Inflation is hitting the residential construction market particularly hard.
High labor and material costs are causing some developers and real estate investors to think twice about starting new projects.
We believe this is a great time to build a multi family project.
Housing demand is sky high.
Despite an increase in housing production over the last 18 months, the country is still experiencing a serious lack of inventory. It’s estimated the country lacks at least a million homes and apartments.
Demand is especially high throughout Northern California and Nevada. Thousands of prospective home buyers are searching for reasonably-priced homes. Even more Americans are looking for affordable apartments.
By most measurements, we should be experiencing a booming, recession-proof, housing market.
Unfortunately, due to inflated construction costs, many investors and developers are putting plans on hold. Some developers recognize an opportunistic market and would like to build but are finding it tough to secure construction loans, again due to high construction costs.
The challenge: bring construction costs back to pre-inflation levels. It’s a mighty tough challenge, but we’re willing and able to take it on.
Our goal with every new project is to bring the costs of construction back down to 2019 levels. It won’t be easy. It will mean cutting into our profit margin. It will mean streamlining operations and reducing overhead. But we believe it’s possible. More importantly, we believe it’s necessary.
How we’re lowering construction costs.
Over the last three decades, we’ve developed several proven ways to significantly lower project costs.
By far the most effective is by increasing efficiency. It enables us to do more for less. It allows us to provide our clients with more for less. It’s exactly what the current housing market needs.
We’ve elevated every stage of development and construction. We’ve significantly increased efficiency from the design stage to permitting and entitlements, from bidding and estimating to project management and warranty fulfillment.
Like most industries the construction industry does things for no other reason than “it’s the way it’s always been done.” In a few cases, the old ways are actually the best ways. But mostly, we discovered the old ways are wildly inefficient. So we’ve made changes.
We’ve developed an approach that has given us the ability to provide our clients with remarkably quick build times, along with unmatched efficiency, unquestionable quality, and the lowest possible pricing.
Our design-build process cuts costs, saves time.
Building “in the dirt” is archaic. It’s costly, wildly inefficient, and relies on an unpredictable labor market. That’s why we now manage and operate our own off-site manufacturing facility where most sections of our apartment buildings are manufactured and assembled, including key assemblies for both carpentry and plumbing.
We also use manufactured wall panels coupled with Smart Components, floor trusses, and roof trusses to further help offset the high cost of labor. With this integrated system, we dramatically cuts costs by eliminating waste and reducing on-site labor.
Off-site manufacturing is not only more economical, it’s appreciably faster. It allows us to start construction on up to a third of each building from day one. And unlike on-site labor, off-site labor can work in continual shifts, 24 hours a day in a safe, secure and controlled environment.
Today, we’re 60% modular with a goal of reaching 100% in the next few years.
When combined with our innovative products, our advanced building process makes us up to 33% faster than the competition. That saves more than month or more. How does that cut costs? It shortens the length of a construction loan and allows our development partners to avoid costly interest payments.
We control the ‘structure and skin.’
To take construction efficiency to another level, we self-perform basic trades, giving us more control over the structure and skin of our buildings. It also reduces costs, enhances workmanship, and simplifies scheduling.
Currently, we self-perform:
- Site Grading
- Concrete
- Framing
- Finish Carpentry
- Stucco
- Painting
All other trades, including electrical and mechanical trades, manufacturing, and on-site labor are provided by the region’s premier residential specialists. These are teams that are experienced and highly familiar with our products and assemblies allowing them to operate at maximum velocity from day one.
Our approach to lower labor costs.
Third-party construction labor is one of a project’s greatest costs. It greatly fluctuates depending on the geographical region and market conditions.
Pacific West is able to get preferred pricing by meeting strict conditions regarding time and material management. We are also experienced in navigating cultural and language differences.
We offer our labor partners preferred scheduling through comprehensive, precise project management. We address every variable that affects performance.
Because we use teams experienced with our assemblies, we can meet best-case timelines, something that’s necessary to satisfy the special conditions often set by labor and subcontractors to qualify for preferred pricing and scheduling.
Our technological edge.
More than 25 years ago, shortly after Pacific West opened, when most construction companies were keeping project information on paper or in the occasional Excel spreadsheet, we created our own IT division to create a networked construction management app.
The fruits of those labors have come in the form of two proprietary programs: tecxc.com and OwnerCare. Collectively, we refer to our overall approach to information technology as T.E.C. (Tools, Energy, Community).
T.E.C. has helped enhance the efficiency of every aspect in the building process, particularly construction management, risk management, quality assurance, and warranty fulfillment services.
T.E.C. incorporates industry-leading software and helps supercharge:
- Building Information Modeling (BIM)
- AutoCAD
- Bidding & Estimating
- Scheduling
- Quality Assurance
- Off-site Assembly and Manufacturing
- Accounting
- Purchasing
- Project Management
- Construction Techniques
- Customer Relationship Management (CRM)
T.E.C. allows us to connect with our clients and other project partners over a secure, easy-to-use integrated platform operating, from office to the field, from anywhere in the world.
A streamlined but powerful team.
Another significant benefit of T.E.C. (our IT system) is it allows us to reach the highest levels of production with a support staff a fraction of the size of other builders. That dramatically lowers our overhead.
Although we’re streamlined, we offer an uncommon combination of experience, ability and flexibility.
Like a championship sports team, our construction management team has been together long enough to develop a kind of sixth sense. It accelerates communication and greatly reduces errors and miscommunication, one of the leading causes for inflated construction costs.
It’s not an exaggeration to say Pacific West’s management team has seen it all. Most of us have worked in the residential construction industry for more than three decades. And most of us have worked together as a unit for more than two decades.
During that time, we’ve experienced historically profitable markets, historically depressed markets, inflation, recession, economic downturns, labor shortages, supply chain issues, industry-wide cash flow issues, material advancements, new tech, changing trends.
We are highly flexible and adaptable. We’re able to change directions quickly with minimal disruption. And we can go from “zero to sixty” in the blink of an eye. That’s something that’s becoming increasingly important for a construction business as market cycles seem to come and go faster than ever.
You can react to the market, our you can control the market.
Demand for housing is near an all-time high. Competition is shying away. And Pacific West’s ultra-efficient process brings prices down significantly.
It’s a great time to build.
We’re aware of the new conditions for construction loans. We’re willing to do everything we can, including working with subs and suppliers, to get overall construction costs down to pre-inflation levels. It’s the best way to restore our clients’ profit margins and to satisfy new financial requirements.
Affordable housing projects are also offering new market opportunities. State and federal agencies are providing funding and changing zoning requirements to encourage affordable housing construction. We have extensive experience in planning, developing, and building affordable communities and can help clients navigate the process.
If you’re interested in developing or investing in a market-rate or affordable residential project but are concerned about inflation’s affect on costs, contact us.
While others are pausing construction projects and waiting for the market to change, we’ll help you overcome pricing challenges allowing you to control the market and help determine its direction.
Run the numbers and see for yourself.
We’ve created one of the industry’s most effective financial modeling tools. It’s easy to use and will instantly give prospective investors real world numbers for a virtually unlimited number of variables.
It provides a clear concise view off the bottom line.
We’ll run models for different investment levels, densities, products, time schedules, and loan rates so you can see in black and white precisely how to increase profitability.
It’s a great time to develop or invest in residential housing. Let us show you why.
