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Chinese Copper, Italian Marble: Coronavirus Shipping Delays Hurt Developers – NYT

Learn about how Coronavirus shipping delays are affecting construction and developers.

By C. J. Hughes

Find the original article here: https://www.nytimes.com/2020/03/20/business/coronavirus-construction.html

When it comes to obtaining building materials, real estate developers often buy globally, not locally. But as the coronavirus spreads across the world, bringing countries to a standstill, the lack of access to overseas supplies is sending jitters through the construction industry.

Delayed so far at large-scale residential and commercial projects have been goods like marble, tile, paving stones, furniture, lighting equipment and elevators — and even models of buildings themselves, workers say.

Warning signs are appearing on multiple fronts. And the setbacks threaten jobs in an industry that employs millions of people. In many cases, no materials means no work, analysts say.

“It’s not like when you build a house and can just go down to a Home Depot and get a different light fixture when you’re short,” said Chris Heger, a vice president of OAC Services, a Seattle firm that manages construction projects. “This stuff is all designed and planned years in advance.”

Theater seats from Colombia, wooden doors from Italy and metal ceilings from Germany bound for a new corporate campus in Silicon Valley are likely to be delayed, which will slow down work, said Mr. Heger, who is overseeing the project. He declined to identify it.

“I’ve been doing this for 30 years,” Mr. Heger said of a period that included the slowdown after the Sept. 11 attacks and the recession of 2008. “And I’ve never seen anything like this.”

Many of the components that make up a building come from China, even after Beijing and Washington got into a messy trade war.

At the Port of Los Angeles, imports from China, including construction materials, were down 23 percent in February from the same period last year, said Mark D. Fergus, a vice president of the consulting firm Cumming Corporation who is based Los Angeles and has managed condo, shopping center and hotel projects.

China is also the center of the coronavirus outbreak, and products scheduled to ship from the country in recent weeks have been plagued by further delays.

Contractors have complained that shipments of Chinese copper have not arrived on time. Hotel furniture from the Philippines, a country that has quarantined much of its population, is also expected to be late, Mr. Fergus said. “And the situation is only going to be exacerbated as we lock down other countries,” he said. “We’re trying to identity the risk and find alternative sources.”

Delays in materials have so far not forced widespread layoffs in the U.S. construction industry, which in February employed more than 7.6 million people, according to the Bureau of Labor Statistics.

As of Tuesday, just a handful of large private projects, like one involving a hospital expansion that may put patients at risk, have stopped work by their choosing, economists say. One reason for the low number of shutdowns may be that some materials from China had been stockpiled in advance to offset vacations taken in February by Chinese factory workers for Lunar New Year, they say.

When work shutdowns have occurred, it’s because government officials ordered them. On Monday, Boston closed all construction sites, affecting tens of thousands of workers. Mayor Martin J. Walsh urged managers to not fire employees but just lay them off temporarily.

For similar reasons, the six counties that make up the Bay Area of San Francisco on Monday ordered a halt to all construction projects except those involving housing.

On a smaller scale, several upscale apartment buildings have stopped apartment renovation projects, including the Ritz Tower co-op in Midtown Manhattan.

“It’s still mostly business as usual,” said Ken Simonson, the chief economist with the Associated General Contractors of America, a Virginia-based trade group. “But the anticipation is that there will major supply-chain problems of a variety of types.”

Projects now on the drawing board may be in trouble. This week, a planned 300-unit rental project in downtown Los Angeles fell apart after negotiations broke down between the project’s developer and the would-be lender, said Mr. Fergus, who is advising the developer.

“The events of the past couple weeks have made lenders extremely conservative,” he said, echoing assessments from developers.

At the same time, lenders have begun demanding details about the timing of shipments of material from Italy and China, two hard-hit countries, said Frank J. Sciame Jr., the chairman of Sciame Construction, a builder in New York.

“Lenders want to make sure they’re not going to be stuck with a half-completed project,” Mr. Sciame said. Even the smallest components are being affected. Controllers for LEDs, which used to take two months to arrive from China, are now be expected to take at least six, he said.

Maintaining quality during production, which often includes producing finishing touches for prominent developments, has also become difficult, Mr. Sciame said.

He was supposed to fly to Manchester, England, this week to inspect a mock-up version of a stage door planned for a new theater that his company is constructing in Manhattan. But the Trump administration banned flights to Britain from the United States.

Videoconferencing may be a substitute in some situations, “but there is nothing like having boots on the ground,” Mr. Sciame said. “The disruption in travel will be impactful.”

In the same vein, the travel bans have affected stoneworkers who regularly travel to quarries in other countries to handpick materials for kitchen counters, like PMI International Stone Importers, a New Jersey-based firm whose product graces department stores, office buildings and condos.

The company’s planned trip in early March to northern Italy to select white marble — one of six such trips a year — was scrapped in the wake of Italy’s national quarantine, said Kevin Gavaghan, a PMI sales manager.

Because PMI will not commit to the expensive stone until it can be seen in person, orders are not likely to be placed until June, Mr. Gavaghan said. “Some projects are going to be stalled because of this,” he said. “There’s no question about it.”

Not everything comes from abroad: Rebar, concrete and lumber often come from American suppliers.

But domestic sources for other materials, like ceramic tiles, may not be so easy to line up overnight, said Joseph Lundgren, a Dallas-based consultant to the tile industry.

Today, 70 percent of the ceramic tiles available in the United States come from elsewhere, Mr. Lundgren said, with Brazil, Turkey and Spain leading the way. The 11 American factories that do make tiles cannot meet the increased demand.

With three months of tile inventory on hand, shortages will probably not result anytime soon, he said. But he wondered if there would be dockworkers to greet tile-carrying ships in the coming months if the U.S. infrastructure shuts down.

Price, of course, dictates where developers shop, and because foreign markets often have lower-cost items, they have become a go-to source.

But with the coronavirus crisis, longtime calculations might have to be rethought, said Jeffrey E. Levine, the chairman of Douglaston Development, a New York-based housing developer.

Paying a bit more for domestic materials whose delivery is less at risk in future crises might be a smarter bet, he said. And the shift in strategy is playing out in real time.

For a 931-unit apartment tower that Douglaston is building in the Hudson Yards neighborhood of Manhattan, for instance, Mr. Levine will probably no longer install Italian cabinets, favoring a New Jersey manufacturer instead.

But in an indication of how difficult a buy-American approach may be, that New Jersey company, as it turns out, gets its raw materials from China. “It’s forcing us to dive into the supply chain,” Mr. Levine said.

Find the original article here: https://www.nytimes.com/2020/03/20/business/coronavirus-construction.html

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