With 2022 coming to a close, it is necessary to reflect on adversities and accomplishments that have arisen along the way. When entering into a new year it is important to outline a new and improved system that will only result in greater success from the year prior. The hurdles that we had to jump over this year are the same hurdles others in the construction industry have faced as well.
Labor Shortages
Labor shortages have incrementally improved since the pandemic began, however, the improvement has been slow. Looking back on this year, we’ve seen more “green” workers in the field than ever before. The desperate need for labor to keep up with the high demand of construction projects has led to less skilled labor joining the workforce. Unfortunately, these workers tend to require more training, hand holding, and job site supervision which has put a strain on more seasoned construction workers and those in managing positions.
From a subcontractor’s point of view, work was steady and oftentimes there was more work than staffing allowed. As a General Contractor, Global Construction had to get RFP’s to subcontractors as quickly as possible before they got too busy. Keeping track of which vendors were available and when was a new challenge we had to deal with when bidding projects and creating construction timelines. At the beginning of the year, we were hopeful that labor shortage woes would begin to ease by the end of the year, but it appears there is still no end in sight.
Material Delays
When it comes to material delays we are still seeing nationwide supply chain issues across multiple industries. This includes kits, appliances, and glass to name a few. We have seen three month delays on the aluminum inserts that hold large glass panes together. At times, commercial metal doors have a 60-90 day wait time. Hardware for doors is a year out depending on the manufacturer. Some clients have had to change unit specs because we have had a 12 month timeframe on some hardware deliveries. Due to this, we are ordering materials ASAP, often 6-8 weeks in advance on all our projects. Unfortunately, this may not be enough time in some cases and has created challenges in keeping up with initial project timelines.
Additionally, rising prices paired with material delays has made it nearly impossible to create an accurate bid as many products are billed on shipment or delivery, not upon order. An 8 week delay could put your project into the next quarter and material prices could see a 6% to 12% hike.
What’s Working?
With labor shortages and material delays being the leading adversities this year we have found solutions that have helped aid in our success. One of the biggest steps we have taken is ordering ahead of time. In some cases, it has actually been beneficial to order in bulk and store materials until they are needed. Things like outlets, drawer pulls, and hinges, which we use on most projects, along with some building materials can be stored until needed. We have also taken the initiative to do the research to find suitable replacements that can be accepted by designers and architects if need be on similar products that are more readily available. Doing our due diligence on this has helped us hit project deadlines from the bid stage to the final project due date.
When it comes to project management, we have provided more supervision to help train and assess the efficiencies of crews. Clear communication and expectations on progress and quality is a key factor in working together in unison. Assessing the progress on a day to day basis helps prevent getting stuck or falling behind. We have even taken measures of going out of our home region to find and hire traveling crews. A great example of this was when we had an Arizona crew come to Colorado and work on our Arkansas Place Apartments. We have had other projects this year where we practiced the same method and had successful results.
Internally, we noticed a trend of heavy value-add clients beginning to fade away and long-term hold clients started to take a forefront. There has not been as much money to be made with interest rates rising and money becoming harder to get for acquisition groups. In turn, ROI’s have dropped compared to previous years (and will likely continue to decrease as we head further into a recession.) The workload did not slow down, but simply shifted as there is still a need to improve properties.
Progression
In 2023 we are nailing down the strategies that have worked thus far and are always looking for new ways to improve in this ever changing market we are all in! Being solution minded and optimistic are the best ways to win in an unpredictable environment. We will be interviewing top leaders in the affordable industry to get their take on 2023 Industry Predictions. Keep an eye out for this new article later this month.