Beginning with the first COVID-19 shutdown in Wuhan, China, the supply chain for construction materials has been rather unpredictable, and prices for construction supplies have continued to increase. At the commencement of the pandemic, China was the leading supplier of many construction materials. That changed as the impacts of China’s zero COVID-19 policy resulted in periodic shutdowns throughout the country. Between February 2020 and the present, the U.S. construction industry has developed alternative materials while opening new supply lines domestically, as well as internationally.
For boards of cooperative and condominium buildings, residents and even managing agents, 2023 shows signs of presenting fewer supply chain issues for basic construction materials. However, issues arising out of the overall labor shortage may continue in 2023.
The shortage of skilled labor in ports and transportation will continue to result in distribution issues. Similarly, there is a continuing shortage of skilled construction workers. Many skilled workers left the construction labor market during the pandemic and have not returned. Approximately 22% of truck drivers and construction workers are baby boomers (birth years 1946-1964). Immigrants alone make up about 25% of the construction labor force. Young Americans, meanwhile, are more attracted to the technology industry than construction, suggesting that the labor shortages in construction and trucking may continue or perhaps even worsen.
On a more positive note, there are alternative materials in greater supply, such as ByBlock or fly ash for concrete, steel insulated panels or engineered wood for lumber, or mineral wool or various foams for insulation. Pre-cast concrete panels, prefabricated assemblies and lightweight self-anchoring concrete panels are building options. Flexibility as to material choices, colors and decorative finishes is key to overcoming supply chain issues. One aspect of the supply chain issue that has had a potentially positive impact: pushing forward alternative products that are also green.
Other strategies in place to address supply chain issues include early ordering of materials. The industry has responded with tighter scheduling and more accurate and frequent schedule updates. The industry has also been using more three-dimensional modeling in design, to allow for more precise ordering of materials, which has led to less waste.
Inflation is easing a bit as well. Economists seem to be anticipating only a 6% increase in construction material costs in 2023, which is approximately 2% less than in 2022. Prices for some products, like semiconductors, are stabilizing. Others, like mechanical and electrical parts, remain in demand.
This column presents a general discussion. This column does not provide legal advice. Please consult your attorney for legal advice.
Carol A. Sigmond
Greenspoon Marder LLP
590 Madison Avenue, Suite 1800
New York, NY 10022