By Katie Sloan
The pandemic has brought many challenges to the student housing industry, particularly as it relates to the much anticipated — and often dreaded — summer turn season.
In 2020, the biggest hurdle was keeping shared spaces sanitized while maintaining the safety of residents and onsite staff. Owners and operators had the added challenge of navigating labor shortages, which left many companies scrambling to find everything from cleaning crews to onsite staff, and supply chain issues that resulted in everything from paint to furniture and appliances being stuck offshore or in ports, with little predictability as to delivery.
Student Housing Business polled a number of owners, operators and vendors on their thoughts and best practices for circumventing supply chain issues in the new year.
Owners & Operators Plan Ahead
Owners and operators are getting on the ball and starting to plan. “I’m no expert on the supply chain, but our experience this year really has focused on furniture delivery, whereas in the first year of COVID-19 it was supplies for cleaning and sanitizing,” says Christine Richards, president of management at Core Spaces. “Items that were supposed to be delivered in June were showing up in December, which created customer service issues and compensation for those promised new furniture that have yet to receive it.”
“This year we’re implementing earlier ordering for items like flooring and furniture,” she continues. “The real issue with this is, ‘could it be too much or too little?’ And clearly, we’re hopeful our predictions on the needs will be overstated so we are in a comfortable position come August. Really, the supply chain issue is clearly related to the labor concerns we have in the states — that is impacting all of us in all areas of business.”
Casey Petersen, chief operating officer at PeakMade Real Estate, agrees that furniture is one of the predominant focuses for early ordering. “The first crucial step for our teams is to focus on ordering any furniture replacements,” he says. “We have received communication from several suppliers that we will need to move up our ordering timeline to ensure supply is available by turnover in late July to early August.”
“It has caused us to need to move up our quarterly inspection schedules and to make some level of assumptions about what condition furniture will be in by next summer,” continues Petersen.
“With most of our furniture coming from overseas, containers making it to us in time has been a big challenge,” says Stacey Lecocke, executive vice president of Asset Living. “Last year, we moved up our orders around six weeks — we typically order by April 1 to be delivered in July. This year, all furniture orders are due January 1.”
At University Partners, Principal Carlie Cresse notes that the largest challenges have been rather aptly felt at their largest projects. “Delays in parts for gates, pools, appliances and technology hardware have severely impacted the upkeep of our day-to-day operations,” she says.
“We are already preparing for turn season, adding to our lead time on all orders and increasing our in-house inventory for maintenance-related items,” continues Cresse. “Over-communication to vendors, our internal teams and our residents has proven to be the most effective way to manage problems.”
At Redstone Residential, the majority of supplies for turn season are being ordered right now, and if needed, the company is willing to rent out storage units to house items until turn again. “We sat down and looked at what the difference would be between a resident not having an appliance due to supply chain issues and paying $100 to $120 per month to rent a storage unit and buy the appliances right now, and it just makes more sense to rent,” says President Jake Jarman.
“It’s worth the extra spending if it means that residents have a perfect experience when they lease at our properties,” he continues. “If we get lucky and the appliances show up early, great. We’d much rather pay for two or three months of storage so that we can guarantee a great customer experience for our residents. Everyone knows that supply chain issues are a factor, including the residents, and if they show up to an unfinished apartment, they’re going to wonder why we didn’t order earlier. We’re going to avoid that to the extent that we can.”
The same practices are being seen in development, according to Douglas Miller, vice president of construction services at Cardinal Group Construction. “It’s all about mitigating the risk of delayed shipments and transport in 2022, so avoiding that means ordering as early as possible and potentially storing furniture and other products at or near the properties being renovated,” he says. “Hopefully we will see labor markets in better shape in 2022 than we did in 2021, so we will have resources to execute the installations. But we won’t really start to understand that until May or June when summer seasonal hiring numbers come out.”
Labor shortages are another factor being considered ahead of next year’s turn. “Labor issues continue to be a challenge whether we are hiring leasing or maintenance staff,” says Michael Davis, president and CEO of Alpha Management Partners. “This has led to higher payroll costs due to overtime and bonuses for employees. Our communities are highly leased, so we’re not seeing any opportunity for turning units early. Instead, we plan to have teams deployed at the end of July through move-in day, assisting sites for the duration of turn versus helping for a couple of days.”
Stuck at Sea
The most significant issue for vendors this past year involved ocean freight, according to Lisa Dillon, director of national sales at University Furnishings. “With container costs at more than three times any amount we have seen historically and unprecedented delays at U.S. ports, this year was incredibly difficult to manage.”
“We were able to navigate most of the timing issues by leveraging our teams on the ground at manufacturing sites, placing orders earlier and planning for two to three times longer delivery timing windows,” Dillon continues. “Additionally, the foam allocations related to the Texas freeze drove up costs and disrupted our domestic upholstery manufacturing. Finally, we saw cost increases in raw materials, domestic labor shortages and increased storage rates. Suffice it to say, this has undoubtedly been the most challenging year on record for University Furnishings and likely for the industry as a whole.”
Curt Christian, president and CEO of Function First Furniture/Curt Christian Design, echoed the difficulty in simply securing shipping containers. “Containers were being given to the highest bidder,” he says. “That was the largest challenge of the entire year. Between our unsophisticated freight, rail and trucking systems, compounded by many people simply not working, the entire supply chain was thrown off.”
“Containers were backed up, then there weren’t enough people to get them off the boats, then there weren’t enough trains or trucks to get the product delivered,” Christian continues. “It’s been a perfect storm, and it has continued to build and is still at the same point today — it has actually gotten worse.”
And it wasn’t only challenging for companies that source overseas. Domestic manufacturers like Dickson Furniture also felt the impact of supply chain issues. “We’re fortunate to be one of the few U.S.-based manufacturers in the industry for student housing furniture,” says Kris Benson, the company’s director of sales.
“Most of our raw materials for furniture and upholstery are domestic, so we did not face substantial delays receiving the necessary supplies,” he says. ”However, similar to other suppliers globally, we’ve seen an increase in costs of materials and our team continues to work on solutions for the ongoing labor shortages.”
Paint is another ‘turn season’ mainstay that was hit hard in 2021, according to Mat Windsor, turn operations director at The Turn Co. “We notified our clients in April to expect issues with matching paint and limited supplies and worked closely with our paint reps in attempts to source matching paint specs,” he says.
“It was a struggle for our paint suppliers to create matching paint specs or even locate them at other stores locally and nationally for us,” continues Windsor. “In some cases, the paint was technically identical to previous years but the colorant levels varied, creating slight but obvious issues with paint matching, presumably due to a lack of availability of certain pigments and dyes. The result was a lot of full paints that would normally otherwise be touch paints, and a lot of budget overruns because of it.”
Vendors Weigh In
No matter the type of commodity, every vendor polled by SHB noted that the name of the game is early action. “We are counseling our clients to get their orders in as soon as possible to help mitigate any further disruptions that could arise and to get into the queue,” says Dillon. “We are already seeing strong demand for the 2022 season, and the most recent projections suggest a robust development pipeline through 2024.”
“You used to be able to plan for room surveys over spring break in past years,” she continues. “This year we would suggest getting orders in over the holidays and to choose your furnishing partner wisely. Make sure that they have a pulse on the supply chain and that they’re not just outsourcing critical functions to third parties. Ensure there are redundancies in place if things go wrong, and make sure there are communication protocols to keep you in the loop from the day you place the order until the day it’s installed.”
While purchase timing is going to vary by product, there’s no better time to plan or buy than right now, reiterates Philip Cannata, CEO and co-founder of Turnable, a software company designed to help better facilitate the execution of turn. “As we head into the new year, it’s important to reach out to all of your regular turn vendors to get a sense of anticipated delays and determine how their estimated time frames align with your needs,” he says.
Balfour Beatty, in partnership with Axium Infrastructure and Vanderbilt University, broke ground last summer on this 616-bed student housing project in Nashville. The development team is hustling to procure key supplies and products in order to stay on pace with the target opening date of August 2023.
“Another critical need for turn isn’t a product at all — it’s people,” continues Cannata. “We would recommend owners and operators evaluate the human power needed to effectively manage their upcoming turn. From in-house team members to vendors, accounting for labor needs now will help ensure you have who you need down the road, especially in saturated markets where good vendors are in high demand.”
Tom Dobbin, director of student housing for University Loft Co., echoes the need for early shopping. “Our founder and CEO James Jannetides said ‘what’s the worst thing that can happen? You order too much and are able to provide for your customers and use the rest the following year?’ Ordering early and covering for unexpected future needs will be important since it’s so early to see future issues with your safety stock on-hand.”
Diversifying your vendor pool away from one specific country or region is another important step in mitigating potential supply chain pitfalls, according to Andreas Egger, sales director at Foliot Furniture. “Research similar product options in other locations and if nothing else, establish a contingency plan that can be executed quickly in case of any issues that may come up unexpectedly,” he says.
“Educate yourself on your supplier’s and vendor’s ability to adjust to sudden shifts and changes impacting their geographic areas of manufacturing,” continues Egger. “What are their contingency plans? What steps have they taken to protect or hedge against known and unknown issues? Look for suppliers with an established manufacturing footprint in North America who are less dependent on a global supply chain and that are capable of providing shorter lead times.”
Many companies are already in meetings with owners and operators preparing for next summer’s turn, like The Turn Co., which provides management, year-round oversight and execution for turn. “This past year, 90 percent of our turn contracts were signed in May, June and July, which makes planning and acquiring labor in multiple markets nationally difficult with such a short runway,” says Windsor. “The critical message for our clients next year is starting earlier, just like with furniture orders, and getting contracts done as soon as possible.”
An End In Sight?
A question on many minds is when the supply chain nightmare will end? And unfortunately, most do not anticipate relief until further into the new year. “We are hopeful that most of the raw material and labor cost inflation has been absorbed,” says Dillon of University Furnishings.
“Regarding ocean freight and port congestion, the adage ‘hope for the best, plan for the worst’ certainly seems apropos,” she continues. “We assume elevated freight rates will continue through 2022 and then begin to normalize in early 2023. While these costs and congestion issues will improve, the ‘new normal’ for freight rates will remain higher than historical averages given the shipping conglomerates’ leverage.”
“I wish I had a crystal ball,” says Richards of Core Spaces. “I have a family member that runs a logistics company in Malaysia. His prediction is by the end of the second quarter we should be starting to normalize, all contingent, of course, on future COVID variants.”
Dobbin of University Loft agrees, noting that the second quarter is the earliest he expects to see resolution. “The holiday season has put added pressure on the supply chain,” he says. “Once that is over, I just don’t see retailers paying such exorbitant prices for inbound freight, which should ultimately start to balance.”
Petersen of PeakMade does not anticipate supply chain issues resolving prior to next year’s turn. “We have heard from many of our turn vendors that the stock is sitting in shipping yards or in containers waiting to be delivered,” he says. “We are already working on combating potential issues and have significantly accelerated our ordering timelines as part of that strategy.”
— This article originally appeared in the November/December issue of Student Housing Business magazine.