Construction has been one of the lucky few segments of the economy that has continued humming along during the pandemic. Student housing projects are still going on as planned, as construction has mostly fallen into the “essential” category of business during the shutdown. While builders report there have been few supply-chain issues, there were some initial slowdowns related to delivery.
“The only significant supply side issue we have had was on a project that we have under construction serving UMass Amherst,” says Brent Little, president of Fountain Residential Partners. The project, North 116 Flats, is under construction for delivery for fall of this year.
“When the outbreak hit fever pitch, we had all of our cabinets and countertops for the project on a ship coming from China in the middle of the ocean. We were very puckered up until those six containers hit the port in Connecticut, and we received pictures of them on the dock. We are now installing those cabinets in the fourth building of five buildings, so that issue has been mitigated. We were worried about some other items, such as laminate flooring, that were coming from overseas as well, but it has all arrived. If it had not, we would just have switched laminate specifications to something that was more readily available stateside.”
Problems that existed prior to the pandemic persist, so COVID-19-related challenges fall on an industry with an already thick skin. “From a construction standpoint, we have been dealing with lack of skilled labor and increasing costs due to tariffs over the past couple of years, so the pandemic has not greatly affected our operations,” says Marty Hoffey, business development manager with MW Builders. “The most asked question we get today is where costs are headed. Although there are reasons that costs could be headed in either direction, ironically, they have remained somewhat stable over the past few months.”
According to Sky Sanborn, chief operating officer and executive vice president with Broeren Russo Builders, warnings of potential shortages or extended lead times didn’t have any effect on business. “We have not experienced any impacts to our project schedules associated with COVID-19 material issues,” says Sanborn. “I think much of that has been the manufacturers trying to avoid overpromising, and then our team working with suppliers to find alternate solutions if needed.”
Giny Knudsen, executive vice president with CEI, reports that none of the company’s projects have been shut down as a result of the pandemic restrictions. “Skilled labor is always an issue, and the current climate certainly hasn’t helped,” Knudsen says. “As a result, we have to be very diligent in our pre-qualification of subcontractors and their work force to ensure they can do the job. Going forward, sourcing for materials and construction-related items will be a bit more creative than in the past. China has been a major supplier to our industry, but that is certainly changing as a result of current conditions. That being said, we have faced hurdles in the past and will continue to do so — it’s the nature of the beast, I’m afraid.”
As is relates to material supply and the pandemic, Eric Grimm, chief development officer with Core Spaces, says his teams have had to overcome a few pandemic hurdles and apply creative problem-solving strategies. “Fortunately, with the diligent work of our collaborative project teams, we have mitigated all substantive impact to date through a combination of alternate sourcing, schedule adjustments and other creative solutions.”
Finfrock remained on track during its development of the FAMU Towers project at Florida A&M. Built along with CTG Development Company and FAMU, the project includes two new residence hall buildings in two phases totaling 700 beds. “Using our proprietary DualDeck Building System, which allows sub-systems to be incorporated into the pre-cast product during manufacturing, we’ve been able to shorten the overall project schedule,” says CEO Allen Finfrock. “We are on track to deliver the first phase of the project ahead of schedule despite industry setbacks and delays due to the COVID-19 pandemic, allowing students to move in as planned for the fall semester.”
The pandemic has, in some cases, even had a positive influence at the job site: “We have not seen material impacts to our projects as a result of the current pandemic,” says Jake Newman, senior vice president of development for American Campus Communities. “Candidly, some of our projects have seen an influx of workers given that most jurisdictions have deemed residential construction an essential business.”
Keeping It Clean
As with every business, construction sites as well as field and corporate offices have to adhere to CDC guidelines. This has changed how some builders approach projects due to the new necessary special accommodations.
“The pandemic has changed the way projects are constructed in the field,” says Jim Moon, project director with Hardison/Downey Construction. “We now conduct self-certified wellness checks at the entrances to our jobsites; foreman’s meetings are held outside with the appropriate distancing; and we’ve increased numbers of hand washing and sanitizing stations. This puts an added burden on the trades as well as our field management staff. We are finding that several of the trades have asked to conduct their work in apartment units with no other tradesmen in the apartment, such as our cabinet and top installers. We have accommodated this request wherever possible and where it makes sense. This all affects production in the field on an already tight schedule.”
The pandemic has taught the construction industry similar lessons learned in all workplaces: telecommuting can sometimes be the best approach. “One interesting change that I’ve noticed, and hope will stick around, is the ease with which our teams, including owners and architects, have been willing and able to meet virtually to hash through a particular item,” says Sanborn. “In the past, it was customary for items to get tabled until the next in-person meeting, or to have difficulty in coordinating a meeting time with everyone’s travel schedules. The ‘new norm’ has pushed us all to up our game with virtual meetings and technology and to be more flexible and available with meeting schedules.”
Grimm says the new site-level guidelines that keep everyone safe have presented challenges that could impact efficiencies. “In general, those challenges can be overcome by providing solutions like staggering shifts, overtime and resequencing,” he says. “We are also dealing with the COVID-19 ‘fear factor,’ which is real. I wouldn’t say things are better or worse, just challenging in an unprecedented manner.”
Demands on Demand
Many companies interviewed for this article concur that their pipeline hasn’t been affected by the pandemic, even though the long view on demand is yet to be known.
“Our view is that post-COVID-19, you may well see an overall increase in demand for modern, apartment-style student housing in close proximity to campus,” Newman says. “In light of the issues that arose as part of the pandemic, student consumers and their parents will place a higher value on apartment housing that easily allows control of their entire environment, including kitchens and bathrooms.” Newman expects consumers will place a higher value on being able to walk to class and avoid crowded public transportation or the hassle of finding a parking spot on campus.
“As it relates to off-campus development for 2021 and 2022, we believe we will continue to see the trend prior to COVID-19 continue, with new development supply being flat to slightly declining. Looking forward for 2022-2023 and beyond, we believe we will continue to see a decline in annual supply, as the economic climate may be more difficult for smaller developers or those that do not have a deep track record in student housing development to secure equity and debt funding while large developers like ACC will still be able to execute on developments.”
Looking to the future, Hardison/Downey is currently eyeing demand opportunities in Arizona. “At Arizona State University, there are many older off-campus housing rental properties that are at the end of their lifecycle and student housing developers are buying them, tearing them down and constructing larger projects on the site,” says Moon. “So there seems to still be the demand for quality projects near campus. Northern Arizona is also short in the numbers of beds available, but construction costs there are an obstacle to making projects pencil.”
MW Builders has not seen a drop-off on 2021-2022 projects, even with the possibility for online classes this fall, according to Hoffey. “Development opportunities will always be present, and although we see projects taking a brief pause, things will pick up as this pandemic improves.”
CORE Spaces reports a strong pipeline as it looks ahead. “The building industry as a whole has been and will continue to be impacted, but we see potential opportunities that come along with the challenges,” says Grimm. “If projects in specific, hard-hit sectors are paused or canceled, we should see a market correction in the construction industry that is more than due.”
Sanborn says Broeren Russo has multiple opportunities that were in the pipeline before the COVID-19 crisis, some of which have been paused temporarily. “We anticipate they will come online as concerns are allayed. It’s understandable that there is uncertainty in what campus lifestyle and student housing will look like, but I believe we will see the demand for in-person learning, the college experience and the housing to go along with it are not going away.”
— Lynn Peisner
This article was originally published in the May/June 2020 issue of Student Housing Business.