In the wake of the COVID-19 pandemic, the construction timeline for apartment communities has significantly stretched, causing challenges for developers, investors, and tenants alike. According to the National Association of Home Builders (NAHB) and data from the Census Bureau, it took an average of 19.9 months to complete an apartment project after obtaining authorization in 2023. This figure represents a 0.1-month increase from 2022, which saw a more substantial rise of 2.3 months from the prior year. While these numbers might seem small on the surface, they underscore a growing problem: construction projects, particularly large-scale developments, are taking increasingly longer to reach completion, and this trend shows no signs of slowing.
The Longer the Construction, the Bigger the Project
Not all apartment communities are facing the same delays. The larger the unit count and overall size of the community, the longer it takes to complete. According to the NAHB, apartment buildings with 20 or more units needed an average of 22 months to complete after obtaining the necessary permits in 2023. This contrasts with smaller developments. Buildings with 10 to 19 units required 21.5 months, while those with two to four units needed 18.7 months, and buildings with five to nine units finished construction in 16.9 months.
This data highlights a key challenge for larger apartment communities: the scale of the project inherently contributes to longer timelines. Larger buildings require more labor, more materials, and a greater coordination of resources, making them more vulnerable to delays caused by supply chain disruptions, labor shortages, or regulatory hurdles. These factors have become more pronounced in the post-pandemic world, leading to greater complexities in project completion.
Pandemic’s Lingering Impact
The construction industry was not spared from the ripple effects of the pandemic, and these effects continue to be felt today. Early in the pandemic, construction was either paused or severely slowed down due to public health concerns, labor shortages, and supply chain disruptions. Now, even years later, these challenges remain a significant factor in the extended timelines for apartment community completion.
The pandemic led to a breakdown in global supply chains, which caused a ripple effect that is still being felt across the construction sector. Building materials like lumber, steel, and concrete became scarce or more expensive, further delaying projects. While some supply chains have stabilized, they have not fully recovered to pre-pandemic efficiency, leaving developers scrambling to source materials and keep projects on schedule.
Similarly, labor shortages continue to plague the industry. The pandemic accelerated a trend of skilled workers leaving the construction industry, either due to retirement or career changes. As a result, the available labor pool is still not meeting the demand, contributing to longer project timelines. Additionally, health and safety protocols implemented during the pandemic remain in place, adding another layer of complexity to the construction process.
Regional Disparities in Completion Times
While the delays in apartment community construction are felt nationwide, the extent of these delays varies significantly by region. In 2023, the Northeast experienced the longest completion times for apartment buildings with 20 or more units, taking an average of over 25 months from authorization to completion. This is not surprising, given that the Northeast often grapples with more complex zoning regulations, weather-related delays, and higher construction costs.
On the other end of the spectrum, smaller apartment communities in the South experienced the shortest completion times. Buildings with two to four units in this region took just over 10 months to complete after obtaining authorization, making it the fastest region for smaller-scale apartment development. The South’s more lenient regulations, warmer climate, and relatively lower labor costs likely contribute to these faster project timelines.
Authorization to Start Remains Consistent
While the time it takes to complete a project after authorization has increased, the period between obtaining authorization and starting construction has remained stable. In 2023, it took an average of 2.8 months to start construction after obtaining authorization, the same as in 2022. This consistency suggests that while the initiation of projects has not been delayed, the construction process itself is where most delays are occurring.
The steady timeframe between authorization and starting construction could be attributed to developers’ eagerness to get projects off the ground, especially in a housing market where demand for multifamily housing remains high. However, once projects are underway, the post-pandemic challenges of labor shortages, supply chain disruptions, and larger unit sizes cause significant delays.
Looking Ahead: Implications for Developers and Investors
For developers and investors, the increasing time it takes to complete apartment communities can lead to higher carrying costs, potential financing issues, and missed revenue opportunities. Delays in project completion mean delays in lease-up, which in turn pushes back the timeline for generating rental income. This is especially concerning in a market where demand for multifamily housing continues to rise, putting additional pressure on developers to deliver completed projects on time.
On the flip side, longer completion times could lead to pent-up demand, allowing developers to lease units quickly once projects are finished. The key for investors will be to factor in these longer timelines when assessing potential projects and returns on investment.
The rising time it takes to complete apartment communities, particularly larger ones, underscores the challenges facing the construction industry today. While the pandemic may no longer be at the forefront of public consciousness, its impact on construction timelines continues to reverberate. As developers adapt to a new normal of longer project timelines, investors will need to adjust their expectations accordingly, balancing the risks of delay with the potential for high returns in an ever-demanding housing market.
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