Supply Chain and Labor Hurdles Continue to Hinder Operators

Multifamily developers and operators continue to adapt to the challenges spurred by the COVID-19 pandemic as well as look for opportunities based on renters’ shifting needs and wants.

While 2020 was about creating safe and touchless experiences for current and prospective residents as well as front-line construction and site teams, new issues have emerged in 2021—primarily around supply chain and labor shortages.

“We are still facing labor shortages, material shortages, wide-ranging price increases, and shipping delays,” says Keith Hughes, vice president of construction at Birchstone Residential. “Some of these challenges were already occurring to some degree, but the pandemic has exacerbated them.”

David Lynd, CEO of Lynd Living, says when you throw a wrench into a well-oiled worldwide supply chain, delays and price increases are going to continue.

“It seems like how this virus works its way through the human body, it’s working through almost every element in the supply chain,” Lynd says. “It’s hard to get shipping containers, ports are backed up, and there’s not enough labor up and down the supply chain.”

With appliance packages, flooring materials, HVAC systems, and shingles among the items that have become hard to source, developers are working harder and paying more to get their developments to the finish line.

For instance, Lynd says his firm recently had to go to four different suppliers to obtain the same make and model of appliances for a 150-unit development.

“The creative solution is you can’t rely on one supplier anymore,” he says. “Start ordering well in advance, find multiple suppliers, and find some alternative solutions to swap out one type of material to another that’s available.”

According to Hughes, teams must prepare contingency plans for delivery delays as well as for the budgetary impact that the rising pricing demands caused by the supply chain shortages can have.

“Patience is key in navigating through inevitable delays, staff constrictions, and material shortages,” Hughes adds. “Temporarily tempering expectations for contractors and suppliers is a proactive approach, as is ordering well in advance to ensure the best chance for on-time delivery.”

Lisa Newton, senior vice president of operations at Hines, says she expects supply chain issues to impact 2022 budgets as the firm looks to alternatives to products in short supply.

Recently, a part wasn’t available to repair a light fixture in a unit. “Rather than waiting for weeks or months to match the previous fixture, we presented the resident with a list of available options and allowed them to select a light fixture that fit their personal style,” she says. “We have to encourage our employees to think outside the box and respond to challenges a little differently than they might have in the past.”

Human capital also is presenting challenges for multifamily operators.

“After 20 months, the pandemic continues to have a lasting impact. Among the most notable challenges, the labor pool has been affected by the pandemic, and we have much longer periods of jobs openings than we are accustomed to,” says Lance Goss, vice president of apartment living at HHHunt. “This issue is compounded if/when an employee tests positive for COVID-19 and is required to be out for 10 days.”

Lynd says on the labor side, the pandemic has made many people reevaluate their lives, their jobs, and where they live. Lynd Living is making moves to become more employee-centric to help retain and attract talent. One focus is around health and wellness, including a full gym in the corporate office with a trainer and yoga sessions.

“We are really trying to expand to show employees it’s a marathon and not a sprint, and we want to make sure they take care of themselves,” he says.

Goss notes HHHunt is an employee-centered company, offering strong employment packages, competitive pay, and support and growth opportunities.

“Even with these benefits and attractive employment terms, we’ve seen some positions take two to three times longer to fill than before the pandemic,” he says. “Additionally, higher wages are needed to attract the best talent.”

Newton adds that the talent challenges vary by market. “Higher rent cities are especially challenged if employees can’t afford to live on-site or in the immediate area and they no longer want to commute,” she says. “Relocation packages are being discussed more frequently, and we are hiring a traveling team that can be deployed for temporary assignments where and when needed.”

Nicole Zdeb, director of people support at Birchstone Residential, says her firm has made a tremendous effort to keep associates happy by providing internal bonuses for referrals, enticing benefit packages, and outside recruiting assistance.

“Associates of any company want to be treated well, and 2021 has underscored the notion that the industry can be proactive and creative in aiming to retain its talent pool,” Zdeb says. “At Birchstone, we continue to cultivate ways to do this with a wide range of associates, including those who have migrated from old-fashioned multifamily mindsets.”

Development Trends

Lynd Living recently announced that it has formed a joint venture with T.R. Inscore to enter the hot single-family build-to-rent space. The partners plan to develop communities in the Sun Belt as well as suburban Chicago.

“Essentially, we found out of all the people who rent, 70% lease homes and 45% cannot afford to buy a home,” says Lynd. “What we are going to be doing helps meet the demand for people who want homes but cannot afford them.”

In traditional apartments, Lynd says units are becoming a little larger as a result of the pandemic as well as increased attention on outdoor space like nature trails, workout areas, and dog parks.

“While we were already designing flexible space within our amenities, the shift to optimize these spaces with more work-from-home solutions is real. What might have been a small, unused conference room is now being utilized as a ‘pay by the hour’ office space,” says Newton. “Residents that are still working from home are utilizing lounge areas as makeshift work space in order to leave the confines of their apartment homes. We do not see this trend ending anytime soon and are responding by placing special focus on the programming of these spaces in our new developments, as well as adapting existing spaces to meet the current needs of our residents.”

Goss says HHHunt also is seeing an increased desire for work-from-home and outdoor areas.

“We definitely have seen a rise in the demand for dedicated home office space, nooks, alcoves, and creative spaces that allow privacy,” says Goss. “We have been also seeing the need for more programmed outdoor space. Residents want more than a traditional pool deck; they’re looking for outdoor space that offers lots of options for entertaining and social distancing.”

He adds that the pandemic has opened executives’ eyes about what the future could hold.

“For example, we implemented smart home technology in all of our apartment homes. This allowed us to give residents access to their homes without coming in the office at all; it allowed us to monitor HVAC conditions remotely and correct issues prior to the resident coming home; it allowed us to offer self-guided tours, changing the way we think about access control,” Goss says. “We have really upped our game related to everything virtual and embraced technology more than ever.”