Central Florida homebuilders are bracing for the inevitable labor and supply shortages to come after the historic back-to-back hurricanes in Texas and Florida.
“In short and sweet terms, my expectation is everything is going to take a little longer to get done, and it’s going to cost more,” said Jeff Schnellmann, president of the Greater Orlando Builders Association.
GOBA’s office was severely damaged during Hurricane Irma when a tree fell through the roof, causing a rupture in the sprinkler system that flooded the office. Schnellman said association members have pitched in to help with the repairs and to donate meeting space until they can get the office back up and running — hopefully by the end of the month.
“Each company has its own set of issues, and then theoretically every employee may have individual issues they are dealing with at home,” Schnellman said. “So you’re not going to have 100 percent efficiencies.”
All of GOBA’s member-builders have some degree of structural damage and clean up that must be dealt with, in addition to the lost production time last week during Hurricane Irma preparations. Those are the immediate costs.
In the long term, the massive rebuilding efforts in southeast Texas and across Florida are expected to cause price spikes in much needed commodities, particularly drywall, plywood and shingles, according to Steven Orosz, vice president of Hanover Family Builders.
“Our concerns with Harvey’s eventual effect in Central Florida could be related to drywall and diverted labor,” Orosz said. “We believe the immediate impact of these storms is significant for homes starting construction or in block/framing, but hopefully that will work itself out in 30-90 days.”
Orosz estimates the impact of the two storms could push back cycle time by as much as three weeks. “This is a huge hit for builders with large work-in-process from a return-on-capital perspective, and trying to achieve business plan goals. This is time that you can’t make up before year-end.”
Even homes that were nearly completed will face delayed closings, according to Aldo Martin, CEO of Bellavista Building Group.
“All of the sod farms were flooded, and it will be a month before they can take it off the ground,” Martin said. “Houses that were almost finished and scheduled to close will sit around for a month because you won’t be able to get a (certificate of occupancy).”
Building materials also will have to be diverted to the Caribbean. “We can’t forget the catastrophic damage that occurred in the islands,” Schnellmann said. “A lot of their materials come from the mainland U.S.”
Matt Brown, sales director for ABD Development, said all homebuilders will suffer from supply shortages for the next six months. But small builders will feel it more acutely.
“With the national builders, they buy materials differently from the local guys,” he said. “A lot of times, they’ve got contract pricing because they buy in such large quantities. The smaller guys, we’re dealing with bids. It’s going to help the national builders.”
The local builders will also have a more difficult time keeping their trades, Brown said.
“Something like this gives them an even bigger competitive advantage,” Brown said. “Think about it — if you’re a sub and get the same contract offer from us and from D.R. Horton, which one are going to take?”
Martin said his first round of calls Monday morning were to his subcontractors. “It’s going to be a slow process getting back to our regular routine,” he said. “I’ve been calling my subs all week saying, ‘Hey, remember me? How are you doing?’ It’s hard because we’re all competing for the same labor pool.”
Martin said Central Florida builders were already facing a labor crunch before the storms. “This was going to be a really big end of season for homebuilders. We had planned a major increase in production, and obviously we will not be making the numbers we had planned.”
Schnellmann, who is also president of Silliman CitySide Homes, said Florida builders had not seen an appreciable exodus of their skilled labor to Houston primarily because that area is still drying out.
“Besides, there’s plenty of work here,” he said. “You don’t have to go to Houston to get work. Our subs were already stretched before the storm, and it’s going to be worse afterward.”
Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407)420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.
