Multifamily developers are starting to feel the pain of sky-high lumber costs.
The price of softwood lumber jumped 83 percent from a year ago, the Wall Street Journal reported, citing data from CoStar Advisory Services. That jump has led to an increase in prices for single-family homes, and now it’s trickling down to developers of apartment buildings, too.
The costs of materials used in multifamily construction — including lumber, fuel, copper and steel — have increased 25 to 30 percent over the past year, the publication reported. That is the biggest increase since 1988.
Analysts say these costs could cause profit margins to narrow, especially if rents remain unchanged. It could also lead to a slowdown in construction.
Apartment buildings are largely made of glass, steel and concrete, but wood is often used for floors, as well as decorative elements like cabinets. But the high cost of limber is not expected to have an will have an impact on new luxury high-rises in places like New York and Miami that use technologies that do not require wood.
[WSJ] — Keith Larsen