By now, everyone has experienced or heard about the tremendous supply chain disruptions that have resulted from the COVID-19 pandemic. Even today, three years since the outbreak of the pandemic, developers are still struggling with material shortages. This has led to a sharp increase in prices for building materials, making construction costs significantly higher and timelines more unpredictable.
In response to this new market, many developers are making several adjustments to their processes, such as:
- Developers are ordering materials earlier in the design process.
- Supply chains are being reworked on a larger scale to reduce reliance on global sources.
- Developers and designers are turning to creative solutions to address shortages, seeking alternative materials or getting creative with the ones they have.
What creative solutions have you seen developers embrace in this time of supply chain disruption?
How materials shortages are changing how developers work
Construction planning is being flipped on its head as costs rise
Remember Whac-A-Mole? When a mallet-totting player hits a mole popping up from one of several holes, another immediately surfaces.
Construction industry experts are using the game as an analogy. In their case, the moles are shortages of materials like steel or timber. Currently it’s sand, which is needed for a range of materials from concrete to flat glass.
“The million-dollar question is what material will be the next problem,” says Andrew Volz, JLL Project and Development Services Americas research lead.
The scarcity of building materials, exacerbated by unwaning demand, is one of the most significant issues plaguing the construction industry. JLL’s recently released Construction Outlook says that volatility around materials is hitting developer’s wallets at a higher rate than initially anticipated earlier this year.
While costs stabilize in one area – for instance, the cost of lumber has steadied – the whack-a-mole pattern continues to push up costs overall, Volz says. As a result, JLL expects the price of materials to grow up to 18% this year, from the previous 12% projection set at the beginning of this year.
It’s not just about costs. The guessing game of what material is next is leading to a shift in how companies are approaching projects, Volz says.
“Delays are pretty much universal at this point,” he says. “Developers will need to rework how they traditionally do projects as ‘design, bid, build’ no longer works.”
Alternative solutions to material woes
While purchasing materials used to be the final step of the “design, bid, build” process, Volz says he sees the entire process flipped.
“Project managers are sitting in on the design phase with engineers, and once they have a general idea of spec, they are placing orders for materials,” he says, adding that by the time the design phase is complete, they often are still waiting on those materials ordered six months earlier.
“Just getting your hands on stuff is almost more difficult than paying for it,” he says.
The issue is expected to persist, in part due to huge looming projects, like rebuilding Ukraine and as public works projects come online from President Biden’s $1 trillion bipartisan infrastructure plan. Volz says such projects could require most of the U.S.’s domestic production of steel and lumber.