Throughout the last two turbulent years we have shared reflections, insights and predictions about the commercial real estate market. Searching for clarity in what has been a challenging and uncertain period in the industry continues to be an ongoing task. This month we want to recall and update our predictions for the remainder of 2022.
"Construction essentially comes down to budget and schedule. Right now what we’re facing is that subcontractors can’t get the labor to get work done; if they do have the labor, they can’t get the supplies and materials they need. And if they can find them, the prices are outrageous."
This all added up to projects taking twice as long and costing twice as much. Fast forward to July of 2022 and while there have been improvements, some persistent and continuing issues remain.
On the positive side, the labor shortage has had trackable improvements. As Craig notes, bids from General Contractors are now being returned in weeks, not months, and that the interminable crunch of work seems to be relenting. Driving this change is the increasing availability of trade-specific sub-contractors who have filled their teams with personnel and are now booking open schedules for the coming months.
On the other hand, material prices have not shown any consistent stabilization or decrease. In fact, “volatility” is the term most on the lips of those in the construction industry with respect to materials. Just surveying the projects in progress, Craig noted that HVAC equipment has a six-month lead time and glass went from being readily available to essentially unavailable and significantly more expensive over the course of a few weeks.
Looking forward, we expect both trends to continue: further stabilization in labor resulting in decreased bid and project timelines and persistent volatility in pricing and availability of materials.
Embracing our new everyday: from supply chain to business operations
The pandemic has had a direct impact on tangible aspects of the commercial real estate industry. That’s exemplified with the supply chain challenges above. Each and every business within this category shares the struggles of all companies and employers adapting to a new world of work.
In January of 2021 we shared our thoughts on how to take the company beyond video conferencing and into a radically altered work environment. Two particular topics we covered have notable updates and extensions 18 months later: adaptability to worker needs and information technology.
“Maintain a balance of professionalism and humanity”, we said in the early days of 2021. As the months of the pandemic continued, we tried to make our “new normal” even more personal with our staff; we learned more about their homes, families, technology and social activities. We broadened our professional relationships to account for discomfort, isolation and quarantine--and it brought us even closer.
We also decided to add an optional second staff meeting to the calendar each month. The goal with this addition is to highlight our employees’ everyday experiences. With six to eight staff members sharing their personal situations and challenges, this has fostered a space of acknowledgement and acceptance for processing changes happening in our professional and personal lives, showing our collective willingness to begin conversations on challenging topics.
"I just felt like NAI Elliott cares I do well as a person, as a human being. I’m not a robot that comes in and clickety-clacks on a computer. I am a person with outside responsibilities and sometimes, it can be a lot. The company has shown it will always continue to support you in your work and your personal life."
As a company, this outcome is exactly what our efforts over the depths of the pandemic aimed to create and we believe that companies and employers will need to continue to evolve the holistic support for employees in order to facilitate their most productive, invested and successful work.
Adding security and reliability to our technology efforts
Also in early 2021, we all recognized the fundamental importance of enlisting strong IT support to assist staff with stable and reliable technology. While we benefited from our long-term push to SaaS platforms and digital tools, what we did not anticipate was the dramatic increase in attempts from malicious actors to penetrate our system.
Along with building out the IT tools and staff to support employees, we quickly found ourselves redoubling our efforts on cybersecurity. Facilitated by a SOC control development and audit process, we received valuable outside validation of our security systems and testing of our tools in order to stave off the notable uptick in phishing, brute-force and social engineering schemes. Looking forward into 2022 and beyond, we are confident that both the complexity and importance of cybersecurity will increase as far-flung conflicts and both local and international bad actors bombard companies with attacks.
The ”post-pandemic” period is upon us, or at least a “pandemic-tolerant” one, and we believe that adaptability to volatile areas of our business, supply chain and construction in particular, and employee support and stable infrastructure, including IT, will be fundamental to this new world. Regular and intentional efforts to seek clarity and prepare for the ongoing evolvements and impacts on the industry and our lives will be essential.