms reporting trouble filling craft positions, especially carpenters and electricians.
Developers and builders are responding by not only paying more but also by providing more attractive incentives and bonuses, increasing benefits, investing in more training and providing more overtime pay. But it’s not enough.
“You need a whole menu of solutions,” said Simonson. “Part of it is technology. There are now brick laying robots and BIM [building information modeling] software. ... But it’s also working with school districts and labor development agencies to restore and modernize vocational education programs.”
“And also a PR message that construction isn’t hot, dirty work where you’ll be laid off in three months,” he added. “It’s also a place where you can play with cool tech toys like drones.”
The other issue is that the labor force has slowed from growing at a pace of roughly 1 percent per year to a rate of about a third of a percent or less, Simonson said. This slowdown reflects a drop in the birthrate, aging baby boomers mass exodus from the workforce and weaker immigration. Should Congress make changes to current immigration policy, there could be further pinch on the construction labor pipeline.
“Immigration is the biggest threat that the construction industry is facing,” said Simonson.
However, destructive fires at several apartment construction sites across the country have caught the attention of policymakers, fire marshals, competing construction material producers and the mainstream media, who are questioning the safety of wood framing. Because the issue is gaining legislative and regulatory traction, there is growing industry concern that the end result could be even more stringent building and fire codes or even bans on wood construction of four stories or higher.
Such bans “would effectively take us back 25 years to garden-style buildings with surface parking lots,” explained KTGY’s Anand.
Multifamily developers and builders are quick to point out that new height restrictions on wood-framed buildings would drastically reduce density and ultimately raise costs for the developer/builder and residents. As an example, Anand said that a typical five-over-two podium, Type III construction yields between 150 and 225 units per acre compared with just 20 to 40 units per acre on a three-story walk-up Type V construction.
Moreover, switching from wood framing to metal composite or all concrete would send costs per square foot up $25 to $30 per square foot and increasing the total cost per unit by as much as $25,000 or $30,000.
Given the potential fallout, NMHC also convened a special design and construction session during the spring meeting. The working group discussed the issues more in-depth and took some initial steps toward developing a more involved strategy to meet these challenges. Interested members should contact Paula Cino, NMHC’s vice president of construction, development and land-use policy, for more information. She can be reached at firstname.lastname@example.org.
Modular.Many developers have made forays in to modular construction in the past, but it has failed to catch on in a big way in the U.S. like it has in Europe and elsewhere. But the escalating labor and materials issues, longer approval periods and burdensome carrying costs are beginning to change the calculation.
However, iUnit’s Leconte cautioned that “the hard costs aren’t cheaper; the money being saved is in time.” To illustrate the point, he said he had a recent 40-unit rental project that was built in 30 days in a factory and assembled on site in 80 days.
“Our goal is to build it, stabilize it and sell it in the same time that it takes to stick build it,” Leconte explained.
With higher construction quality and a quicker time to market, the perceived advantages are becoming more enticing to developers. But there are still significant market challenges. Modular isn’t customizable, so responding to changing resident preferences is more difficult. Finding factories that can accommodate a manufacturing operation that produces commercial buildings is difficult. Transporting the components requires negotiation of routes to accommodate bridges, tunnels and the like. And because every building site is different, the project is subject to different rules, regulations, labor forces and such that tend to eat away at the efficiency and productivity of the modular process.
“At the design/development level, there are very few projects that are ‘typical,’” said Anand. “Everything is crazy, one-offs. So it’s difficult to do modular. But if you break it up into components, beds, baths, kitchens-that’s where I see some efficiencies.”