Author: Tim Moegen
July 14, 2023 - 5 MIN. READ
Are supply chain issues, inflation, and higher labor costs keeping you from gaining the long-term tenants that you want?
When property owners turn towards remodeling their multifamily properties, they often look for upgrades that will draw new tenants and turn existing and new tenants into long-term tenants. However, multifamily purchases that include upgrades that focus on tenant needs, such as multifamily EV chargers, can be hard to come by, between supply delays, inflation, and higher labor costs.
Why not build new?
Building new multifamily properties hit its highest peak since the Great Recession in 2022. Construction increased by more than 15% from 2021 figures. This boom resulted in more than 500,000 new buildings.
The National Association of Home Builders (NAHB) foresees new construction slowing dramatically in 2023. They see a slightly smaller market dip in 2024, leveling out at around 374,000 new buildings.
The NAHB gives several reasons for the slow-down in new builds:
- Slow rent growth
- Rising unemployment
- Tightening commercial real estate financing market
- Substantial supply in the construction backlog
New regulations block the road for many new construction projects. Zoning requirements slow projects. The local zoning board often requests an impact study before considering a new project. Building codes and permitting fees also raise the cost of building new multifamily properties.
All of these stumbling blocks, taken together, add to the affordable housing crisis in the United States.
Renovation
The NAHB predicts that multifamily property remodeling will continue to rise. This increase is due to the high cost of new construction and the need for tenant retention. Much of the workforce has returned to pre-pandemic office hours. However, many still prefer multi-functional spaces such as a home office, study area, and workout area. Younger tenants also prefer "green" choices whenever possible. Multifamily property owners should consider these needs when deciding on renovation projects.
The following design trends are currently popular with multifamily property owners and their tenants.
- Mixed-use buildings. Mixed-use buildings add value to any neighborhood. Combining residential and commercial space, mixed-use buildings often work as "anchor buildings" in a community.
- Technology. Multifamily properties that feature modern technology attract and retain today's tenants. This generation of renters grew up with technology easing every aspect of life.
- EV Charging Stations. While today's tenants prefer mixed-use buildings to reduce carbon footprints, many residents and tenants must drive. As a result, these eco-minded individuals actively look for properties that offer multifamily EV charging.
While you will need to perform some research regarding your building and its electrical capabilities, EV charging stations create happier residents, increase occupancy, and increase your multifamily property's bottom line.
Renovation delays
Many COVID-related supply chain issues have been resolved, but labor shortages, inflation, and some supply issues plague multifamily property owners.
Some multifamily property owners formed a construction arm to keep these costs and delays in line. Others try to perform as much of the work in-house as possible, subcontracting when necessary.
Even with these measures, multifamily property owners see prices skyrocket and double lead times for completed renovations.
The National Multifamily Housing Council (NMHC) surveyed its membership and found that 68% of its members experienced increased labor costs. Another 21% stated that multifamily procurement had risen even more than expected over the previous quarter. A little more than half of the members also reported that labor availability is about the same as last quarter – still tight, but not unexpected.
Materials and sourcing provided the most significant renovation delays, according to 53% of the respondents. In addition, NMHC noted that 41% of its members cited economic uncertainty as a contributing factor in the delays. Inflation loomed large over the membership, though, with 67% of the members reporting that they had to re-price deals upwards by an average of 9%.
Materials and sourcing proved tricky due to fluctuating prices. For some commonly used commodities, such as lumber, prices decreased after experiencing a 201% price increase in 2021. While down from their highest point, lumber prices are still not as low as they could be. In addition, governmental regulations and industry capacity continue to limit harvesting ability.
Other construction and renovation supplies remain scarce. For example, electrical components, including everything from panel boxes to appliances, are still in short supply. The great demand for electrical components and the short supply keeps prices artificially inflated.
While buying in bulk seems as though it should be a solution to overpriced items, many NMHC members find that their suppliers do not have enough items in stock to fill bulk purchase orders.
This inability to find needed materials slows the turnover rate of tenants. For example, one rental could be delayed for weeks due to a lack of cabinet faces required to complete a kitchen renovation. As every multifamily property owner knows, an empty unit represents lost income. The longer the unit remains empty, the greater the loss.
Many members found that they needed to select alternatives when purchasing. For example, rather than buying the countertop initially planned for a space, they purchased a countertop from an alternative, available material.
Raiven eases your sourcing issues
Whether you are interested in installing multifamily EV charging capabilities or renovating a housing unit, Raiven is your purchasing partner of choice!
We bring the buying potential of large companies to your doorstep through the Raiven Marketplace. Name brand vendors with whom you likely already work offer steep discounts through the Marketplace. Grainger, HD Supply and even T-Mobile have pre-negotiated contracts in place with Raiven through the Marketplace.
Key benefits include:
- Pre-negotiated discounts that are generating average client savings of 7-25%+ from big name suppliers like Ferguson, HD Supply, Grainger, Graybar, Office Depot, and more.
- Supply chain alerts for price and product availability changes on the items that matter to you most.
- Private marketplace houses all your preferred suppliers in one location for easy access to your discounts. No more bouncing around websites comparing prices.
- AI-powered purchasing tools that find the lowest prices even when employees shop outside your network.
Raiven is your one stop shop to save time and money. Ask our clients Core Realty, Lyon Living, or Oaks Property Management what we’ve done for them. Visit Raiven to learn what we can do for you.
If you need your EV charging stations installed, be sure to visit Qmerit, the nationwide leader in electrification solutions.
