Lumber Prices Punishing Apartment Developers

Posted By: Jon Lowder Blog ,

Apartment developers have been saying for months that skyrocketing material costs are impacting their projects and today's (5/26/21) Wall Street Journal has an article about it. Here's a taste:

The soaring lumber costs that have slowed construction of single-family homes are starting to pinch apartment-building developers too.

While many multifamily buildings are made of steel, glass and concrete, wood is also a major component, especially in low- and mid-rise buildings. Wood is also used extensively for floors, cabinets and other fixtures.

The vast majority of apartments built in the Piedmont Triad are low- and mid-rise, the impact of soaring lumber prices will be particularly acute here. 

More from the article:

aterial costs included in new multifamily construction are up 25% to 30% over the past year, according to CoStar. That increase—not just in prices for lumber but for other commodities like fuel, copper and steel—was the largest since at least 1988, CoStar said.

These rising costs threaten to cool down one of the hottest construction sectors since the start of the pandemic. Multifamily construction hit a record level in 2020, thanks to strong rent growth, according to CoStar. For example, suburban rents were up 4% in the first quarter of 2021, CoStar said.

Developers in the middle of projects are worried that if the high material costs persist, they could run out of the money they set aside in budgets to protect against cost overruns. Some are accelerating plans.

You can read the full article here.