March 2022 marked two years since the WHO (World Health Organization) declared COVID-19 to be a global pandemic. Emotional and economic recovery has been slow. Supply chain issues continue to impact commercial and residential construction costs and timeframes. Even though real estate investors see industrial development as favorable (the need for space is higher than space available), those in the trenches say the lack of parts and raw materials is negatively impacting construction projects.
The Philadelphia Inquirer says the Ukraine war will do more in our country than raise oil prices. “Nothing influences people’s thinking about future inflation than what they are currently paying at the pump,” said Chief Economist Mark Zandi. As inflation perceptions escalate, the Federal Reserve will likely respond by raising interest rates more aggressively than predicted.
Industrial Development Between a Rock and a Hard Place?
The lack of industrial development materials prolongs the problem of not-enough industrial real estate development. The costs of construction materials like steel and concrete have rocketed upward while competition to win Federal construction project bids is heating up like …well, rocket fuel.
Meanwhile, giants like Amazon, with seemingly unlimited purchasing power and resources for building their own storage spaces, are adding fuel to the fire by stockpiling.
March 2022 lead-time estimates:
- Dock levelers – 35-42 weeks
- Dock seals – 30-40 weeks
- Electrical switch gears – 50-50 weeks
- Main electrical panels – 26-35 weeks
- Overhead doors – 20-22 weeks
Construction Costs, Materials Issues
We’ll see continued efforts to update ports and speed-up customs and import inspection times. But supply chain issues aren’t completely international. North American-produced lumber and steel costs may be higher through 4Q2022. Pop-up storage may alleviate equipment and materials space problems.
Changes in design and materials substitutions keep some industrial development projects alive but other projects are being delayed or canceled. Meanwhile, when it comes to construction materials and prices, prepare for a new normal.
Speaking of normal: Data management and using information sources are now the way our industry operates and thrives. Find out why we think building permit information is an information source that pays for itself.