You may have read in the news that a) the building industry is going gangbusters and b) we’re hamstrung by supply issues. Both are true. Here, three of the original founders of Box™ share their thoughts about what that means for business in the new normal.
Dan Heyworth : Director, New Projects
After nearly 12 years in business, we know the score. We’re used to some delays, logistical conundrums and price increases in materials. We factor that in. But 2021 was, to use a cliché, a ‘gamechanger’.
Whereas previously lead times for material supply meant waiting weeks, now that means months, and price rises, once consistent but stable, have ramped up to ‘unprecedented’ levels. Perhaps that’s because local suppliers have overcommitted internationally (we don’t know how much of our timber is going overseas), or perhaps there’s some price gouging going on.
One thing we do know is that it’s difficult to keep tabs on it, but our priority is to keep our building sites busy.
While the price of the land is still the most significant cost in housing, this situation should nevertheless be driving us to consider dwellings of more human scale. The average house size in New Zealand has doubled over the last 60 years and, even with a budget of $1 – $1.5 million for building, it never quite seems to be enough for what people want.
My advice is to think about how big you really need a home to be and, in this environment, to have some flexibility on materials. For example, instead of Vitex or Kwila decking, opt for one of the many viable alternatives. And if the fixtures and fittings – say, the plumbing hardware – is delayed, be prepared to swap to another brand.
Nat Jakich : Construction Manager
Deliveries are massively affecting the flow of labour on our sites, with suppliers unable to keep up or accurately manage stock supply from companies distributing products such as cladding systems, structural flooring sheets and even certain framing sizes. Has this ever happened in the 30 years I’ve been in the build industry? If it has, I don’t remember it.
Right now, we have an order in for cavity battens (45 x 18mm). Seems easy: they’re usually ten a penny. But they have been in short supply. We tried asking Carters (our preferred supplier) for the slightly more expensive type. Still nothing. They also couldn’t give us an expected ETA. They simply don’t know.
The other catch is that we are receiving materials onto build sites that are often tight for room and not scheduled correctly (because we take the materials when the supplier has them available rather than when we require them). We have decking on a site right now that won’t be used for 6 months!
We are also having to move carpentry resource midway through a job to another site until materials arrive. This will push us to run our sites differently should this trend continue into 2022.
The Level 4 lockdown has, of course, prolonged this situation. One potential silver lining is that, with Auckland still in lockdown and the rest of New Zealand’s construction industry up and running, the manufacture and processing of building products has a small window in which to catch up to the demand Auckland is placing on supplies.
Meanwhile, juggling materials between sites and holding onto any materials delivered is key.
Nat Holloway : Quantity Surveyor
It’s a different world today in terms of how we calculate budgets and manage supply. We always order the important stuff in plenty of time. As soon as the contract is signed, we’ll send out purchase orders for all the framing timber – the bearers and joists – pre nail trusses, cladding and the flooring substrate. But this year supply has been unreliable. Now even everyday stuff such as timber framing (an absolute stock in trade) is unpredictable.
This type of issue is impossible to plan for, although we have been ordering more, earlier. That means we have an oversupply on some building sites. Storing materials this way, especially in Auckland, is difficult. It needs to be well wrapped up and not many sites can accommodate it. One of our builders has been driving around procuring cavity batten from sites that didn’t need it. In a funny way, that is setting up good habits (sharing materials is less wasteful), but the next job needs to be at the correct stage to use it. Then there’s chaos when the supplier overdelivers because so many different people from Box™ have been calling, that they send the order two or three times. That wouldn’t normally happen. But there’s no way we are sending it back.
Normally at Box™, we try not to be too wasteful. We order 80-90 per cent of what the builder needs and let the site supervisor top it up as required. Now the reverse is true. We order heavy and if there’s some left over, lucky us. There is a parallel with building inspections. Just 18 months ago, we could book a slot for two or three days’ time. Now the lead time is three weeks. So everyone is booking well in advance, just to have it in the system. If they aren’t needed, cancellation 24 hours out is free, but inspectors have stopped doing stand-by inspections.
You may imagine the major issue is the effect Covid-19 has had on shipping. Not so. Building capacity in Auckland is through the roof with near-record consents granted this year. The Christmas rush 2020 just never ended. There’s a huge demand for materials. And during the first lockdown (March 2020), a lot of the smaller timber mills, pulled out or folded. At the same time, China’s demand has been booming – so New Zealand fights for the scraps. If you’re trying to buy upmarket European tiles or stone or tapware, the issue is shipping, but not when you’re talking about bog standard construction timber that is made here. As an aside, glass supply seems to be okay, as does aluminium and roofing, but we’re dancing between suppliers when it comes to paint.
For cladding, among others we use local supplier Abodo, whose product is made with homegrown pine. At beginning of 2021, their lead time was 8 weeks. That moved to 13 weeks, then 17 and in about late June, we were told any new orders will be delivered next February. The lead times jumped exponentially because builders panicked and ordered it all. We were twiddling thumbs on at least one project in St Heliers (skeleton crew doing what they could), waiting for a delivery. Here’s hoping their production ramps up because Abodo is a good product to work with.
As far as price increases go, these have been rampant since Christmas. Overall costs are up 20 per cent over four years but 15 per cent of that jump occurred in the last six months. It’s hard to predict what will happen in the next six; I need to be eyes wide open. I hope it plateaus and that in reality, when estimates turn into quotes, the price comes down and we can say, “we overcooked it”.