Multifamily development market ‘dynamic,’ but dwindling supplies, labor pool pose problems

Hudson Hooks of JLB Partners

Hudson Hooks, who heads up development for Texas-based JLBPartners in Atlanta, told BuckheadView today that the 373-unit Village atBuckhead luxury apartments under construction at 235 Pharr Road is running amonth or more behind schedule because of difficulty in getting supplies—mainlydrywall.

Hooks was one of 11 speakers on two panels during the 3^rdAnnual Atlanta Multifamily Summtt at the Cobb Energy Permoning Arts CentreWednesday morning. The summit was produced by Bisnow online real estate newsservice and was attended by about 400.
Overall, the speakers, led by Darin Collier, president of TheWorthing Companies, painted a rosy picture of the state of the multifamilyhousing market—specifically in Buckhead and Midtown.
Collier said Atlanta “has been one of the most dynamic marketsin the past two years. In 2010 it was difficult to get investors interested.Twenty-four months later, Buckhead and Midtown,” he said, are on fire withmultifamily developments. “It has not yet reached the end the demand,” headded.

Worthing Companies' Darin Collier

But with all of the multifamily development projects going on inBuckhead, problems with getting building supplies delivered on time and ashortage of workers could portend problems.
Hooks was just one of the panelists who spoke about the problemof shortages in building materials—primarily drywall, windows and countertops.  This is on top of problems getting certaintypes of labor—primarily in trades such as framing and drywall—connected to stateimmigration policies.
Hooks told BuckheadView that pre-leasing for Village at Buckhead“has been very strong” and he expects to be bringing some of the 373 unitsonline in November. Construction began last summer on the 6.5-acre, five-story$60 million project across Pharr Road from OliverMcMillan’s Buckhead Atlanta.
He said JLB Partners earlier had a hard time getting bricks fora project in Charlotte and is now beginning to feel some of the same pressureshere in Atlanta. The façade of Village at Buckhead is primarily brick.  The general contractor on the project is JLBBuilders LLC. 

Hudson Hooks, left, and Marvin Banks during panel session 

Marvin Banks, president and CFO of Atlanta-based CortlandPartners, said his firm has purchased 28 properties in the past 24 months andits primary business is in remodeling and upgrading properties the companypurchases. He also talked of problems in getting supplies delivered.
Banks said he has had trouble getting countertops, toilets andwindows delivered on time for their projects. “Prices are rising and suppliesare dwindling,” he said.  
Both Banks and Fred Schreiber, senior vice president of AMLI,addressed the recent increases in construction prices and the labor poolproblems.

Fred Schreiber

Schreiber, who said AMLI has two projects it is getting to startin the Atlanta market in the next month or so, said “construction prices haveeasily moved 10 percent,” although he said much of the 10 percent “is just themargin coming back.”
Schreiber pointed out that most of the sub contractors havelimited liquidity. He said if they get in trouble, they will cease paying theirsuppliers and that can end up in liens on the properties. “We see some failuresalready,” he added.
Schreiber also told the Bisnow audience, “There are laborshortages, especially in areas dependent on immigrants. The immigrant pool isnot coming back the way many thought,” he added, mainly referencing the framingand drywall trades. He said many companies who have their own constructionoperations are moving labor crews from market to market.
Banks pointed out that many markets smaller than Atlanta havebigger labor pool problems and thus the construction costs will be higher.

Ben Collins of Crescent Resources, which plans to build
an apartment complex at Terminus in Buckhead, talks
with Perennial Properties partner Aaron Goldman, at
right, prior to the first panel discussion.  

Hooks, Banks and Schreber were three of the five panelists onthe second panel at the Bisnow Multifamily Summit. The other two members ofthat panel, which was moderated by Steven Pepper, a partner at the ArnallGolden Gregory law firm, were Gables Residential Senior Vice President DavidReece and Alan Tapie, vice president of production at Grandbridge Real EstateCapital.
The first panel of the morning, which was moderated by JonathanBartlett, senior manager for commercial real estate at the Reznick Group,included Perennial Properties Partner Aaron Goldman, Crescent ResourcesSoutheast Regional Director Benjamin Collins and Mid-America ApartmentCommunities Senior Vice President Diane Chastain and Collier of The WorthingCompanies.