Supply chain backups postpone apartment openings

Persistent supply chain delays and labor shortages are strangling apartment construction timelines.

In February, the apartment completion rate fell to the lowest level since 2016, according to RealPage. The number of authorized but not-yet-started projects rose 31% year-over-year in March.

These delays create backlogs, headaches and cost overruns for contractors and developers.

But another group in the apartment ecosystem, third-party managers, also faces challenges. When supply chain backups and labor shortages derail project openings, it becomes a big issue for the management firms hired to operate these new properties. To pre-lease apartments and allay resident concerns, these operators are turning to technology and communication.

Real impacts

Vanessa Siebern, a senior vice president of Folsom, California-based FPI Management, the fifth largest apartment manager in the country, knows the impact of construction slowdowns. At one large project in Chico, California, appliances were “significantly delayed,” according to Siebern. 

“We can’t move people into units that don’t have appliances,” Siebern said. “We’re probably about 40 units behind just because we can’t deliver the units — they’re not ready.”

Luanne McNulty, a senior vice president at Orlando, Florida-based property operator ZRS Management, the No. 27 manager in the country, can relate. The firm dealt with a project that was delayed by four months because of issues with windows. “If you can’t put windows in, it just snowballs and they can’t finish,” she said. 

In some cases, developers are improvising. Companies such as Ft. Mitchell, Kentucky-based Drees Homes have been going through channels to source the products they need. “The developer or the construction team is running down the street to a Home Depot or a big box retailer to buy appliances because the bulk order isn’t coming,” McNulty said. “They don’t want to delay more.” 

But sometimes this improvisation can lead to higher costs for managers. At another project, McNulty said the construction team told her that she would need to budget for higher paint replacement costs. Why? Supply shortages forced the contractor to use five different paint manufacturers.

“They’re saying: ‘Because we had to use so many different paint manufacturers, you’re never going to be able to use touch-up paint. You’ll be doing full paints on everything,’” McNulty said.

Transparency is key

When a developer or contractor can’t source products or there is a major delay, it inevitably affects the resident. For property operators, managing this disappointment starts with being open. 

“Our general rule of thumb is always being as transparent as we can and giving the prospects as much advance notice as possible,” McNulty said.

Generally, residents haven’t been too upset about encountering delays, according to McNulty. “It’s really been pretty refreshing,” she said. 

Credit media coverage for these understanding attitudes. “There has been so much national news about supply chain issues,” McNulty said. “People are really more understanding than you would have ever thought they would be. That’s one place where the media sort of helps out. It conditions people to expect delays.”

Filling in with technology

Charlotte, North Carolina-based apartment operator RKW Residential is managing a project in Miami that was slated to be ready in January, but that opening has been pushed to May. RKW president Marcie Williams says the company normally brings the leasing team on site about 30 days before the opening. Fortunately, technologies like virtual leasing can help fill the gaps when a building isn’t ready for tours. 

“If a project is delayed, as a management company, we can pre-lease harder and be able to create video tours of the units that are available,” Williams said.

Ultimately, the managers that will successfully navigate supply chain delays are the ones that are most flexible.  

“It’s really just about managing around those supply chain issues instead of being defeated by them,” Williams said.

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